Obama In Tough Summit With Russian Leaders

Developing Countries Need Trade

The developed world can help them overcome their supply-side constraints.

PASCAL LAMY From today's Wall Street Journal Europe.

GENEVA -- We are experiencing the worst economic crisis in 70 years. No economy has been spared its brutal effect and the full human and social impact of what has been wrought is still to come.

Crises such as these often cause governments to reassess their commitments and their priorities. Too often, this has led them to shy away from continuing their efforts to combat poverty and suffering in the developing world through sound aid and trade policies. Trade is a major casualty of this crisis. The steep reduction in trade volumes over the last eight months has subjected many open economies to economic volatility and has led some to question the role of international trade as an engine of economic growth and development.

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History tells us that no poor country has ever become wealthy without trade. Moreover, many developing country success stories -- Singapore, South Korea, Chile, China and Malaysia, to name only a few -- have, in recent decades, seen their national incomes grow by a percentage point or more per year as a result of open trade policies than would have been the case had they remained closed. The extra funds generated during this period have enabled them to respond to the crisis with stimulus packages that have prevented the crisis from turning into a protracted recession with its inevitable human costs.

But it is true that trade is not a panacea for everyone, everywhere, every time. For trade to work, governments must have the physical and governmental infrastructure, production capacity and technical skills to take advantage of the market opening opportunities which arise from trade opening. Market opening must go hand in hand with policies that lift people out of poverty and distribute the benefits of trade expansion equitably across and within developing countries. That's why four years ago at a World Trade Organization Ministerial Conference in Hong Kong we launched an initiative we call Aid for Trade. Aid for Trade is all about enhancing growth prospects by helping countries overcome their supply-side constraints and increase their competitiveness and their effective participation in world trade.

Aid for Trade is about helping to integrate developing countries into the global economy and ensuring that they can take advantage of trade opening and greater access to markets for their exports of goods and services. One key component of this is the creation of adequate physical infrastructure -- roads, ports, telecommunications, electricity supply, storage facilities -- to ensure the consistent and reliable flow of goods, services and information that underpin global trade. Another is to ensure that producers are trained in meeting global product quality and safety standards demanded by the world's consumers. Improving physical and human capacity will further assist countries in diversifying their production and reaching new markets.

It's a heady goal to be sure, and the WTO certainly cannot do this on its own. We see ourselves as coordinators, relying greatly on our partnership with international financial institutions, the global and regional development banks and bilateral donors. They take the lead in financing Aid for Trade projects.

The North-South corridor better linking Southern African countries is a good example. This infrastructure project would provide a substantial boost to development and poverty alleviation in the region by addressing the transportation, communications and energy challenges facing Sub-Saharan Africa today. Funds for this project have been pledged from the African Development Bank, the World Bank and various donor countries including the United States, the European Union and Japan. The Mesoamerican plan, which links Central American countries more efficiently through better roads and easier border formalities, is another example, as is the Greater Mekong Sub-region project, which offers Southeast Asian countries a blueprint for better development opportunities in much the same manner.

To improve on our work in this field and to assess the achievements and the needs for the future I have invited the major international financial institutions and regional development banks as well as donors and recipients to Geneva this week for a collective Global Review on Aid for Trade. Our objective is to monitor Aid for Trade flows more effectively; to improve the assessment of the trade development needs of developing countries; to move the focus of our work from pledges of support to getting these projects up and running; to strengthen the regional dimension of Aid for Trade by encouraging more trade between neighboring countries; and to devote additional efforts toward a broader participation of the private sector, private foundations and civil society in this initiative.

Governments have increased their commitments to Aid for Trade by 10% annually since 2005 and funding pledges today stand at more than $25 billion annually. Non-concessional loans add an additional $27 billion to help developing countries overcome production constraints. Importantly, this increase in Aid for Trade has been achieved without reducing resources to other development priorities such as health, education or environment. The global economic crisis threatens such support. And yet making such resources available will be essential to help poor countries be better prepared to exit the crisis.

