Case
Mexican Economy
Foreign investment can’t solve Mexican economy—non-tradable sectors are key but
don’t attract investors
Maurer, Harvard Business School associate professor, 6
(Noel, associate professor at the Harvard Business School in the Business, Government and the
International Economy (BGIE) unit, Ph.D. from Stanford University, former assistant professor in the
Department of Economics at ITAM (university in Mexico City); “Was NAFTA Necessary? Trade Policy and
Relative Economic Failure since 1982,” http://www.hbs.edu/faculty/Publication%20Files/06-043.pdf, pg.
1-2, Accessed 7/12/13 )
Since ¶ NAFTA was ratified in 1994, the Mexican economy
has grown, Mexican wages have ¶ risen, and inequality appears to have declined slightly. On the other hand, productivity gains have
not spread outside the manufacturing sector, real wages are still ¶ well below the level of 1982, and
Mexico’s relative position vis-à-vis Europe and the United States has yet to regain its 1994 level, let alone its 1982
peak. NAFTA did ¶ succeed in dramatically increasing the level of foreign investment. These gains, ¶
however, were mostly exhausted by 2001. NAFTA failed to produce dramatic growth in Mexico because,
quite simply, it ¶ had little effect on most of the domestic economy. Foreign direct investment (FDI), ¶ for all its merits, is
not a substitute for domestic investment. FDI tends to cluster in ¶ the production of tradable goods (e.g., automobiles,
electronics), but tends not to occur in the production of non-tradables (e.g., services, with the partial exceptions of ¶ banking and
large-scale retailing). Most people in Mexico (as in the U.S.) produce ¶ non-tradables. Moreover, the production
of traded goods requires inputs from the ¶ non-traded sector. Imagine, for example, an automobile
manufacturer financed with ¶ FDI. Its output (automobiles) is tradable, and it consumes many tradable goods ¶ (tires,
windshields, brake linings, cylinder heads). It also consumes a wide variety of ¶ non-tradables (building materials, machinery
repairs and maintenance, electricity, ¶ accounting and legal services). The workers in this firm also consume a wide variety of
non-tradables (haircuts, restaurant meals, public transportation, electricity, ¶ housing), and they must price their labor in
accordance with the prices they face ¶ from the non-tradable sector. Thus, much of the costs of the firm
are determined by ¶ the productivity of the non-tradables sector. If productivity growth in the nontradables sector is slow, then firms in the tradables sector will face higher prices than ¶ they would otherwise.
These higher prices will, in turn, influence the prices that ¶ firms in the tradables sector must charge
for their output. In short, the long-run performance of the economy hinges upon the performance of a myriad
of economic sectors which do not attract much (if any) FDI.
Did Mexico’s strategy work? There have been some positive outcomes.
Arctic Turn
DF causes Russia protectionism in the artic.
Pete Kasperowicz , June 27, 2013, staff writer for The Hill, “House votes to implement US-Mexico
offshore energy deal” http://thehill.com/blogs/floor-action/house/308263-house-votes-to-implementus-mexico-offshore-energy-deal
The House on Thursday passed a bill that would implement a U.S.-Mexico agreement on offshore energy development on the countries'
maritime border despite opposition from Democrats who called it an attack on the Dodd-Frank financial reform law.
Members voted 256-171 in favor of the bill, with 28 Democrats voting with Republicans to implement the deal approved by the Obama
administration.
Several Democrats said during debate that they support the 2012 agreement between the U.S. and
Mexico. But they pointed out that the legislation includes language that would waive a provision of
Dodd-Frank that requires companies to disclose payments made to foreign governments.¶ Republicans said
this waiver is needed because Mexico has not decided how it would receive royalties from energy
development under the agreement.¶ "This would create a potential conflict because Mexico has yet to decide
how they will collect royalties and could potentially set regulatory measures that prohibit disclosure
of payments," House Natural Resources Committee Chairman Doc Hastings (R-Wash.) said. "This would then block American
workers from being able to develop these resources.¶ "Waiving the Dodd-Frank requirement is
necessary in order to help protect jobs American jobs and American-made energy in this instance," he added.
"Without it, foreign-controlled energy companies could develop this American energy resource, and the royalty payments to Mexico would still
be undisclosed and kept private."¶ Democrats rejected this and called it an attempt to dismantle Dodd-Frank. Rep. Peter DeFazio (D-Ore.) said
the language is "totally unnecessary" and added that the provision waives Dodd-Frank's reporting rules for all offshore energy deals between
the U.S. and a foreign government.¶ "They
actually want to repeal totally this section of Dodd-Frank for any
future agreements with any other nations on a transboundary basis, which could certainly include
Canada and, likely with the conflicts that are looming over the Arctic Ocean and the resources up
there, with Russia," he said.¶ "Now I get pretty nervous when I start thinking that U.S. companies are going to start negotiating secret
agreements with Russia, and somehow these are going to protect our taxpayers," he said. "They're going to protect our shareholders, they're
going to protect our public interest."
U.S dependence F/L
DoD will always have access to fuel—A crisis in Syria will not effect DOD
access—Defense Production Act makes sure
Bartis and Van Bibber 11—senior policy researcher @ RAND
James T and Lawrence, “Alternative Fuels for Military Applications” RAND Defense Department goals for alternative fuels in tactical
weapon systems should be based on potential national benefits, since the use of alternative, rather than petroleum-derived, fuels offers
no direct military benefits. While Fischer-Tropsch
fuels and hydrotreated renewable fuels are no less able than
offer no particular military benefit over their
petroleum-derived counterparts. For example, even if alternative fuels can be produced at costs below
the prevailing costs for conventional fuels, they will be priced at market rates. Also, we are unable to
find any credible evidence that sources to produce jet or naval distillate fuel will run out in the
conventional fuels to meet the Defense Department’s needs, they
foreseeable future. If conflict or a natural disaster were to abruptly disrupt global oil supplies , the U.S.
military would not suffer a physical shortage . Rather, the resulting sharp increase in world prices would cause
consumers around the world to curb use of petroleum products. Less usage would ensure that supplies
remained available. As long as the military is willing to pay higher prices, it is unlikely to have a problem getting the fuel it
requires. If problems do arise, the Defense Production Act of 1950 (P.L. 81-774) contains provisions for
performance on a priority basis of contracts for the production, refining, and delivery of petroleum
products to the Defense Department and its contractors.
U.S Air Force transitioning to alternative energy now
U.S Air Force 13, (U.S. Air Force energy Strategic Plan, March 2013,
http://www.safie.hq.af.mil/shared/media/document/AFD-130325-132.pdf)
Assuring our energy supply is not limited to our aviation operations; it also includes our facilities, ground vehicles, and equipment . The
Air Force is focused on developing on-site sources of renewable energy, particularly those
sources that can insulate the Air Force from grid failure or other supply disruptions. Increased
use of on-site renewable energy can provide the Air Force with consistency in energy
pricing, as well as promote positive environmental benefits by avoiding greenhouse gas
emissions. The Air Force is expanding its use of alternative fueled and plug-in electric
vehicles. The use of such vehicles could help insulate the Air Force against fuel price
volatility, improve energy security by decreasing dependence on foreign oil, and address
environmental concerns, such as air quality.
