Jean Labrique
(Secretary General to Western Defense Studies Institute, Rome
and President to European Osint Nexus - EON, Paris – Bruxelles)

Copyright: Jean Labrigue on line

Spain, Hungary and Belgium have agreed to cooperate during the period they will each head the EU.

The challenges are many and amongst them there is one that we should monitor with interest: inter-government cooperation in the sharing of information and intelligence. I use both words deliberately. In the modern computerized world, information - masses of information, is readily available to everyone, private citizen and governments alike…however, intelligence is that information which has been collected, processed and analyzed…usually by governments. It is this process of collection, analysis and dissemination that makes information useable, i.e. intelligence…and also probably sensitive and classified.

In 2007 Hungary launched an initiative called Open Source Intelligence or OSINT. Much to their dismay, the founders discovered that the EU apparatus were, to say the least, reluctant to the idea of pooling or sharing intelligence. In fact, immediately after the launching, EU agencies made it clear that, intelligence, open source or other, should be a government-only initiative and that NGO’s were to be kept far from the meetings.

One member of the Roman think tank, Western Defense Studies Institute, suggested the use of different semantic i.e. open source information instead of open source intelligence. This was favourably received, and at the third Budapest meeting, OSINT Budapest Club became OSINF Budapest Club. This was immediately appreciated by the EU government agencies attending the meeting. It changed the chemistry of the gathering.

A fourth meeting was held in Bucharest. Some agencies tried to relegate the Hungarian initiative -OSINF Budapest Club- to a secondary role and to even neuter the innovative concept of open source information sharing by treating it the same manner as traditional government intelligence – to be jealously protected, guarded and NOT SHARED!

But the ball was already rolling, some member countries were co-operating with the Budapest Club initiative. New information technologies were combining with the ancient practice of human information/intelligence collection (HUMINT or HUMINF). One could no longer ignore or dissolve the process without risking to be left behind, conceptually in the last century.

Although the Budapest Club had to accept that separate meetings would be set-up for government only, they insisted and obtained that recognition a union of both NGO’s and government representatives was also useful. Those meetings looked more to be commercial presentation of technologies which could be used by government “Intelligence agencies”.

EU agencies such as EDA organized seminars where the private sector could present their “know how”.

A key element, in fact the sine qua non, of inter-agency and intra-government information and intelligence sharing is a formal organizational structure dedicated to this purpose which has become known world wide as a fusion center…that is a center where, ideally, all-source information is collected, analyzed (“fused”) and disseminated by a variety of professionals from different disciplines…and even different agencies or governments. In fact, this concept of multiple source staffing (“fused” in working together) is important in habituating different agencies to collaborate for a common goal and is the foundation of trust that will eventually lead to real cooperation between European national intelligence agencies.

Now, with the support of the next three presidencies for the initiative of OSINF, and its practical operational manifestation, the fusion center, one could hope that the concepts will finally be recognized as a plus to the EU and its member governments, instead of an unwanted intrusion into a sector were parochial secrecy and sovereignty privileges are the norm and sharing the exception!

We can only hope that this will come to be, in spite of the still strong conservative Establishment opposition to international cooperation. The advantages far supersede the negative points. Will EU find itself innovative in this field?

published on:



The Bleeding of Western Power

Published Jan 06 2010 by European Osint Nexus

The Bleeding of Western Power.

Paul Krugman has hit the nail on the head four times about the Chinese government pegging their currency to the Dollar. He wrote about it in October, in November and twice end December 2009. John McCain recently wrote something similar and our Dutch economist writer Heleen Mees does so as well. Left and right, people are beginning to stir. However, the pegging of the Renminbi to the Dollar is not the whole story.

Keeping the Chinese currency artificially low is only one of three major parts of the picture. At a certain juncture,
Krugman writes, ?If I were the Chinese government, I?d be really worried.? Even a near genius like Krugman can make an error. Dean Baker (The American Prospect, December 28) was right about that. Truth is, the Chinese government is not worried at all. It knows very well that the odds of international trade are unfairly stacked in China?s favor. It wants to keep it that way and the Chinese will say anything they feel to be useful in preventing us gullible Americans and Europeans from changing the present situation. It is not worry that we find over there, it is cool determination.