As G-8 leaders prepare to meet in l'Aquila, Italy, they must remember that Aid for Trade is part of our collective response to the present situation. We have to make sure it is more and more effective in helping developing countries overcome their economic difficulties. It's what people expect from us today.

Mr. Lamy is director-general of the World Trade Organization.

Obama In Tough Summit With Russian Leaders

The Palin Puzzle

This isn't the way to win in 2012.

The political class is flummoxed by Sarah Palin's decision to quit as Alaska Governor, and understandably so. Giving up on an executive job a year and a half early isn't the best way to persuade voters you're ready for the more demanding rigors and scrutiny of the White House.

Mrs. Palin's explanation on Friday was hardly clear or persuasive, wandering from the taxpayer expense of various ethics probes, to the self-indulgence of lame-duck Governors who serve out their terms, to the fact that she and her family had concluded she can better serve the people out of public office. Some Alaskans, including many of her admirers, can be forgiven if they conclude she bugged out when the going got rough.

Perhaps she is finished with political life, and who could blame her? Since John McCain chose her as his running mate after a mere two years as Governor, Democrats and their media running mates have given her the kind of mauling they always reserve for conservative Republicans who aren't part of the Beltway club. At least the press corps left Dan Quayle's children out of his trashing. For whatever reason, Mrs. Palin seems in particular to drive feminist writers into condescending fits. If she wants to devote herself during the next few years to raising her family, writing a book and making money to pay her legal and medical bills, those are understandable choices.

The more troubling question is whether the 45-year-old is also calculating that this is the best way for her to seek the White House in 2012. If so, she's probably mistaken. Her main claim on executive experience is the Alaskan state house, and giving it up early diminishes an otherwise solid record, especially in challenging GOP elites, and reneges on a promise to voters. Millions of conservatives admire her reform credentials and her personal story, but to win the White House she needs to persuade millions of others, including independents, that she has the policy depth and personal judgment to be President.

Our advice after the election last year was that Mrs. Palin spend two years out of the limelight, tending to her Alaskan duties and studying national issues. Last year's campaign showed she didn't understand economics any better than Mr. McCain -- a very low bar -- and her responses on too many issues sounded like half-baked spin rather than sincere judgments that she herself had reached or understood. No doubt Mr. McCain's backbiting campaign team didn't help her -- we hope the next nominee bars them all -- but every candidate is ultimately responsible for her own performance.

Ronald Reagan changed the national debate, and for three decades Republicans have been able to utter bromides about "liberals" and "big government" and get away with it. After the financial meltdown and long recession, those days are over. The GOP nominee in 2012 will need an explanation for how we got into this mess that goes beyond mimicking Democrats about "Wall Street greed," as well as an agenda for how to restore U.S. prosperity. President Obama will take credit for any recovery, however sluggish, and Republicans will need more than a critical riff about spending and budget deficits.

On the evidence so far, Mrs. Palin isn't yet up to that task. Whether she will be in two years, or six or 10, will depend on whether she's willing to do the hard policy work that can add substance to her natural political talents.

The President's Mission to Moscow

Obama doesn't need to engage Russia's leaders. He needs to deter them.

DAVID SATTER

Moscow

President Barack Obama arrives here today facing a dilemma of his own making. Having called for a "reset" in U.S.-Russian relations, the U.S. side is virtually obliged to make some new overtures. But Russia does not need to be engaged. It needs to be deterred.

The expectations that Mr. Obama has inspired are substantial. Both officials and ordinary citizens in Russia interpret the call for a reset as an admission of U.S. guilt for ignoring Russia's interests. Sergei Rybakov, the Russian deputy foreign minister, said that mutual trust was "lacking over the last several years." It was the task of the U.S. to show its good intentions with "concrete actions" because in Russia, the U.S. is "deeply distrusted."

David Gothard

Accepting the Russian view of reality on the issues that divide the U.S. and Russia, however, would be a grave mistake. Russia aspires to resurrect a version of the Soviet Union in which it projects power and dominates its neighbors. To encourage its ambitions in any way would be to undermine not only U.S. security but, in the long run, the security of Russia as well.