Navy going forward with biofuels – that gets other sectors of the military on
board
Alan Yu, story from Chicago Public Media, June 28, 2013. Boeing, United, USDA and Navy hope to power Midwest flights with
biofuels, http://www.wbez.org/boeing-united-usda-and-navy-hope-power-midwest-flights-biofuels-107900
At a summit to announce the report’s findings, representatives from the U.S. Department of Agriculture and the Navy
joined their
civilian counterparts in declaring biofuels as the way forward for air travel.¶ For example, the
Navy used a 50/50 biofuel blend to power its Great Green Fleet, a carrier strike group that includes the
U.S.S. Nimitz, in the world’s largest maritime exercise last summer, says Tom Hicks, deputy assistant secretary of the Navy. Hicks
said that the Navy often takes the lead with adopting new technology, citing titanium and
nuclear power as examples. He said civilians often follow their lead.¶ “As you look back over
the history of the Navy, the history of the defense department, when we get involved in different
technologies, those absolutely have commercial impact,” Hicks said. “And (aviation biofuels) is
something that we see going forward, as these fuels can be entered into the commercial
market and be cost competitive, that this will just part of the new normal for the Navy in the
future.”
That solves heg and there are no threats to naval dominance for decades
Friedman 7
(George, Stratfor, April)
There are times when the Navy's use is tactical, and times when it is strategic. At this moment in U.S. history, the role of naval
power is highly strategic. The domination of the world's oceans represents the
foundation stone of U.S. grand strategy. It allows the United States to take risks while minimizing
consequences. It facilitates risk-taking. Above all, it
eliminates the threat of sustained conventional attack
against the homeland. U.S. grand strategy has worked so well that this risk appears to be a phantom. The
dispersal of U.S. forces around the world attests to what naval power can achieve. It is
illusory to believe that this situation cannot be reversed, but it is ultimately a
generational threat. Just as U.S. maritime hegemony is measured in generations, the
threat to that hegemony will emerge over generations. The apparent lack of utility of naval forces in
secondary campaigns, like Iraq, masks the fundamentally indispensable role the Navy plays in U.S. national security.
U.S oil imports rapidly declining and expected to be the world’s largest oil
producing nation
Committee on Energy and Commerce 13 ( Jun 7, 2013 , RENEWABLE FUEL STANDARD ASSESSMENT
WHITEPAPER(http://energycommerce.house.gov/sites/republicans.energycommerce.house.gov/files/analysis/20130607RFSWhitePap
er4.pdf)¶ Energy markets have changed significantly since 2007. To the surprise of many, domestic oil production
has
reversed its decline and has undergone a substantial increase, largely driven by advances in
tight oil production.5 This growth is projected to continue in the years ahead.6 Equally surprising has been the decline in
gasoline demand, a trend that is also projected to continue due to new CAFE/GHG standards.7 In summary, the assumptions of falling
domestic supply and rising demand have given way to a reality that is precisely the converse. The
percentage of oil
imports, which reached 60 percent in 2005, declined to 41 percent as of 2012.8 The Energy
Information Administration (EIA) projects that imports will decline to 34 percent by 2019 and then slightly
increase to 37 percent by 2040.9 While oil imports have declined overall, the makeup of those imports has also changed. The nation with
the largest increase in exports to the U.S. is a non-OPEC member – Canada.10 Of the shrinking imports into the U.S., 28 percent comes
from the Persian Gulf.11 The International Energy Agency (IEA) projects continued growth in U.S. and Canadian oil production, even
projecting that the
2020
U.S. will overtake Saudi Arabia as the world’s largest oil producing nation by
and North
America may become a net oil exporter in 2030.12
Oil doesn’t hurt leadership – interdependence and connections to oildependent allies means that we would only lose influence over oil producers if
we abandoned oil.
Verrastro and Ladislaw 07 (Frank and Sarah, CSIS Energy and National Security Program director
and fellow, “Providing Energy Security in an Interdependent Work”, p. 4-5,
www.twq.com/07autumn/docs/07autumn_verrastro.pdf)
All energy producers/exporters and consumers/importers are bound together by a
mutual interdependency. All are vulnerable to any event, anywhere, at any time, that
has an impact on supply or demand. The U.S. energy future likely will be shaped at least in part by events
outside of its control and beyond its influence. Calls for energy independence absent major technological break- throughs and a
national commitment ring hollow and in the near term are both unrealistic and unachievable. In the absence of decisive political
will to undertake those steps necessary to improve efficiency, promote conservation, and encourage the development of
domestic energy resources as well as renewable energy forms, learning to manage the risks accompanying import dependency
may be the only reasonable course of action, at least for the foreseeable future. Although reducing U.S. import dependence will
make us more secure, absent the reimposition of domestic price controls, the United States will still be subject to global oil price
increases regardless of whether oil import dependence is at 20 percent or 60 percent. Further, the
notion that simply
reducing the United States’ oil import dependence would significantly enhance U.S.
foreign policy options is also mis guided and potentially damaging to many existing
relationships. Even if the United States were energy self-sufficient, as long as its allies
remained import dependent it might well have less leverage diplomatically, as the
world could become more factionalized. The mutual dependence among consumer
nations n and between consumers and producers should be used as a means for
finding common solutions to shared global energy problems, including environmental, security, and
economic considerations.
Oil dependence key to Middle East influence—gives US basing opportunities
Fisher 10
Max “The Upside of Depending on Foreign Oil”
[http://www.theatlantic.com/international/archive/2010/04/the-upside-of-depending-onforeign-oil/38380/] April 2
The top ten oil exporters to the U.S., which account for half of all U.S. consumption, read like a State
Department tourism warning list: Saudi Arabia, Venezuela, Nigeria, Iraq, Angola, Russia,
Colombia, and Brazil. (To be fair, Canada has long been our number one oil source, and Mexico alternates with Saudi
Arabia for the number two spot.) But keep in mind that most of these countries need our money a lot
more then we need their oil. If Saudi Arabia and the U.S. suddenly ended our trade
tomorrow, for example, the U.S. and global economies would not suffer nearly as much
as Saudi Arabia's. The Saudis understand this and so want to keep U.S. and Saudi
interests aligned. As a result, buying Saudi oil gets us a lot more than just energy. It gets us
a dedicated ally that wields unparalleled influence in a part of the world where we
desperately need it: the Middle East. The Saudi royal family has put their wily
intelligence service at our disposal and allowed sprawling U.S. military bases onto
their soil. In 1992, the Saudis even exiled one of their own on America's behalf: A
prominent, wealthy, and popular humanitarian and freedom fighter named Osama bin Laden. Saudi royalty risked a
violent backlash by expelling bin Laden to Sudan, but U.S. officials had demanded his
ouster. That's no small favor. It would be almost as if the United States deported Google CEO Eric Schmidt to
Honduras at the request of angry Chinese officials. The Saudis came to our aid again in 1996 when they convinced the Sudanese
regime to themselves deport bin Laden. Bin Laden's anti-American terrorism did not begin until he fled to Afghanistan, where
the United States then had little influence. In the decade since, he has moved between there and Pakistan, two countries with
which the U.S. has no meaningful economic ties save foreign aid. Unlike with Saudi Arabia, our pleas to those governments to
help us rout bin Laden went largely ignored. If our oil-greased
relationships with other top producing
states are half as close as the U.S.-Saudi partnership, it will give us much-needed
leverage over some of this century's biggest emerging threats.