The Chinese Reservoir
The second of the three aspects to consider is the sheer number of very poor Chinese citizens. Until 2001, such a factor of near inexhaustible, cheap, and available labor in a single country never played a role in world trade. Independently from the currency peg, this enormous human resource pool stands the logic of free trade on its head. Of the about 1.35 billion Chinese population, roughly 400 million are now doing very well. This number includes millionaires as well as taxi drivers, businessmen as well as housewives, teachers as well as
civil servants. The visitor to Beijing, walking out of the airport, sees them everywhere. In terms of local purchasing power, and except for the taxi drivers, these 400 million are comparable to our US and European populations, with the difference that their incomes are more widely spread.

Less visible are the approximately 200 million Chinese who are poor, but still have a decent roof, reasonable shoes, mostly enough food and often a
mobile phone.
Finally, only to be seen by the traveler who ventures outside tourist routes, are the 500 to 700 million really poor Chinese who live on less than $3 a day. 125 million of these have less than $ 1,25 a day. Because of its economic impact, I dubbed this group "he Chinese Reservoir".

Information on these numbers varies, but whether the Reservoir holds 300 million or 700 million, its incredible size helps
China to continue competing with other countries at unbeatable prices. This certainly provides delight for the Chinese government, which sees China?s wealth increase. But it soon will have disastrous consequences for us, and not just for us. China?s economic power also unsettles other countries such as Indonesia (NYTimes, December 9th, 2009, article by Michael Wines).

The Theory of Free
World Trade
We in the West believe in the benefits of free trade. The concept has a wide following, and U.S. governments in particular have been promoting this notion with enthusiasm.
World trade is based on the idea that when rich countries buy simple products from poor countries, the populations of these poor countries will progressively get richer and so can begin their development. This allows the richer countries to buy simple goods cheaply and to concentrate on their own activities of a higher, more scientific and more sophisticated level. As affluence in the poor countries grows, new markets in those countries are being formed. The low salaries will gradually increase, and so the global economy will remain in balance, assuring everyone's well-being. Macro-economically and in practice, this theory is roughly correct. Or so it was until recently.
The Chinese Reservoir has a negative influence on the idealized functioning of free trade because the number of people in it is so huge that their income, and therefore their cost of manufacturing, does not substantially increase and will not do so for the coming 15 years! When a hundred million of these poor would seek higher wages, they can and will be exchanged for another 100 million from The Reservoir. The result is that the inflow of extremely low paid workers from rural areas and city slums into the Chinese economy can continue years into the future and can keep costs at bottom levels. This is new in world trade. The total picture is somewhat more complex, but this is its essence.

The Bleeding
The Renminbi pegged to the Dollar and the existence of The Reservoir together are violating accepted world trade logic for the first time. Every month, every quarter, every year,
China enriches itself with a huge trade surplus income, while the West is being impoverished by the same amounts. In the short eight years since China joined the WTO, Chinese holdings in foreign currency have already become momentous: In September 2009, the total was larger than 2.2 trillion Dollars, a tenfold (!) increase from the already neat 212 billion of 2001. We now see China buying in Africa on a scale never witnessed before. This enrichment process is very fast and, more importantly, it is only just beginning.

If this trade disequilibrium is allowed to continue ? and at present all signs are that the West will let that happen ? 15 years from now, these amounts will have changed the balance of power in the world. Not a little bit. Fundamentally.
What it means

China will soon be able to buy all it wants, in whatever domain. It is good to stop a while and think what this means. China will not only be able to buy the best researchers, the best companies of the world, any patent it cares to have, but also the most sophisticated military hardware. China will have no budget qualms about increasing its navy fourfold. Moreover, which set of shareholders anywhere in the world owning a valuable asset will not crumble when offered double the going rate? The list is frightening. China will be able to buy real estate of its choice anywhere too. And it can buy loyalty of governments as well as all the commodities it wants.
The result: Excessive political and military power is accruing to
We in the West will soon not be able to compete because we will be debt-ridden and suffering from diminished purchasing power. In other words, the present imbalance in trade terms makes power bleed from the West to

China our friend?
We must be clear in our basic attitude. We do not begrudge
China?s growth into a major player in the world. In fact, the West should be happy to see China do what we ourselves did in the course of the last few centuries. That is, we got rich thanks to our combination of good legal and economic state structures and a strong, organized work ethic. We did not get rich by working for a foreign power at cutthroat rates. We pulled ourselves up by our bootstraps. It will be fine if China does that too, and joins us. We also should not mind exchanging products and knowledge with China, as long as it is for mutual benefit. But we would be very short-sighted if we continued to allow China?s riches to grow unfairly and faster than normal at our expense.