There are three important areas of conflict between the U.S. and Russia: NATO expansion, the U.S. missile shield in Eastern Europe and the Russian human rights situation. In each case, any reset should be on the Russian side.

The most urgent issue may be NATO expansion. There are serious indications that Russia is preparing for a second invasion of Georgia. The first Georgian war was accompanied by a burst of patriotism in Russia but didn't achieve its strategic objectives. Georgian president Mikheil Saakashvili remains in power and Georgia remains a supply corridor to the West for energy from Central Asia and the Caspian Sea. Many Russian leaders want to finish the job. At a televised forum in December, Prime Minister Vladimir Putin was asked about press reports that he had told French president Nicolas Sarkozy that Mr. Saakashvili should be "hung by his ba**s." He replied, "Why only by one part?"

Under these circumstances, the best protection for Georgia is NATO membership. According to Pavel Felgenhauer, a defense analyst with Novaya Gazeta, the decision to invade Georgia last August came in April after NATO failed to offer outright a Membership Action Plan to Georgia and Ukraine at its annual summit in Bucharest.

Russia will argue strenuously that Georgia, Ukraine and the other former Soviet republics are part of its sphere of "privileged interests." This is an issue on which Mr. Obama cannot give way. If the former Soviet republics are denied NATO membership at Russia's behest, they either will be turned into Russian satellites with manipulated elections and a controlled foreign policy or form a zone of instability along Russia's borders with unpredictable consequences for both Russia and the West.

Beside the issue of NATO expansion, Russia and the U.S. have a critical conflict over U.S. plans to install a missile shield in the Czech Republic and Poland. Not only have U.S. experts argued that the anti-missile system is not aimed at Russia but Russia's military experts agree. Nonetheless, the system is described by Russian leaders as a threat and denunciations of the missile shield are a staple of the anti-Western programming on Russian state television.

According to Mikhail Delyagin, who served as an adviser to former Russian Prime Minister Mikhail Kasyanov, the placement of rockets in Poland is unacceptable to Russia for emotional and symbolic reasons. "It shows that the U.S. is now the master in Eastern Europe," he said. Any decision to yield to Russian objections, however, would effectively divide NATO into countries that need Russian approval for deployments and those that do not. Even dubious Russian promises to help with Iran would not compensate for the damage done to the alliance by such a concession to Russian pretensions.

Finally, there is the conflict between Russia and the U.S. over human rights. The status of human rights is a universal concern but it also has strategic implications. A population that lacks democratic rights and is subject to constant anti-Western propaganda can easily be mobilized against the U.S.

By any measure, the state of human rights in Russia is unacceptable. Russia today lacks honest elections or a separation of powers. The regime allows a degree of freedom but the features of daily life include police torture, prisoner abuse, political control of the courts and, for democratic activists, the danger of being beaten or killed. The result is that fear has returned to Russia less than two decades after the fall of the Soviet Union.

The regime is also taking steps to curtail freedom of speech. Freedom of the press has long been restricted under Mr. Putin with censorship on state run television and pressure on newspapers through their owners, to exercise self censorship. Peaceful demonstrations have also been forcibly dispersed. In recent weeks, however, a bill has been introduced in the State Duma that would make it illegal to deny the role of the Soviet Union in the victory in World War II or the crimes of Hitler's cronies (but not the crimes of Stalin and his entourage). The punishment both for Russian citizens and for foreigners will be three to five years in prison.

In the run up to Mr. Obama's visit, Russian academics and self described realists in the U.S. have called for a "grand deal" in which the U.S. accedes to Russian demands in the former Soviet Union in return for Russian help on Iran, North Korea and Afghanistan. In the case of Iran, Russia, which has repeatedly thwarted tough United Nations resolutions on that country's nuclear energy program, is offering to assist in dealing with a problem that it helped to create.

Unfortunately such a deal, the only "reset" in which the Russians have shown any interest, would eliminate moral criteria from the U.S.-Russian relationship and deprive the U.S. of any basis for limiting Russia's demands in the future. Under those circumstances, Russia's appetite is likely to grow.