In Nigeria, we can pressure the
government to peacefully contain the state's alarming increase in terrorism. For Iraq, the economic ties with America would be
an important counterbalance to Iran's religious and political influence. As for Venezuela, no matter how antagonistic President
Hugo Chavez gets, he would be a lot worse if we didn't take close to a million barrels off his hands every day.
Extensions
DOD will always have fuel 2NC
DoD will always have access to oil—DoD consensus in on our side
Schlossberg 11
(Andrew Scholssberg, Department of Political Science College of Arts and Sciences University of
Pennsylvania, 4/8/11, “The Military Dimensions of Post-Cold War U.S. Oil Policy: Access to Oil and
Consequences for Geostrategy”
http://repository.upenn.edu/cgi/viewcontent.cgi?article=1173&context=curej)
Therefore, the consensus from interviews is that it would be difficult to imagine a scenario
where DoD would be unable to obtain the petroleum it needs in the future. Even if fuel
supply is low, DLA Energy can override commercial fuel suppliers to send oil to troops
in war- fighting mode.
Global market and Defense Production Act means military oily supply is
inevitable
Schlossberg 11
(Andrew Scholssberg, Department of Political Science College of Arts and Sciences University of
Pennsylvania, 4/8/11, “The Military Dimensions of Post-Cold War U.S. Oil Policy: Access to Oil and
Consequences for Geostrategy”
http://repository.upenn.edu/cgi/viewcontent.cgi?article=1173&context=curej)
What can one learn from the military energy primer described in Chapter 2? How can any of this information translate into
tangible policy moving forward? The main goal in this paper has been to keep geostrategists like Michael Klare and Flynt
Leverett honest, by focusing on the military dimensions of oil policy and how DoD buys oil on a day-to-day basis. And after
extensive research and interviews, it is clear that while the military strives to reduce energy demand and
invest in alternative energies, oil will continue to be the key resource in war-fighting (and the global
economy) for many decades to come. What is also clear is that the Persian Gulf region will remain an essential
global supplier of these resources for the foreseeable future. While some military planners prescribe to the doctrine of
preemption (the preservation and enhancement of US access or control of foreign oil resources is a means to reduce the
prospects of any Eurasian rival power emerging to challenge American primacy), the
overwhelming sentiment
among DoD personnel is that access to oil will be guaranteed through the market for
future war-fighting purposes. Some consulting reports have claimed that, for instance, ―the control over
enormous oil supplies gives exporting countries the flexibility to adopt policies that oppose democratic interests and values—
and the US and its allies.‖98 But, as long
as there is a world market, there will be oil for all
services in war-time. If prices increase, demand decreases (and vice versa), and states will
look for alternatives. Yes, the cost of fuel for DoD increases with the world price, but DoD
will always be able to pay whatever price the market demands, especially given its
ability to override civilian oil needs in times of national crisis through the Defense
Production Act.
Air Force 2NC
Air force-using biofuels now and will switch by 2016
U.S Air Force 13, (U.S. Air Force energy Strategic Plan, March 2013,
http://www.safie.hq.af.mil/shared/media/document/AFD-130325-132.pdf)
Key InItIatIve: alternatIve avIatIon Fuels The Air
Force is focused on increasing and diversifying its energy
supplies to improve our energy security. To demonstrate its strong commitment to this effort, the Air Force set a
very ambitious goal to ensure our aircraft could fly on commercially available fuels by 2016 , as long as
those fuels are drop-in fuels that are cost competitive with traditional petroleum-based jet fuels, and meet our environmental and
technical specifications. As the market grows for these fuels and prices decrease , the
Air Force intends to increase its use
of alternative aviation fuel blends for non-contingency operations to 50% of total consumption by 2025. To get there, we
are certifying our aircraft to fly on different alternative fuel blends, including biofuel blends. By
preparing for a variety of alternatives, the Air Force is ensuring it will be ready for whatever private
industry is able to bring to market.
Navy 2NC
US Navy is investing in advanced biofuels to reduce’s fossil fuel dependence e
James Hacker 11, is an energy and sustainability consultant based in Washington DC. He is a 2009 graduate of the George
Washington University, where he studied economics and international affairs and was a Presidential Academic Scholar, 23 December
2011. But who’s buying? The Navy, biofuels, and subsidies, www.senseandsustainability.net/2011/12/23/whos-buying/
On December 5, the
US Navy announced the largest ever purchase of biofuels by the US
government—at 450,000 gallons, worth roughly $12 million, it eclipses any other one-off purchase in government history. The
purchase is also unique for its makeup, as all 450,000 gallons are advanced “drop-in”
biofuels, which can be burned in any gas-burning engine. None are corn ethanol. The purchase is
likely to be the first of many, and the end goal is a US Navy with significantly reduced use of
conventional fuels, replacing at least half of the 1.26 billion barrels used per year with advanced nonconventionals by 2020.
All subs and aircraft carriers are nuclear powered
O’Rourke 9—specialist in naval affairs
Ronald, “Navy Nuclear-Powered Surface Ships: Background, Issues, and Options for Congress” CRS
Report, December 23
All of the Navy’s submarines and all of its aircraft carriers are nuclear-powered. No other
Navy ships are currently nuclear-powered. The Navy’s combat submarine force has been entirely
nuclear-powered since 1990.6 The Navy’s aircraft carrier force became entirely
nuclear-powered on May 12, 2009, with the retirement of the Kitty Hawk (CV-63), the Navy’s last remaining
conventionally powered carrier.