The third factor to consider is Chinese mentality. I have been to
China 25 times and my wife is Chinese. One can like China a lot and acquire a strong admiration for the Chinese people. I do, and I have. But we must also see reality. In China, the spirit of fair play is not in the book, except sometimes inside the family. Fair play is to be found neither in business nor in politics. In the Chinese mind, in the present post Second World War period, fair play is synonymous with weakness. The Tibet example, although discussed ad nauseam, is still revealing. If fair play were still an element of the Chinese political psyche, Tibet would have been left to its own religious and happy devices during the last 60 years, just like it was by pre-communist Chinese emperors, wisely and fairly, during almost three centuries. The copy of a Tibetan temple, which earlier Chinese rulers erected in Beijing, is still a landmark of the bygone evenhanded mentality of the old Middle Kingdom. The previous rulers respected the Tibetan way of life and showed it. At present, fair play and evenhandedness have vanished.

President Obama displayed a friendly attitude when visiting China. He at least behaved kindly when visible by the press. We do not know what he said behind closed doors, but friendliness or, in other words, not talking about serious problems that we may have with a Chinese position or attitude in the interest of maintaining good relations, is not understood as friendliness as we know it. It is understood as a weakness to be leveraged against the speaker.
When in future, we talk tough to the Chinese, we should remain as polite as we will be strict. This keeps the door open for accommodation. Strong and loud language may close the door. Perhaps the President did very well behind closed doors, but we do not know.

These last ten years
Most people do not remember that in 2000 and 2001,
China played European nations against each other and then very successfully played Europe against the US. At the beginning of this millennium, in order to be accepted as member of the World Trade Organization, China had to change a lot in its legal, fiscal, and banking organization. It had to legalize ownership of private property, change its banking system, accept name and patent protection etc.. Many more demands of the WTO were submitted and, step by step, these were met. As a last demand, after China had already done a lot, at least certainly on paper if not always in practice, the WTO members demanded that China let its currency float freely. Everyone who has really studied John Maynard Keynes? theory knows this is a condition to equilibrium. At the time, the Renminbi, also called Yuan, was already pegged to the Dollar.

China then lodged clear complaints, claiming that it had already acted in good faith and suggesting that Western countries were just trying to keep it out of the greater world community in which it wanted to become a member in good standing.
At that juncture, something happened for which each European citizen should be ashamed. Opportunistic leaders in
Germany and France publicly announced that they would accept China into the WTO regardless of its currency pegged to the Dollar. This left the US as the only strong voice in the WTO refusing to let China in on those conditions. The Chinese government then mounted a superbly executed public relations offensive, stating that the US wanted to keep China out of the WTO, sometimes citing reasons of power play, sometimes suggesting the US was reacting out of fear. China succeeded in casting the US in the role of the backpedaling, dark, jealous opponent. That was at the beginning of George W. Bush?s presidency. Surprised and cornered into that position, the US government decided not to harm future relations with China and capitulated.

From this sorry episode we must remember, first, that
Europe was at the origin of the present Renminbi-Dollar problem; second, that a clever opponent can play European countries against each other and against the US. This is the major intrinsic consequence of the fact that the European Union is not a federation but still just a group of independent sovereign countries, each of which often first thinks of its own interest before considering the greater good. As it happened, the then German chancellor Gerhard Schrder was a clever opportunist who liked to grandstand against the US and to posture for electoral gain. He may also have reasoned that being nice to China would help his country?s exports. His neighbor, former President Chirac of France, although a more principled character on other issues, followed suit. Third, The Chinese have a first-class ability in public relations and in manipulating public opinion. In this field, they make worthy opponents and should never be underestimated. Finally, fourth, if the West wishes to tackle the problem of the bleeding of its power, it is imperative that the US government succeed in having its major European allies lined up and agreeing before even starting any action. Unfortunately, it remains unlikely that an initiative in this respect will come from Europe. It can only come from the US.

