www.ipsnews.net Gustavo Capdevila

The outbreak of a war against Iraq could weaken the bargaining position of developing countries in the World Trade Organisation (WTO) multilateral trade talks with a view to the ministerial meeting in September in Mexico, warned activists at the World Social Forum taking place in this southern Brazilian city.

PORTO ALEGRE, Jan 25 (IPS) - The outbreak of a war against Iraq could weaken the bargaining position of developing countries in the World Trade Organisation (WTO) multilateral trade talks with a view to the ministerial meeting in September in Mexico, warned activists at the World Social Forum taking place in this southern Brazilian city.

There is no doubt that a United States victory in what many see as an impending military strike on Iraq would have a dramatic effect on the WTO talks and other regional or bilateral negotiations, said Paul Nicholson, with the Spanish branch of Via Campesina, an international network of peasant, small farmer and indigenous organisations.

The difficulties facing developing countries in the run-up to the WTO ministerial meeting in Mexico were discussed by Nicholson and other experts in a panel Saturday, the third day of the World Social Forum (WSF) which has drawn tens of thousands of activists and left-leaning politicians and intellectuals to Porto Alegre from Jan 23-28.

Keeping a close eye on and protesting the war would consume a large part of the energy of civil society, said Martin Khor, with the Malaysia-based Third World Network.

Khor said a war on Iraq would divert the attention of developing countries from the WTO negotiations ahead of the September ministerial meeting in the southwestern Mexican resort town of Cancun.

That could enable the United States, the European Union and other industrialised nations to force the rest of the world's governments to accept the start of negotiations on new issues in the WTO, he predicted.

The WTO, which coordinates the multilateral trade system, is involved in talks aimed at the further opening up of the world's markets.

The main negotiations are focusing on trade in agricultural products and services, as well as the question of enforcement of prior agreements and the developing world's demand for special and differential treatment to compensate for the smaller size of their economies.

In Cancun, the 145 WTO member countries are to reach a decision on the industrialised world's goal of starting talks on investment, competition and government procurements -- the three ''new issues'' mentioned by Khor.

The countries of the North are also applying pressure to reach agreement on new WTO standards that would strengthen the power of transnational corporations and their attempt to absorb small and medium farms as well as industry in developing nations, said the activist.

At the last WTO ministerial conference, held in Doha, Qatar in late 2001, the United States was able to ''use the events of September 11'' (the terrorist attacks on New York and Washington that year) to press the rest of the nations to accept its proposals, argued Khor. Stanley A. Gacek, with the U.S. AFL-CIO labour federation, called for a consolidation of the coalition of ''progressive forces'' that has emerged in the United States and Canada against the threatened war against Iraq.

The warmongering of the U.S. government of George W. Bush has strengthened civil society and public opinion in the United States, according to Gacek.

The panel of experts meeting at the WSF in Porto Alegre also discussed the relationship between the WTO talks and the negotiations for the creation of a Free Trade Area of the Americas (FTAA) among 34 nations -- all of the countries in the hemisphere except Cuba.

Gacek observed that the process of creating the FTAA, in which investment and trade interests have predominated so far, could see a shift now that leftist former steelworker Luiz Inácio ''Lula'' da Silva is president of Brazil, given his emphasis on an integration process that would also put priority on political and social aspects. Khor underlined that there are similarities between the FTAA and WTO negotiations, and recommended that civil society and developing countries closely follow both processes.

As the Cancun conference approaches, civil society should alternate the strategy of lobbying with protests and demonstrations to press the demands of the developing South, said U.S. activist Lori Wallach with Public Citizen, the consumer advocacy organisation founded by Ralph Nader.

Civil society in each country must determine the methods with which it will carry out its campaign of opposition to the new WTO reforms, said Wallach. The aim is to check the WTO, and keep things from getting worse, she added.

Alejandro Ramos Hernández, with the committee set up in Cancun to welcome civil society organisations planning to take part in the ''anti-globalisation'' protests surrounding the upcoming WTO conference, said the Mexican government had already begun making arrangements to keep demonstrators from approaching the site of the meeting.

Mexican authorities are also planning on building a barracks to house special federal police contingents, he said, adding that special police agents who have been dubbed ''robotoks'' can already be seen on the streets of Cancun, even though there are still eight months to go before the conference.

Wallach called on activists who planned to travel to Cancun to use an application form available on the WTO web site (http.www.wto.org) to seek accreditation for attending the ministerial conference. (END)

www.chicagotribune.com By Melita Marie Garza Tribune staff reporter Published January 26, 2003

The oil price run-up, partly triggered by the threat of war with Iraq, has cut into milk money, and in some cases, the rest of the grocery bill too.