( ) Naval Power High Now- New Class of Ships
Moran, et. Al., September 2012
(William, pg. http://www.usni.org/magazines/proceedings/2012-09-0/leap-ahead-21st-centurynavy)
No other warship proclaims America’s commitment to the defense of the nation and its
allies, as well as the broader issues of peace and stability, more clearly than the
nuclear-powered aircraft carriers of the U.S. Navy. For nearly 40 years, Nimitz -class
carriers have played the role of first responder to crises and conflicts. The delivery of the USS
George H. W. Bush (CVN-77) less than three years ago proved the early-’60s design of the Nimitz-class carriers has served the
nation well and will continue to do so until 2059. The
Gerald R. Ford class will begin to succeed Nimitz
-class carriers when CVN-78 delivers in 2015. Her mission will remain unchanged, but
she will carry it out with greater lethality, survivability, joint interoperability, and at
reduced operating and maintenance cost to taxpayers.
( ) US Naval Power Stronger than its ever been
Axe 12
12 (David, 4/2, pg. http://the-diplomat.com/flashpoints-blog/2012/04/02/must-u-s-navydownsize-plans/)
But the Navy is shifting a greater proportion of its forces to the Pacific while reducing its
Atlantic presence. By 2016, seven of 11 aircraft carriers will Pacific-based, up from six today. The Navy has signed an
agreement with Singapore for forward-basing of a portion of its new fleet of small Littoral Combat Ships. The smaller
size of the future U.S. fleet belies its potential combat power and superiority compared
to rival navies. The deepest cuts are to smaller amphibious ships and unarmed support
vessels such as catamaran transports and logistics vessels. The Navy plans to sustain a force of 10 to
12 nuclear-powered aircraft carriers, nine or 10 large-deck assault ships and around 48 nuclear attack submarines. Under
the new plan, the number of destroyers actually increases. "It is important to
remember that, as much as the U.S. battle fleet has shrunk since the end of the Cold
War, the rest of the world’s navies have shrunk even more," then-Secretary of Defense Robert Gates
said in a 2010 speech. "So, in relative terms, the U.S. Navy is as strong as it has ever been."
( ) their evidence of naval decline is just media hype
Grant 9
(Greg, 2/20, pg. http://www.dodbuzz.com/2009/02/20/csbas-20-billion-a-year-shipbuildingplan/)
To begin with, Work says, the U.S. Navy is in far better condition than many believe. Alarmists
who say U.S. naval power is in serious decline perform a rather dishonest counting of
the current number of ships and compare that to the 1980s “600 ship Navy” standard. A more honest net
assessment compares the size and combat power of the Navy to potential contemporary competitors, which paints a very
different picture. Counting those ships that can “perform naval fire and maneuver,” including submarines and aviation platforms,
the Navy has 203 warships. The Russian and Chinese navies combined operate 215
warships, so the U.S. has close to the “two navy standard” the Royal Navy aimed to maintain in its
heyday. Measuring fleet tonnage displacement, the best proxy for measuring a fleet’s
overall combat capability, the U.S. Navy enjoys a “13-Navy standard” over the world’s
next biggest navies.
U.S oil independent 2NC
They have no advantage—status quo oil and gas development on land solve
dependence Mohi-uddin 12—Mansoor Mohi-uddin is managing director of foreign exchange strategy at UBS,
Dollar bears in for shock if US cuts energy imports, Financial Times, 2-14
The future of the dollar is more likely to be determined in the shale gas and oilfields of Dakota
and Texas than in the sovereign wealth funds of Asia and the Middle East. This is because striking new
technological developments are set to transform America’s energy supplies, significantly
improving the US balance of payments and the long-term outlook for the greenback.¶ The US’s
current account deficit has been a longstanding drag on the dollar. At the height of the credit boom in 2006, it reached $800bn or 6 per
cent of gross domestic product. Though the deficit has halved as the credit crunch has lowered imports, it still stands at 3 per cent of GDP,
largely because the US, like the eurozone, Japan, China and India, remains a major energy importer, with annual net foreign oil purchases
of $300bn a year. As the US economy slowly recovers, the International Monetary Fund expects the US current account deficit to start
rising again. That would lead to foreign central banks accumulating greater reserves of dollars. But such straight-line forecasts are likely
to be challenged as the US’s shale gas and “tight oil” reserves are commercially exploited over the next few years. The US has vast
reserves of shale gas but, until recently, energy
companies were unable to tap the gas trapped in
shale rock. Now, through hydraulic fracturing or ‘fracking’, US reserves of economically available gas
supplies have started to rise sharply. Already the ratio of US gas reserves to annual production has increased from eight
years to 12 years. This may not appear substantial when compared to other regions of the world. Qatar, for example, has proven gas
reserves well above 100 years of current production. But fracking may allow the US to soon count up to one hundred years of gas
reserves relative to current production. That
would lead to a major shift in the US’s energy outlook.¶ In
of tight oilfields through new technology is increasing the US’s
domestic oil production relative to imports. This marks a significant departure from the past
three decades, when the share of US oil consumption accounted for by foreign supplies rose from around 30 per cent in the 1980s
addition the exploitation
to over 65 per cent by the time the credit crunch began in 2007. In 2010 imports had already declined to 61 per cent of total US oil
consumption and are set to decrease further.¶ More strikingly, the
US is starting to export oil again given its
increased domestic oil production. Ten years ago, US oil exports were less than 10 per cent of the country’s oil imports.
Now they are close to 20 per cent of US imports as local oil output surges. For example, North Dakota yielded more than
500,000 barrels of oil a day at the end of last year, exceeding the production of Opec member
Ecuador.¶ There remain significant environmental concerns regarding the use of fracking to exploit shale gas in commercial quantities.
But if America is able to dramatically increase its energy reserves, then it can reduce its reliance on foreign supplies – particularly from
volatile regions such as the Middle East.¶ Over time this would engineer a sharp improvement in the US current account deficit. As the
US’s net oil import position accounts for the lion’s share of its balance of payments deficit, increased domestic production has the
potential to reduce the US current account deficit from 3 per cent of GDP to lower levels, or even send it into a surplus over the next
decade.¶ The US economy last ran a current account surplus at the start of the 1990s. If the US is able to return to a similar position over
the next few years owing to reduced energy imports, it would have three important consequences for financial markets and the global
economy.¶ First, in the foreign exchange markets, the dollar would continue its recovery against the euro and other major currencies that
began during the financial crisis of 2008. Consensus forecasts that the greenback will keep on depreciating to rebalance America’s
current account deficit will need to be torn up.¶ Second, the negative relationship between oil prices and the dollar would break down.
China and India are still likely to be large consumers of Middle East energy but significantly reduced US foreign oil purchases will limit
the growth of the region’s sovereign wealth funds. As a result, their dollar-diversifying activities, heightened when oil prices rise, will be
constrained in future.¶ Third, stronger growth in the US on the back of a more balanced economy would call into question the Fed’s
current stance of keeping monetary policy super-loose.¶ Thus the conventional wisdom of an ever-weakening greenback is likely to
become obsolete. Over the next decade, the currency is set to benefit from the US’s reduced reliance on foreign energy. That will be a
positive shock for US consumers and companies and a negative shock for long-term dollar bears.
