01

BUSINESS

BSunday, 12 May, 2013

Courtesy BloomBerg

AS every leading candi-date has proudly noted,tomorrow’s parliamen-tary elections in willmark the first civiliantransfer of power in that

country’s 66-year history. To ensure it’s notthe last, the winner should turn to an un-likely ally: India.

Whichever party takes power in Islam-abad will almost certainly have to cobbletogether a coalition to rule. The new gov-ernment will inherit a looming , hours-longblackouts that have provoked street riots,and overlapping insurgencies and sectarianwars that have claimed thousands of lives.Though army chief Ashfaq Parvez Kayanihas resisted the temptation to restore mili-

tary rule, he will retire soon. His successorsmay not be so restrained.

None of Pakistan’s ills has a quick fix.But one key decision would immediatelyhelp jump-start the economy, lower re-gional tensions and reduce the army’s in-fluence in politics: lifting long-standing

barriers to trade with .The benefits of a border more open to

commerce are indisputable. Trade betweenIndia and Pakistan — currently less than $3billion annually — may grow tenfold ormore if existing restrictions were to belifted, according to an April produced by

the Woodrow Wilson International Centerfor Scholars. Millions in revenue are cur-rently lost via smuggling and informaltrade. Some estimates put the potential forIndian investment in Pakistan at $50 bil-lion.FrAught Border

Equally important, a more open borderwould be a less fraught one. The army’s ob-session with the “Indian threat” drives Pak-istan’s most dangerous policies. It fuels theworld’s fastest-growing and diverts thelion’s share of the country’s limited re-sources to defense. It has led the military tolend unofficial support to anti-India jihadistgroups such as Lashkar-e-Taiba, which car-ried out the deadly 2008 terrorist attack inMumbai. Pakistan has also backed Talibanfactions in as a means of countering Indianinfluence there.

A remarkable consensus in favor offreer trade with Pakistan’s archrival hasnow developed across the political spec-trum. In November 2011, the governmentpledged to grant its larger neighbor “most-favored nation” status — a decision thatcould not have been made without the sup-port of the military. (India afforded Pak-istan the same status in 1996.) All ofPakistan’s mainstream parties have en-dorsed an economic rapprochement. Thefront-runner — Punjabi magnate and for-mer Prime Minister — has made increasedtrade and economic progress central to hisappeal to voters.inForMAl BArriers

Pakistan has yet to follow through onits 2011 pledge. Now is the time to do so.

The next government should immediatelytrim back the list of that still cannot be im-ported. Some of these restrictions are meantto defend Pakistani farmers, say, fromcheaper Indian crops. But mostly they pro-tect well-connected lobbies: More than 500of the banned goods affect the automobile,iron and steel industries.

India needs to do what it can to helpthe next Pakistani government. ThoughIndia’s list of banned imports is muchsmaller, other informal barriers still im-pede Pakistani exports. It takes sixmonths for Pakistani companies to getapproval to ship cement to India, for in-stance. The government in should striveto eliminate such roadblocks and to im-prove transport and logistics links acrossthe border. Better trade facilities alonecould pump up Pakistan’s exports toIndia by 200 percent.

Both sides need to act quickly, beforeanother terrorist attack or domestic politi-cal controversy derails the current mo-mentum. India’s next government couldwell be led by the Hindu nationalist ,whose base remains deeply skeptical ofPakistan’s trustworthiness. ( must be heldbefore the end of next May.) The impend-ing U.S. pullout could turn Afghanistaninto another shadow battleground for theSouth Asian rivals, much like the disputedterritory of Kashmir.

Delay has allowed past opportunitiesfor reconciliation to slip away. Neither Pak-istan nor India — whose own economy isslowing dramatically — can afford to letthis happen again.

Courtesy BloomBerg

President ’s suggestion last weekend thatgreater U.S. exports of liquefied natural gasis a welcome sign. More exports wouldspur more domestic production and helpbalance U.S. trade.

LNG exports could also help counterthe unsettling increase in American to. In2012, the U.S. sent about 66.4 million shorttons (60.2 million metric tons) of coalacross the Atlantic, 23 percent more thanthe year before. Exporting coal worksagainst the progress the U.S. has made inlowering its own greenhouse-gas emissionsby replacing coal power with cleaner-burn-ing natural gas.

In Europe and Asia, where natural gassells for $10 to $16 per million Britishthermal units — three to four times theU.S. price — demand is high. Importsfrom the U.S. could also give Europeancountries greater power to bargain onprices with ’s OAO Gazprom, now adominant supplier of natural gas. Allthat’s missing are the U.S. facilities toliquefy gas for export.