Mr. Obama may wish to improve the U.S.-Russia relationship but the problems in that relationship come not from our actions but from assumptions on the Russian side about the prerogatives of power that we cannot possibly accept. Instead of resetting relations, we may just have to content ourselves with resisting Russian pretensions until such time as the mentality that gives rise to them can be changed.

Mr. Satter is a senior fellow at the Hudson Institute and a visiting scholar at the Johns Hopkins University School of Advanced International Studies (SAIS). He is writing a book on the Russian attitude to the Soviet past.

Information Overload? Relax

We survived copy machines. We'll survive Twitter.

• By L. GORDON CROVITZ

Just in time for summer, Crown Imports has brought back a popular television advertisement for its Corona beer that first aired in 1998. The new one shows a man at the beach skipping rocks into the sea. He decides to do the same with his BlackBerry -- a beeper in the earlier version -- when it interrupts his relaxation by ringing and vibrating.

The ad addresses one of the key causes of anxiety in the information age: What does it mean that for the first time, information is no longer scarce? We have fast and easy access to the communications and the facts we need, through email, the Web, Facebook, Twitter, text messages and other tools. So now we have the problem of too much supply. How can we escape useless information, unneeded emails and unwanted communications?

Our era in the information age is a transition period of learning how to navigate information abundance. Rather than pitch our BlackBerrys and iPhones into the sea, imagine the benefits once we have figured out how to manage the chaos of endless data and routine multitasking, a process that will help refine our judgment about information and refocus our attention on what's truly important.

For now, popular culture is more troubled than excited by information abundance. Actress Gwyneth Paltrow told an interviewer last week that she spends so much time in Spain because "they seem to enjoy life a little bit more. . . . They don't always have their Blackberrys on." In order to get passengers to pay attention to safety announcements, Air New Zealand decided to show a video of stewardesses and pilots dressed in nothing but body paint.

One of the companies that led the charge on information is trying to make a business out of solving the problem. Xerox says, "We've been navigating the flood of information for 70 years -- since the first xerographic print launched the 'sharing era.'" It makes the case that "too much information can make you feel powerless and unproductive," reporting that more than half of people think that less than half the information they get at work is valuable. Xerox hosts a corporate blog called Information Sanity, with tips on how to cope.

As one data point, a search for "Information Overload" on Google returns 2.92 million results in 0.37 second.

The book "Rapt" by Winifred Gallagher reports that many neuroscientists believe attention is a process of either selecting a topic or not. As suggested by the expression "pay attention," we have a limited ability to focus. If this is right, young people who do their homework while on Twitter, the phone and YouTube may not be engaging deeply enough. "When you're finally forced to confront intellectually demanding situations in high school or college," Ms. Gallagher writes, "you may find that you've traded depth of knowledge for breadth and stunted your capacity for serious thought."

But there's a more optimistic way to think about the issue. Humans adapt, so we'll learn how to live with information overabundance. Young people growing up multitasking are already less anxious about using technology and may well cope better than those of us in older generations. They have no choice but to get more sophisticated at separating the important from the unimportant and the authoritative from the unreliable, even while sampling from among many new kinds of information tools.

Tyler Cowen, an economist and popular blogger, focuses on our broader range of information options in a new book published this month, "Create Your Own Economy." He says, "When access is easy, we tend to favor the short, the sweet, and the bitty. When access is difficult, we tend to look for large-scale productions, extravaganzas, and masterpieces." Mr. Cowen says, "The current trend -- as it has been running for decades -- is that a lot of our culture is coming in shorter and smaller bits."

Different kinds of information are useful for different purposes. "Paying attention" means different things for different tasks. As cognitive scientist David Meyer puts it, "Einstein didn't invent the theory of relativity while multitasking at the Swiss patent office." For other kinds of tasks, though, access to blogs and Twitter posts at least gives us the chance to become aware of issues we might want to pursue further, in greater depth.

Technological progress does not reverse, so the trend toward multitasking and consuming many different types of information will only continue. Getting our heads around information abundance will mean becoming more discerning about what information is worth our time and what kinds of tasks require real focus. Tools like on-demand information and smarter filtering will help.