The present system solves entirely with on land exploration
Karl 6-23-12. David J. Karl, president of the Asia Strategy Initiative, an analysis and advisory firm
that has a particular focus on South Asia. He serves on the board of counselors of Young
Professionals in Foreign Policy and previously on the Executive Committee of the Southern
California chapter of TiE (formerly The Indus Entrepreneurs), the world's largest not-for-profit
organization dedicated to promoting entrepreneurship. “New World Coming: America the Energy
Superpower.” [http://foreignpolicyblogs.com/2012/07/24/new-world-coming-america-theenergy-superpower/] [MG]
The energy boom upends arguments about the inevitability of U.S. strategic decline.
A previous post peered into the crystal ball to argue that America’s strategic prospects are dramatically
brightening due to an unexpectedly improving energy outlook and the looming
revitalization of its manufacturing base. This thesis cuts against the reigning anxiety about
the nation’s economic course as well as the torrent of prophesying about how China is poised to eat America’s lunch.* A
subsequent post extended this theme to suggest that among the foreign policy implications of the U.S. energy boom would be the
denouement of Russia’s great power aspirations and the restoration of U.S. soft power.
In the few months since these two posts, other analysts have amplified these points and offered others worth pondering. The present
post focuses on the energy side of the story, while my next one will pick up the manufacturing side.
As a starting point, consider the
sheer magnitude of the U.S. energy bonanza. Over the last five
years, there has been a marked surge in domestic oil and natural gas production, causing in
turn a dramatic reduction in the level of oil imports. According to the Wall Street Journal, the
United States will cut its reliance on Middle Eastern oil in half by the end of this decade and
could end it altogether by 2035. Citigroup reports that for the first time since 1949, the U.S.
has become a net exporter of petroleum products and has edged out Russia as the world’s
largest refined petroleum exporter. Some experts even predict that the country will become
the world’s largest producer of oil and gas by 2020.
Just a few years ago, the fear was that America was quickly running out of domestic energy
resources, but it now appears that it is sitting atop a staggering amount of natural gas, perhaps as much as a century’s worth
supply. The International Energy Agency speaks of the “Golden Age of Gas” and just last month natural gas supplanted coal as the largest
source of U.S. power generation. The new-found bounty is courtesy of key strides in extraction technology – namely, hydraulic fracturing
(“fracking”) and horizontal drilling
– as well as advances in seismic imagining that have unlocked
gas and oil deposits previously thought inaccessible within tightly-packed shale rock formations.
A recent report by the Government Accountability Office concludes that oil deposits in the Green River Formation
spanning parts of Colorado, Utah and Wyoming contain up to 3 trillion barrels of oil , half of
which may be recoverable, which is about equal to the entire world’s proven oil reserves. The
Bakken shale bed in North Dakota has been a bonanza (here and here), turning the state into the nation’s second-largest oil producer
after Texas. The gas-rich Marcellus formation in the eastern U.S. has made Pennsylvania the site of the world’s second-largest gas field.
The Congressional Research Service reports that total U.S. energy reserves now exceed those of all other countries, including the Middle
Eastern nations that have long been our oil overlords.
The energy boom promises far-reaching, even astounding, economic reverberations. A new Bank of America Merrill Lynch study finds
that the benefits are injecting as much as $1 billion a day into the U.S. economy and may be keeping the country out of another recession.
According to the IHS Cera research firm, some 600,000 new energy-related jobs have already been created since 2008. The Citigroup
study cited above predicts net job creation from 2.7 million to as high as 3.6 million across the entire economy by 2020 as manufacturers
benefit from much lower energy costs. It also foresees an increase in real GDP by an additional 2 to 3 percentage points and a 60-percent
reduction in the current account deficit as oil imports fall and energy exports rise.
The political ramifications are equally profound. As Walter Russell Mead sees it, growing prosperity in the American heartland will
rework the domestic political landscape as the Middle West’s pragmatism reasserts itself and calms the nation’s roiling ideological
divisions. Building on this point, one might add that the region’s Jacksonian values, which look askance at ideology-based exertions
abroad, will also have a major effect on the nation’s foreign policy debates.
Peering beyond the nation’s shores, the decades-long centrality of
the Middle East to the global economy and the U.S.
foreign policy agenda is set to fade in the years ahead. A number of analysts (examples here and here)
anticipate the irrelevance, if not outright collapse, of the OPEC oil cartel. A former president of Shell USA predicts
that “OPEC will descend into chaos as an organization.” Another commentator foresees “the slow-motion collapse of the Middle Eastern
oil empire,” an event that represents “a tectonic shift in the geopolitical balance of power, a strategically pivotal development only
A third expert terms the waning U.S. reliance on the
region’s oil “the energy equivalent of the Berlin Wall coming down. Just as the trauma of the Cold War
ended in Berlin, so the trauma of the 1973 oil embargo is ending now.”
slightly less momentous than the fall of the Soviet Union.”
To be sure, Saudi Arabia’s pivotal capacity for swing oil production and the continued dependence of key U.S. allies (Europe, Japan and
South Korea) and partners (India) on the region’s petroleum means that the United States cannot become entirely indifferent to the
Persian Gulf’s security dynamics. But the relative decline in strategic interest could enable Washington to move from its present role as
an extra-regional hegemon to something like an off-shore balancer. And having
been freed from needing to deploy
on a permanent basis significant naval and air power assets in the region, the U.S. would be
able to augment even further its ongoing military buildup in East Asia, helping in turn to address
concerns that America’s deep fiscal challenges undercut the Obama administration’s much-ballyhooed regional “pivot.”
Status quo equals independence in 5 years
Gallu 13 Ambani Says U.S. Will Be Energy Independent in 5-7 Years By Joshua Gallu - Feb 9, 2013
11:00 PM CT http://www.bloomberg.com/news/2013-02-09/ambani-says-u-s-to-be-energyindependent-in-5-7-years.html, mmm/uco
Mukesh Ambani, the billionaire chairman of Reliance Industries Ltd., said that the U.S.’s development of shale oil and gas will make the
country energy independent as early as 2018. “For many decades, we have heard that the
U.S. will be independent of
foreign imports of energy,” Ambani, whose company operates the largest oil refining complex in the world, said in an
interview to be aired today on CNN’s “Fareed Zakaria GPS” program. “Realistically, I can now tell you that it is my judgment this will
happen in the next five to seven years,” Ambani said the “fundamental transformation” in the U.S. energy sector will help
drive economic growth this year, according to a transcript of the interview provided by CNN. He said he was “more optimistic than most”
about the global economy and that a recovery will begin this year, particularly in the U.S. When asked what a military strike on Iran
would do to the price of oil, Ambani, 55, said that there is “enough spare capacity” in global energy markets to “take care of eventualities,”
according to the transcript.