Just this month Oberweis Dairy, based in North Aurora, increased its home delivery charge by 10 cents to $2.30 to cover increased diesel fuel costs. What's more, the 76-year-old dairy, which has 40,000 home delivery customers, also is considering retrofitting trucks to run on gasoline to further cut fuel costs.

"We have been trying to ride out the price swings for the past three years, but this is completely out of control," said Robert Renaut, Oberweis' president. "We haven't passed any of the costs on. This increase just gets us back to even."

Diesel fuel, which sells for an average of $1.66 a gallon in the Chicago area, generally is more expensive than gasoline and supplies are more limited. As a result, Oberweis has looked into converting 54 home delivery trucks and about a dozen larger vehicles used to haul milk to grocery stores to operate on gasoline. "There is a time lag involved in ordering the required parts and having the trucks converted," Renaut said. "The other issue is that if supplies are disrupted, neither gasoline nor diesel might be available."

A prolonged war with Iraq likely would cause oil prices to soar further, contributing to a ripple effect of price increases as trucking companies and retailers try to pass off higher energy costs to consumers. The higher prices would be reflected in the bulk of the nation's goods, which primarily are delivered by truck.

The situation could be more serious than the one truckers and motorists confronted during the Persian Gulf war in 1991, when U.S. oil refiners were awash in crude inventory. Since 1999, oil companies have limited the amount of refined fuel kept in storage. As a result of an 8-week strike in Venezuela, one of the top five oil exporters to the U.S., oil companies have been tapping stored inventories to keep products flowing.

Such use has reduced the U.S. inventory close to a critical 270-million barrel level that the federal government says could lead to supply disruptions.

The truckers only have to look back to 2000 to get an idea of what could happen. A price spike in diesel fuel essentially stalled truckers in parts of New England.

"Diesel fuel cost between $2.50 and $2.60 a gallon, and trucks would not even go into Maine because there was not enough freight to pick up on the return trip to offset the cost," said Todd Spencer, executive vice president of the Owner-Operator Independent Drivers Association in Grain Valley, Mo.

Any disruption in trucking would have an almost immediate impact on consumers and workers.

Businesses ranging from groceries to manufacturers have widely adopted just-in-time inventory practices to reduce costly warehousing and to avoid having money tied up in parts or goods.

"There is more dependence on just-in-time deliveries," said Mark Whitenton, vice president for resources and environmental policy at the National Association of Manufacturers. "Even a couple of days disruption could cause factories to close."

Spencer paints a dire scenario for small or independent truckers, who generally operate under contract and, as a result, cannot impose surcharges to cover fuel price hikes.

"Most small-business truckers don't have an operating cash reserve that would allow them to withstand a long run of increased prices," Spencer said. "We would quickly see repossessions of trucks."

Consider what happened to long-haul trucker Lee Klass in 1990 when crude oil prices nearly doubled to $41 a barrel after Iraq invaded Kuwait.

40-cent price jump

"The price of diesel fuel jumped 40 cents a gallon," Klass, now 55, recounted. Rather than pay the price at the pump, he parked his truck. "I decided not to take any loads for a couple of days just to see how things shook out. It reaches a point that unless rates are doubled it doesn't make sense to haul any freight."

The quick success of the U.S. and its allies in the 1991 conflict eased fears of oil supply shortages, and prices plunged as rapidly as they had risen, easing to $21 a barrel by February 1991.

"The war could have a positive effect on the economy," said Sung Won Sohn, chief economist at Wells Fargo Bank. "We have a decisive war in our favor so the price of oil drops dramatically to low teens. That would raise consumer and business confidence significantly. The price of oil could drop by more than half, which would amount to a huge tax cut for us, bigger than anything Bush proposes."

Still, these days, uncertainty, rather than oil, seems more abundant.

"The world oil market is being strained right now and people are trying to guess what's going to happen when we invade Iraq," said Mark Baxter, director of the Maguire Energy Institute at Southern Methodist University in Dallas.

"I believe the market already has counted in the effects of Iraq. But they aren't counting on Iraq, Venezuela, and the effects of any refinery, pipeline or other mishaps on top of that," Baxter said.

Baxter noted that two weeks ago a couple of oil platforms in the North Sea were shut down due to a flaring problem, taking more than 100,000 barrels a day off the market.

Customarily, an event like this would add a couple of cents to the price of a barrel of oil. But in the context of war, these incidents could ratchet up prices more significantly.

Terrorist attacks?

Other unknowns about potential supply disruptions loom, including the prospect of terrorist attacks on oil tankers, something that had not been widely contemplated in 1990.

"What will Saddam do with those oil wells and those oil fields?" Baxter asked. "Is this an opportunity for overt actions by terrorists? Disrupting the shipping lanes for these oil tankers would be a major disruption to the oil supply."

Bill O'Grady, vice president, futures research, at A.G. Edwards in St. Louis, asked: "Why were the oil companies holding such huge inventories prior to the Persian Gulf war? You saw a similar buildup prior to the Iran-Iraq war. And why aren't they building them now?"