Still, the development of this human software to deal with an overabundance of information will take some time to catch up to the machine technology that made the information abundance possible. Young people will cope first as we all evolve to become more sophisticated, less anxious users of information.

Stocks Stumble as Oil Slides

• By PETER A. MCKAY

A slump in the energy sector and worries about the upcoming earnings season weighed on stocks Monday morning.

The Dow Jones Industrial Average was off about 60 points at 8220.28 at 10:56 a.m. Its energy components, Exxon Mobil and Chevron, fell around 2% each as oil prices plummeted.

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The commodity put in solid gains along with the stock market, helped by an influx of speculative bets by traders newly willing to take on risk. But in recent sessions, it has been hurt by worries about demand weakness due to the global recession, which now seems likely to last longer than many traders expected.

Crude futures were recently down $2.54 to $64.19 a barrel in New York, leading a broad decline in raw materials. The Dow Jones-UBS Commodity Index was off 2.9%.

Blue-chip aluminum maker Alcoa fell 7.2%, hurt by both the weakness in commodity prices and investors' shifting focus to the second-quarter earnings season. Alcoa will announce its results after Wednesday's close, marking the symbolic start to a reporting season that many investors are looking forward to with increasing dread.

For much of the year, the consensus on Wall Street was that the global economy would begin a rebound in the second half of the year. But now that the second half is here, there is little evidence of such a comeback, and executives seem unlikely to provide much solace in the forecasts that accompany their companies' second-quarter financial statements.

One relative bright spot, however, may come from the relatively low-bar set by the year-ago period as a comparison to the forthcoming numbers. Since the U.S. economy has now been in recession for more than a year and a half, it's getting easier for companies to beat analysts' earnings expectations with each passing quarter, say veteran traders and analysts.

"There is an opportunity here for the season to come out on a positive note," said Richard Sichel, chief investment officer at the poortfolio-management firm Philadelphia Trust Co.

He added: "Companies have dramatically cut their expenses, so bottom lines might be better than expected. We probably still won't see top-line revenue growth, which would be nice. But for now, we'll take bottom-line growth if we can get it."

In recent action, the S&P 500 was off 0.9%, hurt by declines in ever sector except consumer staples, a traditional haven that managed a 0.7% rise. The Nasdaq Composite Index was off 1.3%.

In economic news, the Institute for Supply Management said its non-manufacturing index, a measure of U.S. service-sector activity, rose to 47.0 in June, up from 44.0 in May. The latest reading was better than analysts expected, signalling a slowing contraction in the service sector.

The dollar stuck to narrow ranges against major counterparts, losing ground to the yen but edging higher against the euro ahead of this week's Group of Eight meeting.

Among stocks to watch, LDK Solar shares sank more than 5% after the solar-power company boosted its wafer shipment forecast for the second quarter but issued a revenue view below Wall Street estimates.

Most Asian markets ended lower Monday, with oil and mining shares tumbling on the drop in commodity prices. Tokyo's Nikkei slid 1.4% and Hong Kong's Hang Seng Index fell 1.2%. European shares also sank as commodities-linked stocks declined.

Treasury prices were mixed. The two-year note gained 3/32 to yield 0.941%.

Futures Down Ahead of Earnings Rush

U.S., Russia Set Arms Treaty Goals

| A WALL STREET JOURNAL NEWS ROUNDUP

AFP/Getty Images

Obama and Russian President Medvedev meet at the Kremlin. The White House appears to be trying to boost Mr. Medvedev, limiting attention to Russian Prime Minister Vladimir Putin.

MOSCOW – U.S. President Barack Obama and Russian President Dmitry Medvedev have signed what they call a "joint understanding" to negotiate a new arms control treaty that would set substantially lower levels of nuclear warheads for both countries.

The deal would replace a nuclear arms treaty that expires in December.

Meeting in Moscow, the two presidents hailed their new approach on arms control. They set a goal of negotiating new limits of between 1,500 and 1,675 deployed strategic warheads. That compares with a current limit of between 1,700 and 2,200 warheads.