Opposition to building these terminalscomes mainly from U.S. manufacturingcompanies that domestic natural-gasprices go up as some of the supply is soldoverseas. Dow Chemical Co., Alcoa Inc.and other industrial-energy users arguethat by raising domestic prices, exportswould slow the U.S. manufacturing ren-aissance and hobble economic growth.Paul Cicio, president of the Washington-based trade group Industrial Energy Con-sumers of America, has delayingapprovals for some new export terminalsto avoid a domestic price shock.

Individual consumers, too, have reasonto wince at the prospect of electricity andnatural-gas bills going up because ofgreater exports.More Production

Yet any increase in prices would betemporary if gas production rises, too. Thelow U.S. prices of the past year and a half(last June, they were less than $2.50 permillion Btu, and have since risen to about$4) led many energy companies to stopdrilling. With more demand from exports,more production is to be expected. As muchas 80 percent of foreign demand for Amer-ican natural gas could be met by newdrilling, suggest.

In for the U.S. Energy Department,NERA Economic Consulting found — asother have before — that exports wouldbring a net economic benefit by helping tobalance U.S. trade. The increase in grossdomestic product may amount to $20 bil-lion, or possibly as much as $47 billion ifvery large amounts of LNG — 12 billioncubic feet per day — are exported, theNERA study found.

Delaying or restricting export termi-nal permits would not only negate thatbenefit. It would also put the U.S. in anew trade quandary: Because there is nonational-security reason to limit exportsof the U.S.’s new surplus of natural gas,doing so would amount to unfair compe-tition. As Michael Levi of the Council onForeign Relations has pointed out, theWorld Trade Organization might see lim-its on U.S. natural-gas exports as no lessunfair than are ’s restrictions on exportsof rare-earth elements.

The U.S., with its trade deficit, should-n’t see its booming oil and gas production

as a reason to secede from global energymarkets.

Obama seems to agree; in Costa Ricaon May 4, he said he envisions the U.S. be-coming a net natural-gas exporter by 2020.If so, he has some work to do convertingwords into action.

Last year, the Energy Department gavea permit to one facility in Louisiana to sellLNG to countries without trade agreements

with the U.S. — including sales to and Eu-ropean nations. Nineteen more applicationsare pending. Given the expense and timeinvolved in building these plants — severalbillion dollars each and at least four years— only a few can be expected to come tofruition.

A recent Moody’s Investors Service re-port predicted that if three more plants —in Texas, Maryland and — are soon ap-

proved, as expected, it will still take until2020 for the U.S. to export significantquantities of natural gas.

On May 4, Obama said, “I’ve got tomake an executive decision broadly aboutwhether or not we export liquefied naturalgas at all.” Though the decision has yet tobe made, the right one is clear, and the ap-provals of the new plants should be madewithout delay.

US should export natural gas, not coal

PRO 12-05-2013_Layout 1 5/11/2013 11:51 PM Page 1

BUSINESSSunday, 12 May, 2013

02

B

Courtesy BloomBerg

lONG-TERM unem-ployment is one of themost vexing problemsthe U.S. faces, andtoday’s jobs reportshows all-too-meager

progress in fixing it.The U.S. created 165,000 new jobs in

April, pushing down the to 7.5 percentfrom March’s 7.6 percent. But as of the endof April, 4.4 million Americans, or 37 per-cent of the unemployed, had been withouta job for 27 weeks or longer, barely betterthan March’s 39 percent. The U.S. can’t af-ford to more than 4 million people whowould like to work but haven’t for morethan six months.

Long-term joblessness peaked in April2010 at 6.7 million, so the picture mightseem to be improving. Hidden within thatnumber is this troubling fact: The averageunemployed person has been out of workfor . That’s not much better than the De-cember 2011 duration of 40.7 weeks,which was the longest since World War II.Long-term unemployment at the start ofthe recession in December 2007 was 1.3million people, and the average durationwas 16.6 weeks.

Terrible things happen to people whenthey are out of work for long periods, nu-merous show. Beyond a sharp drop in in-come, long-term unemployment isassociated with higher rates of suicide, can-cer (especially among men) and divorce.The children of the long-term unemployedalso show an increased probability of hav-ing to in school.Finding cAuses

There is less agreement on why somany people have been out of work for solong. Democrats generally point to the ane-mic recovery, in which weak demand forgoods and services results in less hiring.The cyclical nature of unemployment, theysay, can be addressed with more govern-ment stimulus.

Republicans tend to focus more onstructural problems, in which the educationand experience levels of the unemployeddon’t match what employers say they wantin job candidates. More , they say, wouldbe a waste of money because it won’t closethe skills gap. Some Republicans also thinkthat extended unemployment benefits are adisincentive to job hunters.

Recently, though, in both camps havecome to agree that something bigger — andmore insidious — is at work: Unemploy-ment causes social scarring. In other words,the stigma of long-term joblessness is, byitself, causing persistent joblessness. This

is true whether you have a college degreeor a high-school diploma, whether you aremiddle-aged or 20-something. It’s also truewhether your collar is blue or white.