"It could be that they don't think there is going to be a war. Or, yes, there will be a war, but it will be very short and they don't want to be saddled with a lot of product to sell at low prices. Or it could be that they are relying on the U.S. Strategic Petroleum Reserve, and counting on the government to hold the extra supply for them."

Last May Peapod Inc., the Skokie-based Web grocer, raised its delivery charge in the Chicago area from $2.95 for an order of $100 to more to $4.95, partly to offset rising fuel costs.

In December it went a step further. It spent $15,000 to install its own gasoline storage tanks at its Lake Zurich distribution center. Drivers for its fleet of 70 trucks cover a combined 6,000 miles daily and had been driving off their routes to find gasoline stations that would accept the company's credit cards.

Scott DeGraeve, vice president and general manager for Peapod's Chicago region, explained: "The rising fuel prices spurred us to see what we could do to offset these costs. It saves us a few pennies, but it also saves us labor and time."

Copyright © 2003, Chica

www.washingtonpost.com Last Week Sunday, January 26, 2003; Page H02

It may be a month or two before the first shots are fired in Iraq, but for all intents and purposes the war has already begun on financial markets.

On Wall Street, stock price declines over the past two weeks have wiped out the gains built up earlier in the month on expectation of an economic rebound later in the year. On Friday, stocks took their steepest dive in four months, leaving the Dow Jones industrial average off more than 5 percent for the week. A steady stream of downbeat corporate earnings reports and forecasts prompted the sell-off, but most analysts blamed jitters about war for the market's downbeat mood.

Perhaps more ominous was the nine-day tumble of the dollar against the euro, with the dollar ending the week at a three-year low of $1.08 to the euro. That's down 1.4 percent for the week and 8 percent over the past two months. Shaken by what they see as President Bush's willingness to have the United States bear the full political and economic cost of a war to oust Saddam Hussein, some European investors have concluded that the dollar and dollar-denominated stocks and bonds may not be the safe havens in a time of geopolitical crisis that they are usually thought to be. Not surprisingly, the price of gold continued to climb, hitting $368 an ounce by week's end.

The challenge for the dollar is not that foreigners are selling their U.S. stocks and bonds en masse. It's that at a time when the United States has to attract more than $1 billion a day in foreign capital to sustain its record trade deficits, the dollar can fall even if Europeans and Asians simply slow the pace of their new U.S. investments.

The dollar's fall mirrors the steady increase in price of crude oil. The continued shut-off of supply from strike-ridden Venezuela and fears that another Gulf War could disrupt shipments from Iraq and other Middle Eastern countries combined to drive up the price in New York trading Friday by 3 percent, to $33.28 per barrel -- 69 percent higher than at this time a year ago. Economists say that when gross domestic product figures come out this week, higher energy prices will be one reason the numbers may show the economy has stopped growing.

Indeed, in a meeting last Monday with more than a dozen economists, President Bush acknowledged that because of the downdraft in consumer and business confidence caused by anxiety over war, the package of tax cuts he has proposed will have "little impact" on the economy or the stock market in the short term. He and his team are now pitching the plan as a stimulant to long-term growth.

Today in Italy - Special service by AGI on behalf of the Italian Prime Minister's office

(AGI) - Agrigento, Italy, Jan. 25 - The adoption of the euro has had an effect on Italian consumer trends and real inflation, that which is felt by consumers, "is decidedly higher" than that quoted by Istat, whose survey system is "rigorous" but "traditional." Bank of Italy Governor, Antonio Fazio, speaking from the stage at Agrigento, where he gave his traditional speech at the Forex convention, has once again turned his attention to price increases - and it appears that he gives credit to the complaints put forward by consumers, who over the last few weeks have created much controversy over official statistics concerning inflation. "The change to the single European currency has weighed on consumer trends," he said. "Empirical analysis - he added referring to the elaborations carried out based upon the Bank of Italy's econometric model carried out together with ISAE on Istat data - shows that the inflation felt by consumers is decidedly higher than that which emerges from the traditional and rigorous methods used by Istat." Fazio explains that "the increase in consumer prices between the end of 2001 and the end of last year was equal to 2.8 percent and the effect of the rounding up of prices is assessable to a little more than 0.5 percent." The price of general food goods weighed most heavily on the bread basket where "price increases measured by official indexes is above or is a little below 10 percent." "Decreases on the other hand were registered for consumer durables." (AGI)

251458 GEN 03 COPYRIGHTS 2002-2003 AGI S.p.A.

www.morningstar.ca 25 Jan 03(8:14 PM) | E-mail Article to a Friend

By Pierre Belec

NEW YORK (Reuters) - The question du jour in the crawl toward war against Iraq: How will stocks behave after the United States leads another war on the oil-rich country?