Miniscule
A2 heavy vs. light oil
They don’t have a single piece of evidence that says one or the other is key to
military independence
The only difference is density
Index Mundi no date http://www.indexmundi.com/commodities/glossary/light-vs-heavy-crude-oil
Light Crude oil is liquid petroleum that has low density and that flows freely at room temperature. It has low
viscosity, low specific gravity and high API gravity due to the presence of a high proportion of light hydrocarbon fractions. It generally
has a low wax content as well. On the other hand,
heavy crude oil or extra heavy crude oil is any type of crude oil which does not
or specific gravity is higher than that of light
flow easily. It is referred to as “heavy” because its density
crude oil. Heavy crude oil has been defined as any liquid petroleum with an API gravity less than 20°. Extra heavy oil is defined with
API gravity below 10.0 °API (API gravity, is a measure of how heavy or light a petroleum liquid is compared to water. If its API gravity is
greater than 10, it is lighter and floats on water; if less than 10, it is heavier and sinks. )
AT Entanglement
Military oil independence doesn’t solve foreign entanglement—oil is a global
commodity and effects the global economy—means US will maintain its
present to insulate itself
ESLC 12—Energy Security Leadership Council
The New American Oil Boom: Implications for Energy Security pg 34
Rising oil production will not mitigate the foreign and military challenges of U.S. oil
dependence : Whether the result of production disruptions due to conflict in a specific country or the impediment of supply through a
critical shipping route, interruptions to the flow of oil can be highly economically damaging for the U.S. and
global economies, as discussed above. To mitigate this risk, U.S. armed forces expend enormous resources
protecting chronically vulnerable infrastructure in hostile corners of the globe and patrolling oil transit
routes. This engagement benefits all nations, but comes primarily at the expense of the American military and ultimately the American
taxpayer. A 2009 study by the RAND Corporation placed the ongoing cost of this burden at between $67.5 billion and $83 billion annually, plus
an additional $8 billion in military operations.173 As U.S. oil imports continue to decline, and other countries—China in particular—grow to
become larger net oil importers, many are asking whether the United States will be relieved of its oil-security duties. The question has gained a
particular relevance as U.S. imports from the Middle East have declined substantially in recent years. Persian Gulf supplies to the United States
were down to 1.8 mbd in 2011 after being as high as 2.8 mbd in 2001.174 Unfortunately, the United States will remain committed to stability in
the Middle East—and a handful of other critical oil producing regions—for the foreseeable future. The growth
of domestic oil
supply in the United States between 2009 and 2011 is an impressive story. Nonetheless, the U.S.
commitment to global oil security is largely a function of the importance of oil in the global and
domestic economies, and the United States is expected to remain the world’s largest oil consumer for decades. The United
States has clearly placed a special significance on the security of Persian Gulf oil supplies as far back as
the Carter Administration, but this has very little to do with the direct importance of those supplies to
the United States. In fact, since 1981, Persian Gulf supplies have never accounted for more than 15 percent of U.S. oil supplies.175
Instead, the American commitment to the Middle East is based on the importance of that region for the
stability of the global market, for which Persian Gulf suppliers accounted for 30 percent of total oil
supplies in 2011 and as much as 37 percent in 1974.176 The fact is that the world market—on which the U.S. economy depends—derives a
significant quantity of its supplies from geopolitically risky countries in the Middle East and North Africa. More broadly, the number of
threats to oil flows is as high today as it has ever been, and the consequences of a disruption for the
U.S. economy are just as dire. Consider that, in 2010, total world oil production amounted to approximately 88 million barrels per
day, and more than 50 percent was moved by tankers on fixed maritime routes.177 The majority of these supplies transited a strategic
chokepoint such as the Strait of Hormuz, the Straits of Malacca, or the Suez Canal, all narrow waterways that present hostile actors with an
opportunity to disrupt large volumes of oil and the global economy. Looking forward, it is difficult
to imagine a reduced U.S.
commitment to the Middle East. The International Energy Agency recently estimated that the Persian Gulf will supply 32 percent of the
world’s oil in 2020 and 35 percent in 2030.178 As long as oil is priced in a global market, and oil plays a critical role
in the U.S. economy, no amount of domestic production will eliminate the U.S. commitment to
the security of this region or any other region critical to global oil flows.
Politics Links
Plan Unpopular
Popularity is not bipartisan—It is Republicans who won’t vote for Obama
anyway who favor it—His democratic base does not and their turnout is key
Capiello 12
Dina Cappiello and Matthew Daly, Associated Press | Thu, Jun 14, 2012
http://www.apnorc.org/news-media/Pages/News+Media/republicans-democrats-at-odds-onenergy-issues.aspx
Republicans and Democrats seem to be living on different planets when it comes to how to
meet U.S. energy needs.¶ Republicans overwhelmingly push for more oil drilling. Democrats
back conservation and new energy sources such as wind and solar power.¶ A survey by The Associated Press-NORC
Center for Public Affairs Research shows that the polarized positions on energy that have divided Congress and emerged
in the presidential campaign also run deep among the public.¶ While majorities in both parties say
energy is an important issue, the poll shows that partisan identification is closely tied to
people's perceptions of the causes of the country's energy problems and possible solutions.
No other demographic factor — not race, age, gender or income level — is as consistently associated with
opinions on energy as political party identification.¶ For example:¶ — Three of four Democrats surveyed report
that a major reason for the county's energy problems is that industry does not do enough to support clean energy. By comparison, 43
percent of the Republicans questioned believe that.¶ — Three of four Republicans in the poll cite government limits on drilling as a major
reason for energy problems, compared with 34 percent of Democrats.¶ Also, 85 percent say it is a serious problem that the United States
needs to buy energy from other countries, but there's disagreement about why. Among Republicans in the poll, 65 percent say the U.S.
does not produce enough domestic energy to meet demand. Yet just over half the Democrats say people use too much energy.¶ Even on
areas where there's majority agreement, a partisan gap remains. For instance, there is broad backing for programs to help consumers
learn to make more energy-efficient choices, but the support is 81 percent among Democrats and 57 percent among Republicans.¶ Paul
Bledsoe, a senior adviser with the Bipartisan Policy Center and a former Clinton White House aide, said the results provide an unsettling
snapshot of a partisan rift that affects every aspect of policy and politics. He said the big question is whether parties and candidates will
acknowledge that they agree on a range of energy solutions and try to make progress, or keep up attacks intended to appeal to their
political bases.
Dodd-Frank Exemption Unpopular
Obama would veto any law including DF Act.
Pete Kasperowicz , June 27, 2013, staff writer for The Hill, “House votes to implement US-Mexico
offshore energy deal” http://thehill.com/blogs/floor-action/house/308263-house-votes-to-implementus-mexico-offshore-energy-deal
DeFazio and other Democrats argued that the Senate would never pass the House bill as written and said
the Dodd-Frank language delays an agreement that both parties want to see implemented. "You're
messing up a good agreement," Rep. Maxine Waters (D-Calif.) said.