When at the sent fake resumes toemployers with , the length of time can-didates had been out of work matteredmore than their job experience in deter-mining who got called in for an inter-view. Applicants who had only recentlylost a job but had no relevant experiencewere far more likely to be called thanthose with many years of experience whohad been out of work a long time. So

much for the skills gap.One way to thwart such bias is to make

sure the unemployed understand that theirchances of getting work improve if they arein a job-training program or working atleast part-time. Not is paramount. This iswhere government can help.

Unfortunately, the U.S.’s job trainingeffort is a mishmash of 47 programsspread across nine agencies. At $18 bil-lion a year, it’s also costly. The effective-ness of those programs is hard to quantifybecause of poor data collection and man-agement oversight, the Government Ac-

countability Office Only five of the 47 programs could

demonstrate whether a positive outcome —meaning a trainee got a job, for example, orobtained a new credential — could be at-tributed to the program. About half the pro-grams hadn’t had a performance reviewsince 2004.Finding solutions

Finding out what works is crucial.Other solutions should be tried, includinggiving preference to the long-term unem-ployed when filling federal governmentjobs. In addition, President should ask Con-

gress to approve tax breaks for companiesthat hire the long-term unemployed.

Work-share programs, in which em-ployees accept reduced hours when de-mand is slack in exchange for tocompensate for lost wages, has worked inother countries. The U.S. should also ex-periment with state-based clearinghousesthat connect employers with job-seekersin other states and subsidize the movingexpenses.

The U.S. is in dire danger of having apermanent class of long-term unemployed.It has to do better.

Floyd Norris

The New York Times

THE recovery from the Great Recessionhas been slow, or even nonexistent, in most

of the developed world.But not in gerMAny.

In Germany, alone among the 27 mem-bers of the European Union, unemploymentrates for both older and younger workers

are now lower than they were when theUnited States slipped into a recession at theend of 2007.

In the rest of the euro zone, the unem-ployment rate for workers ages 25 to 74 hasmore than doubled over that period, to 12.8percent. The rate for younger workers ismore than 30 percent, on average — andabove 50 percent in Spain and Greece. InGermany, it is less than 8 percent.

The accompanying charts show howunemployment rates for both groups ofworkers have changed in each of the 17countries in the euro zone, as well as forBritain and the United States.

In terms of adult unemployment rates,the most recent figures for the United States(6.1 percent) and Britain (5.7 percent) arenot that far from Germany’s figure of 5.1percent. The major difference is in youthunemployment, which is above 16 percentin the United States and above 20 percentin Britain.

What accounts for that difference?Some of the credit goes to Germany’s edu-cation and employment system for youngworkers, and to German policies that en-

courage employers facing downturns to re-duce working hours rather than fire work-ers. In Germany, students are separated intodifferent career tracks, with many put intoa system that leads to apprenticeships ratherthan to college degrees.

But that is not the entire story. The eurozone’s troubles have helped Germany’s ex-port-oriented economy. The weak euro hasmade Germany’s exports more competitiveagainst those of countries with which itcompetes, most notably the United Statesand Japan. Since the end of 2007, the eurois down about 10 percent against the dollarand about 20 percent against the yen.

Were the euro zone to break up, thereis little question that the value of a newGerman mark would rise sharply, while thecurrencies of many other members of thezone would fall relative both to the markand other international currencies. Thatwould depress German exports.

The charts reflecting Germany’s unem-ployment rates, if they were the only evi-dence available on world economic trends,would seem to indicate there was a milddownturn in 2009 that soon ended, with the

economy recovering the next year. TheUnited States charts would indicate a moresevere downturn, followed by a recoverythat began in 2010 and may now be gather-ing strength. In Britain, there has beenmuch less progress since unemploymentpeaked in 2011.

In the 16 other euro zone countries as agroup, the chart indicates a deep recessionthat leveled off in 2010 and 2011 but hassince gotten much worse — particularly foryoung workers. “We will have to speed upin fighting youth unemployment,” the Ger-man finance minister, Wolfgang Schäuble,said at a conference this week, “becauseotherwise we will lose the support, in ademocratic way, in some populations of theEuropean Union.”

If that is to happen, it may require achange of course for Europe, where it ap-pears the rich will continue to get richer.The European Commission’s latest eco-nomic forecast, released last week, pre-dicted declining unemployment inGermany this year and next, but said job-lessness was likely to continue to climb inFrance, Italy and Spain.

Long-term unempLoyment isturning jobLess into pariahs

Recovery in Germany is faster than elsewhere

PRO 12-05-2013_Layout 1 5/11/2013 11:51 PM Page 2