Civilization, History and Ethics. The Perspective
The rules and even international law under which much of the world currently functions come from the thinkers of the West. These are not Islamic inspired, they are not Communist rules, not Egyptian nor
Buddhist; they are from our Western Christian or ex-Christian civilization. For better or for worse, it is not just the English language, but it are the results of Western thinking that are circling the globe. We have created our society over centuries, after long and often arduous struggles. Although we need not forget that, many centuries ago, the great Muslim Empire in Central Europe played a vital role as keepers, enhancers and transmitters of thought and knowledge for our long term development and although we may marvel at the wonderful level of Chinese technical ability a few hundreds of years before Christ, we should remain conscious of the fact that the present world society has come out of our Western hands, our thinkers, our statesmen. We need not boast about it, but neither should we ignore it: Even though practice has often been raw, the system under which we function and under which all the peoples of the earth increasingly function, comes from us. The basic ideal is that this should help make a better world, where riches are gradually spread more equally and where poor societies can grow and join.
One of many great institutions created by our Western society is the
World Trade Organization. But now, in our relationship with China, free trade is being put into practice in a way that is fast undermining our Western society. Do we have the right, are we allowed to change and adapt the rules to this new reality? Of course we do! In fact, we should consider ensuring equality and fairness for all concerned to be a profound obligation.

The medium term future of Communism

China, under Deng Xiaoping, reverted from communist state monopoly to free market, individual ownership and competition. One does not forget Deng?s adage: ?No matter the color of the cat, as long as it catches mice!? Many of us were happy to see China join our ideas when it changed its economic structure. Together with the demise of the Soviet Union, this confirmed for us that we are on the right path with our society. Optimism went as far as a Mr. Fukuyama famously writing ?The end of History?? For a while, in this euphoria our sense of reality was lost. After the dissolution of the Soviet Union, we in the West have often thought that Communist rule in other countries would eventually crumble under the appeal of our free society. We looked at China with a benevolent feeling of superiority and President Clinton, at his visit to China, spoke in that sense.
However, from the demise of the USSR the Chinese have drawn different conclusions. These seem to be: Never to let down the authority of the Party like the
Soviet Union did. Nip any talk of democracy or dissidence in the bud and use all necessary force or violence to do so. Throughout China, they continually indoctrinate civil servants, personnel of government owned companies and the huge military about ?correct Party thinking?. This is done with obligatory seminars, on average one full week a year and, before important job promotions, for a full month. With this indoctrination, more than half the salaried jobs in China are covered.

In other words, the Chinese Party leadership has decided the same will not happen to them, period.

It is not for this article to discuss whether that is good or bad; the Chinese choose their ways like we choose ours, but we must understand how things are done over there.

The background is also very different from what it was at the Soviet demise of 20 years ago. Unlike the
Soviet Union and Western Europe, the two geographies of the West and China are not contiguous. There is no thin and chilling Iron Curtain between them. There is not a whole series of satellite countries craving for their own independence, occupied by force like they were by the Soviet Union in Eastern Europe. There is no rich versus poor attraction from the West, like there was with the Soviet Union and its East European satellite countries. Neither is there much desire for freedom in China. Living in China, for many, is not so horrible. In short, in China there is less of a feeling of ?Our system is failing? and more of ?We are doing better than the others, and we will show them.?
There is certainly an affinity for our free and democratic societies, and there are some dissidents whose life is made hell, but they are fewer in numbers than in Europe 20 years ago. And in China, there is this strong Party ready and willing to nip dissidence in the bud.

Thus, waiting with self-confidence for the Chinese regime to implode is an error. So is thinking that a soft approach to China will succeed. And it would be nave to believe that everything will come out all right through some natural balance of all matters.