The Obama administration said Tuesday that it "cannot support" the bill as written because of the
Dodd-Frank portion, although it stopped short of saying President Obama would veto the bill. "The
provision directly and negatively impacts U.S. efforts to increase transparency and accountability, particularly in the oil, gas, and minerals
sectors," the White House said.
DF is unpopular – unnecessary, extranseous provisions
Ben Geman, June 25, 2013, staff writer for The Hill, “White House ‘cannot support’ House US-Mexico
drilling bill”, http://thehill.com/blogs/e2-wire/e2-wire/307769-white-house-cannot-support-house-usmexico-drilling-bill
The White House said Tuesday that it opposes House legislation to implement a 2012 administration pact with Mexico on Gulf of
Mexico drilling cooperation, citing “unnecessary, extraneous provisions that seriously detract from
the bill.”¶ The formal statement of administration policy backs the “goal” of the bill that’s coming to the House floor Wednesday to
implement the U.S.-Mexico Transboundary Hydrocarbons Agreement.¶ But it cites provisions in the GOP-crafted bill that exempts oil companies
operating under the pact from controversial federal rules that force energy producers to disclose their payments to foreign governments.¶ “As
a practical matter, this provision
would waive the requirement for the disclosure of any payments made by
resource extraction companies to the United States or foreign governments in accordance with a transboundary hydrocarbon
agreement. The provision directly and negatively impacts U.S. efforts to increase transparency and
accountability, particularly in the oil, gas, and minerals sectors,” the White House Office of Management and Budget said.¶ The White
House statement, however, stops short of a veto threat despite saying it "cannot support" the measure. It says the administration looks
forward to working with Congress on an implementing bill.¶ Click here for much more on the House bill and its controversial exemption from
rules required under the 2010 Dodd-Frank financial overhaul law.¶ The
Senate version of the implementing bill,
sponsored by the bipartisan leadership of the Senate’s energy committee, does not include the exemption from
the Securities and Exchange Commission payment disclosure rules.¶ But proponents of the House measure say the carve-out is needed to
prevent a collision with confidentiality provisions in the U.S.-Mexico accord. ¶ The underlying 2012 U.S.-Mexico accord, which has support from
Republicans and the administration, is designed to enable cooperation in development of oil-and-gas along a maritime boundary in the Gulf of
Mexico.¶ “Implementing this Agreement will offer significant opportunities for responsible and efficient exploration and development of
hydrocarbon resources in an expanded area along the U.S.-Mexico maritime boundary as well as significant new opportunities for U.S.
companies,” the White House said.¶ In a separate statement Tuesday, the
White House threatened to veto a separate
GOP bill coming to the House floor Wednesday that would require a major expansion of offshore oiland-gas leasing. ¶ The House has passed similar measures in the last Congress but they did not come up in the Senate.
Only without reporting exemptions does the TBA stand a chance of passage.
Ian Gary, May 9, 2013, the Senior Policy Manager for Extractive Industries at Oxfam America and the
author of Oxfam America’s report “Ghana’s Big Test: Oil’s Challenge to Democratic Development.” He
previously worked at the Ford Foundation and Catholic Relief Services. He has been quoted in major
media outlets and has testified twice before the US Congress. “A back door attack on oil payment
transparency” http://politicsofpoverty.oxfamamerica.org/2013/05/09/a-back-door-attack-on-oilpayment-transparency/#sthash.BO6qTYFF.dpuf)
I spoke this week with Neil Brown who was, until very recently, a top Senate Republican aide working on energy issues for Senator Lugar, who
was the ranking member of the Senate Foreign Relations Committee. His response: “this exemption
is unnecessary and
inclusion would only forestall quick approval of this important agreement.”¶ He should know. As both the coauthor of a Senate Foreign Relations Committee minority staff report for Senator Lugar on “Oil, Mexico and the Transboundary Agreement” as
well as someone intimately familiar with the “Cardin-Lugar” provision in Dodd-Frank, Mr. Brown would know if the reporting requirements in
Dodd-Frank Section 1504 present any issue in approving the US-Mexico TBA. The short answer – they don’t. The
minority staff report
envisions reporting under Section 1504 and says that under Section 1504 covered companies “would
already have to disclose payments” to the SEC if “they invest in Mexico”.¶ The US-Mexico TBA requires
that certain information be kept confidential unless disclosure is required by law. The TBA text demonstrates
that the US and Mexico have already made the correct policy judgment that the specific confidentiality provisions of the TBA should be
subordinated to each country’s commitment to openness and subject to each country’s disclosure requirements. Nothing in the TBA would
require the exemption provided by H.R. 1613.¶ Tellingly, the Senate Energy Committee has introduced a bi-partisan bill, S. 812, sponsored by
Senators Ron Wyden (D-OR) and Lisa Murkowski (R-AK) to approve the US-Mexico TBA, and it contains no Section 1504 exemption provision. If
Congress is truly interested in approving this agreement and providing the “rules of the road” for joint
development of oil and gas reserves straddling the US-Mexico maritime boundary, then it should
adopt the clean Senate bill without the reporting exemption.¶ Former Senator Jeff Bingaman, past Senate Energy
Committee chairman, told Reuters that the exemption proposed by the House “complicates things significantly” for passage of the bill.
Referring to the Section 1504 exemption language, he said, “They’ve added in some things that are going to make it difficult to pass in that
form.”
The plan disrupts sequencing matters
Michael Hirsh, National Journal, 2/7/13, There’s No Such Thing as Political Capital,
www.nationaljournal.com/magazine/there-s-no-such-thing-as-political-capital-20130207
Presidents are limited in what they can do by time and attention span, of course, just as much as they are by
electoral balances in the House and Senate. But this, too, has nothing to do with political capital. Another well-worn meme of
recent years was that Obama used up too much political capital passing the health care law in his first term. But the
real problem was that the plan was unpopular , the economy was bad, and the president didn’t realize that the
national mood (yes, again, the national mood) was at a tipping point against big-government intervention, with the tea-party revolt about
to burst on the scene. For Americans in 2009 and 2010—haunted by too many rounds of layoffs, appalled by the Wall Street bailout,
aghast at the amount of federal spending that never seemed to find its way into their pockets—government-imposed health care coverage was
simply an intervention too far. So was the idea of another economic stimulus. Cue
the tea party and what ensued: two titanic
fights over the debt ceiling. Obama, like Bush, had settled on pushing an issue that was out of sync with the
country’s mood. Unlike Bush, Obama did ultimately get his idea passed. But the bigger political problem with health care
reform was that it distracted the government’s attention from other issues that people cared about more urgently,
such as the need to jump-start the economy and financial reform. Various congressional staffers told me at the time that their
bosses didn’t really have the time to understand how the Wall Street lobby was riddling the Dodd-Frank financial-reform
legislation with loopholes. Health care was sucking all the oxygen out of the room , the aides said.