They also said their negotiators would work out new limits on the bombers, land-based missiles and submarine-based missiles that carry such warheads. The new limit on those vehicles would be between 500 and 1,100. The current limit is 1,600.

The deal sets up tough talks on warhead launch systems and verification procedures ahead of the Dec. 5 deadline, when the current Strategic Arms Reduction Treaty expires.

Obama In Tough Summit With Russian Leaders

1:48

U.S. President Barack Obama flew through the night to reach Russia, where he faces a tough two-day summit over a variety of defense-related issues with top Russian leaders.

Related

• Joint statement from the U.S. and Russia

The Cold War imagery of two nuclear powers negotiating arms control suits the Kremlin by thrusting Moscow back to prominence on the world stage, but Mr. Obama has a stake in the talks as well. Completing a new strategic arms treaty is the first small step in a far broader arms control agenda that he believes will further isolate North Korea and Iran.

U.S. negotiators hope to turn immediately to a more ambitious treaty with Russia reducing nondeployed strategic warheads and battlefield "tactical" nuclear weapons. Another effort is seeking an international ban on fissile materials, and the president is likely to submit the Comprehensive Test Ban Treaty to the Senate some time next year.

All of that would precede a major United Nations conference to update and toughen the nuclear Non-Proliferation Treaty.

The White House appears to be trying to boost Mr. Medvedev as the more progressive and forward-thinking of Russia's leaders, limiting attention to Russian Prime Minister Vladimir Putin, despite the fact that the prime minister is widely viewed to be the more powerful partner in Russia's ruling tandem. After four hours of talks with Mr. Medvedev on Monday, Barack and Michelle Obama will dine with Mr. Medvedev and his wife Monday night. An additional session with Mr. Medvedev was added for Tuesday, after a one-hour breakfast at Mr. Putin's Moscow dacha.

Associated Press

Russia's President Medvedev, left, welcomes Barack Obama to the Kremlin.

For his part, Mr. Putin has scheduled his own event Tuesday, a business deal-signing ceremony, and invited cameras to grab some of the spotlight.

Wading into murky Kremlin politics is a risky gambit that could backfire, analysts said. Andrew Kuchins, director of the Russia program at the Center for Strategic and International Studies, says any attempt to play up perceived splits will not work. "Obama should have no illusions that he can do anything in Moscow to empower Medvedev," he said. "There's no daylight between them."

Outside the talks with Messrs. Medvedev and Putin, the U.S. president's schedule focuses on meetings with civil-society and opposition leaders, including Garry Kasparov, the former chess champion who's a fierce critic of the Kremlin.

For arms control negotiators, a sticking point remains over how to count U.S. submarines and bombers that have either been converted to non-nuclear use or mothballed. Four U.S. Trident submarines with 48 missile tubes and the entire B-1 bomber fleet have been reconfigured to launch conventional bombs and missiles. The U.S. considers dozens of B-52 bombers that once carried nuclear weapons as unable to fly, but they are not destroyed.

Russian negotiators want all those systems counted under the limit of nuclear weapons launch vehicles in the new treaty, according to Mr. Samore, the White House official. U.S. negotiators say that either means the new treaty has a very high limit on warhead launchers – not the public relations image either are looking for – or the Russians accept that these "phantom" converted or mothballed delivery systems don't count, something the Russians oppose.

The Russians are continuing to say they cannot reach a final agreement on a new treaty if the U.S. insists on deploying missile defense systems on Poland and the Czech Republic. U.S. negotiators say a decision on that deployment will come this fall, based on technical, not diplomatic, considerations. They say the Russian position is mostly posturing ahead of Mr. Obama's visit and shouldn't affect the chances for agreeing on new talks.

But Russian mistrust of Washington is high after years of what the Kremlin sees as failure by the U.S. to follow through on promises. As a result, they're pushing for public, binding assurances on missile defense, which the Kremlin views as a threat to Russia's nuclear deterrent.

Answering written questions from the opposition newspaper Novaya Gazeta, Mr. Obama dismissed that, saying "that kind of thinking is simply a legacy of the Cold War."