How China functions.
Sidestepping the precise legal aspect, one could almost say that China is being run under two very different constitutions. Everything that has to do with how the Communist Party keeps its power is inspired by Marxist theory. Everything that has to do with market and economy, with some exceptions, is being run under the market rules developed by the West. However, in the end, on any decision of importance, the power lies with the Party, not with any market forces. Marxist and Leninist advice on how to keep power is entirely focused on the self-interests of the Party. There is no altruistic idealism of any sort, even though theoretically everything is for the benefit of the workers. There is nothing in China?s political fundamentals that can be likened to the ideals that one finds so clearly stated, so well meaning and generous, in the United States Constitution.

The Importance of Now
Doing the right thing about this skewed situation is now, for the West, the single most important foreign policy issue to be tackled, and it should be resolved successfully in the course of the two or three coming years. This will require strength, determination and unity of purpose. Astonishing as it may seem, compared to this question and its consequences, Afghanistan is a secondary issue. The war on the Taliban is not putting our very position in the world at risk. The Bleeding of Power is.
Europe and the US must first agree, then act together
As recent events have taught us, to turn things around the US and Europe must be able to act together. Without unity, the vital policy of stopping China?s unfair enrichment, and stopping our corollary road to secondary status, will fail.

Many parameters should be right for this action to succeed and, on a few scores, we happen to be lucky.
The American President is a capable man.
In France and in Germany we see political leaders with a less inward-looking philosophy than before. Both Chancellor Merkel and President Sarkozy are on record for emphasizing the importance of Europe acting with more coherence and unity on the global political scene. The United Kingdom, as experience would indicate, can probably be relied upon to follow a US initiative.
Then there is the Director General of the WTO, Mr. Pascal Lamy. He has been reappointed for a second 4-year term on September 1st, 2009 and is now in full understanding of his job. He will be comfortable with its challenges, and will have time for important decisions. It is also positive that Mr. Lamy is not an American, but a European citizen: He is French and a good man. There will be European goodwill.
These factors seem to augur well for an American initiative based on the notion of the West as a coherent group with shared interests in major issues of world politics.

The corridors of the State Department
It will not be easy for all this to be understood. In the eyes of experienced politicians, economists are often seen as nerds of a necessary but less exalted discipline than their own. One almost tends to agree with that. However, here, this instinctive paradigm will have to be taken with caution: the major foreign policy issue of the day is based on hard and sound economic information. An excellent and experienced man like Joe Biden and a tough thinker like Hillary Clinton will have to execute a rethink in order to grasp and fully embrace the realities and action requirements of the present economic danger. A first reaction will almost inevitably be: ?The nerds are exaggerating their own importance again!? Well, not this time. For once, what the economists say is going to be vital to our position in the world. In fact, we should not underestimate how difficult it will be to convince ourselves of the present reality.

What is needed
Once the Bleeding of Power is understood, the first question that arises is ?So what should be done?? It would seem a negotiation with China must be initiated towards obtaining that trade flows are equal. This means that in- and outflow of goods and money must be equalized and will have to be monitored so that they stay roughly in equilibrium. THis will be difficult to obtain. Many will see this as a step back and it certainly is! It is a step backwards in the gradual and necessary opening of generalized world trade. So the question is ?What is the overriding logic here??. The answer is that in survival, in strategy, a step backwards is sometimes the only right course and it is here. Charging forward, blindfolded to the consequences, would be the error. To revert to the macroeconomic sanity that we enjoyed prior to the beginning of the millennium, there will have to be tough interior adjustments. Wal-Mart and its ilk will have to redirect their purchases elsewhere and many Chinese factories will have to close.

The Reaction we can expect from China
For China, it will probably be impossible to accept without a good fight the removal of the unfair advantage on which they have already built. The present situation brings China huge riches and global power in record time! We must therefore expect China to initially react furiously and negatively. If so, the US with its European allies will unilaterally have to terminate a number of important aspects of their treaty with the WTO. Given the demonstrated Chinese expertise at public relations, such an action on the part of the West will have to be accompanied by a well orchestrated, thorough and truthful explanatory campaign to the press and to the world at large.
How to understand it all

This must not be seen as an action against China. The aim is to make, maintain and monitor a trade equilibrium that entirely stops the unfair Bleeding of Power, duly executed with the deep respect that the nations involved should have for each other. We will be happy when China gets rich and joins us in a civilized world, fairly.
Edward Price



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