Plan Popular
Dodd-Frank Exemption Popular
Dodd-Frank Exemption Popular with Oil Lobbies
German 4/26/13 [German, Ben, staff writer for The Hill, "Senate Bill on US-Mexico Drilling Lacks DoddFrank Exemption." The Hill. N.p., 26 Apr. 2013. Web. 31 July 2013.]
The Senate plan does not include language in the House version that would create a limited
exemption from Securities and Exchange Commission (SEC) disclosure rules. Republicans and oil
industry groups say the exemption is needed because of confidentiality provisions in the U.S.-Mexico
deal. Click here for much more on the House plan. The American Petroleum Institute (API), the oil
industry lobbying group that’s battling the SEC rules in court, is pushing for the House language to
prevail. “API sees the need for both the House and Senate to move to approve the agreement quickly,
and we believe that these differences can be worked on in conference,” said Erik Milito, a senior official
with the industry group. “API is hopeful that Congress and the administration will address the
problematic 1504 rules, and we certainly would like to see these important 1504 exemptions make it
through to a final bill so that U.S. companies can compete on a level playing field,” he said, referring to
the numerical section of the 2010 Dodd-Frank financial law that required the disclosure rule.
Dodd Frank support has dwindled – constitutional principles and gives too much
power to select institutions.
Hester Pierce, July 21, 2013, a senior research fellow specialising in the regulation of financial markets
at the Mercatus Center at George Mason University. Previously, she served as counsel to Commissioner
Paul S Atkins at the Securities and Exchange Commission (2004-2008). She is co-author of Dodd-Frank:
What it Does and Why it's Flawed “Dodd-Frank at three: time to reform the financial reform act”,
http://www.guardian.co.uk/commentisfree/2013/jul/21/dodd-frank-financial-reform
The process of diagnosing the problem is already underway. The ranks of those who believe that Dodd-Frank descended
from heaven in impeccable perfection have thinned considerably over the past few years. A glance through a 50-page
technical reform bill introduced by Senator Richard Shelby (Republican, Alabama) last March should convince others that Dodd-Frank isn't the
flawless piece of legislation they envisioned it to be.¶ Senator Shelby's
bill concentrates on purely technical mistakes,
but these small errors serve as mementos to the haste with which Dodd-Frank was drafted. As any lawyer
knows, even missing parentheses, misspellings, and incorrect statutory crossreferences matter a great deal.¶ That Dodd-Frank has discrete and
substantive flaws was illustrated by a bipartisan bill that passed 420 to two in the House of Representatives last month. That bill would amend
Dodd-Frank to enable information-sharing among derivatives regulators – something Dodd-Frank made inexplicably difficult.¶ But Dodd-
Frank has more fundamental problems – including the enormous powers granted to regulators and
unprecedented barriers to holding those regulators accountable. It also mandates some remarkable
departures from constitutional principles, not to mention the embrace of a financial system dominated by
a few big financial institutions handpicked by regulators.¶ After diagnosing the problem, there must be the will to amputate parts
of Dodd-Frank that are harmful or useless. This may be painful, but retaining unhealthy laws simply because they are already on the books is
foolhardy. Recall that much of Dodd-Frank became law without a whole lot of thought.
DF is inefficient in domestic and international regulatory cooperation.
Mike Konczal, July 20, 2013, staff writer for the WP, “Does Dodd-Frank work? We asked 16 experts to
find out”, http://www.washingtonpost.com/blogs/wonkblog/wp/2013/07/20/does-dodd-frank-workwe-asked-16-experts-to-find-out/
Aaron Klein directs the Bipartisan Policy Center’s Financial Regulatory Reform Initiative
“The part that has gone better is in failure resolution. Dodd-Frank
attempted to solve the ‘too big to fail’ problem in
several ways, including creating a new failure resolution regime that applies to all systemically
important financial institutions. The FDIC came up with a ‘single point of entry’ approach to carry out
the new regime although that approach does not appear in Dodd-Frank. It has been a breakthrough,
gaining significant international buy-in from both the United Kingdom and Canada.¶ “The part that has gone
worse is regulatory cooperation. The financial crisis of 2008 showed the importance of domestic and
international regulatory cooperation. Dodd-Frank’s efforts to encourage greater cooperation have so
far been mixed at best. Domestic regulators can’t agree on a Volcker Rule, the SEC and CFTC can’t agree on a common definition for a
U.S. person, and the Federal Reserve has moved aggressively through its foreign bank proposal in a way that has raised threats of retaliation
from other central banks.”
Generally, makes everyone nervous.
Mike Konczal, July 20, 2013, staff writer for the WP, “Does Dodd-Frank work? We asked 16 experts to
find out”, http://www.washingtonpost.com/blogs/wonkblog/wp/2013/07/20/does-dodd-frank-workwe-asked-16-experts-to-find-out/
Adam Levitin is a law professor at the Georgetown University Law Center
“On the plus side, the CFPB has been a huge success. The newly created agency has impressed even its critics by turning out a battery of
balanced rule-makings on schedule and flexing the most effective enforcement muscle yet seen from a financial regulator even as it continues
the failure of other federal bank regulators to
agree on the definition of the ‘qualified residential mortgage’ exemption from the Dodd-Frank Act’s
credit risk retention for securitization has contributed to the uncertainty about the future of the
housing finance market, which is the Dodd-Frank Act’s unaddressed elephant in the room for financial
regulatory reform.”
to staff up and in the face of intense political headwinds. On the minus side,
Fails in case of financial crisis.
Mike Konczal, July 20, 2013, staff writer for the WP, “Does Dodd-Frank work? We asked 16 experts to
find out”, http://www.washingtonpost.com/blogs/wonkblog/wp/2013/07/20/does-dodd-frank-workwe-asked-16-experts-to-find-out/
Marcus Stanley is policy director for Americans for Financial Reform
“The progress of the CFPB has been the most impressive thing about Dodd-Frank implementation. In 2009, very few people would have
predicted that a few years later there would be a fully operational and independent consumer financial protection bureau.
On the negative side, there
are too many other areas where regulators have not acted to use the broad
authority they were granted in Dodd-Frank to hold the financial system accountable. They have not
yet followed through with rules adequate to the problems revealed in the financial crisis, or in many
cases with any completed rules at all. An exception has been Gary Gensler at the Commodity Futures Trading Commission. While
there are flaws in the CFTC’s derivatives framework it still represents a substantial improvement over the pre-crisis lack of derivatives
regulation, and it’s impressive that the smallest financial regulator has managed to actually complete one of the biggest rulemaking jobs in
Dodd-Frank.”