Investors are crossing their fingers, hoping that if there is a war, it will a short one. But few people are willing to bet the ranch on how things will turn out because the economy is fragile and the stock market is not in great shape.

A long-lasting war could wreak havoc on both.

The price of energy will be the biggest factor. If oil prices spike up at this stage of the current economic down cycle, growth in the United States and the rest of the world could grind to a virtual halt.

Wartime history won't be of much help in anticipating the market's response to fighting in the Gulf.

The run-up to war has traditionally caused stocks to drop and stay weak until the United States takes military action.

That is how things played out ahead of both World War Two and the last Gulf War, 12 years ago. Back then, stocks fell to levels that were judged to be undervalued and the market had an easy time rallying.

This time around, things are different. The U.S. economy is not back on its feet after sliding into recession in 2001 and it is more vulnerable to a destabilizing shock. Just as important, the global economy is wobbly .

Stock investors are eager to put more money on the table but the experts warn that the threat of another terrorist attack on the United States will be the wild card. The horrors of Sept. 11 kicked up the risk.

PEP TALK

The nation's brokerage houses are doing a lot of hand holding. They're laying out possible outcomes. Most are putting a positive spin on the war story, trying to soothe investors' worries.

Stock salesman are reminding their clients that the market didn't crash after the Gulf War began on Jan. 17, 1991.

One brokerage house offers "Ammunition when clients say they are afraid to buy anything because we may be going to war soon" in a pep talk to its sales force.

"For those who were in the business back during the Gulf War, I'm sure you remember the market was dismal between the time Iraq invaded Kuwait and when we started shooting," the internal memo says, adding that stocks performed superbly during Desert Storm.

Indeed, the market was fired up. The Dow Jones industrial average initially surged 115 points or 4.6 percent. Three months later, the Dow was up some 500 points or 19.7 percent. One year later, the blue-chip index had climbed an impressive 756 points, or 30.1 percent.

Crude oil soared in the months leading up to the Gulf War. In today's prices, adjusted for inflation, oil climbed from $23 a barrel to $47 by October of 1990. Days after the first bomb was dropped on Baghdad, oil slid to $25.

Fast forward to 2003. Oil hovers at a 26-month high around $32 a barrel, up from $20 in 2002, fueled in part by unrest in Venezuela, a big supplier to the United States. Whether oil prices will continue to increase in the event of a war is the big unknown for the world economy and for stocks.

After a strong start in the first week of 2003, the stock market is now dead in the water, with the Dow having lost all of the year's gains, and then some.

The Dow Jones industrial average fell 238.46 points on Friday, or 2.85 percent, to 8,131.01. The Standard & Poor's 500 index slumped 25.94 points, or 2.92 percent, to 861.40. Both indexes hit their lowest since Oct. 17. The Nasdaq Composite Index dropped 46.14 points, or 3.32 percent, to 1,342.13.

For the week, the Dow tumbled 5.3 percent, the S&P 500 4.5 percent and the Nasdaq 2.5 percent. The Dow and S&P 500 are in negative ground for the year despite an early January rally.

SMARTING INVESTORS

Clearly investors are scared stiff. Few are making bets that the next military strike against Iraq will be a cakewalk or that oil prices will collapse. Only the brave are getting flashbacks to the glory days of the Gulf War.

Average investors have gotten smart after $8 trillion in market wealth went up in smoke over the past three years. They've learned that Wall Street is a risky place.

The smart money says: Wait until the geopolitical script plays itself out and then make decisions with all the facts in hand.

"Any kind of surprise terrorist event or war, could send the market into a free-fall crash," writes James Dines, editor of the Dines Letter. "What I find especially disturbing is the very urgency of President Bush's demand that Iraq be attacked immediately before Saddam Hussein 'develops weapons of mass destruction.' Why the hurry?. I can only wonder whether Bush knows something that he has not chosen to disclose."

Bush again this week beat the war drums, saying that Hussein is not disarming but is "delaying and deceiving." But opposition to the U.S. stand has mounted, with China and Russia joining France, Germany and Canada on Thursday in urging that U.N. weapons inspectors be given more time in Iraq.

Iraq said it would expand its cooperation with United Nations weapons inspectors but said it was convinced the United States will attack despite efforts aimed at resolution. A Russian military source said this week the Washington and its allies planned an attack in the second half of February.

Yet some people reckon history is on the side of investors.

"The market loves action," says Kent Engelke, capital markets strategist for Anderson & Strudwick Inc., "I arrogantly and naively believe the market will follow a similar course as in 1991 once we start bombing Iraq. It will again be a no-contest."

Dines says the market is too risky and only the most aggressive traders should venture into stocks at this time. The average investor should sit on the sidelines.

"Nobody knows for sure where the markets are going next in these dangerous times," Dines says.