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The majority of Americans polled recently by CNN viewed free trade as a threat to the U.S. economy. That’s a little like saying that oxygen is a threat to breathing.

And, to trot out a Clintonism: “It’s the economy, stupid!” The poll found that those surveyed thought the economy was the biggest issue in the presidential election.

“Agflation,” or the inflating price of agricultural commodities, is hitting the transitional economies of Eastern Europe and the Baltics like a punch in the chest.

It’s not something we think of too much in the western world. Food makes up only a small part of our consumption basket. But when the price of butter goes up 65% in three months in Bosnia and Herzegovina it can lead to serious unrest.

The central bankers of the countries most affected often see their hands tied. They’ve pegged to the Euro (a prerequisite for joining the EU) and can do little if anything to fight the inflation.

The Transitions Online site has an interesting story about the problem.

[Image from IAState.edu]

There are a handful of news articles out today speculating that Saudi Arabia will break ranks with the rest of OPEC and increase the supply of oil (see CNN.com, for example).

The country can afford to throw its weight around because its reserves are so much larger than its closest competitor. Most of the other countries in OPEC are already pumping at full capacity. More oil on the market would hurt these other countries who would be unable to offset the falling crude price with more production.

Economists spend a lot of time thinking about cartels and the game theory behind how they work. Cartels are hard to enforce, especially when the one-time reward of cheating can outweigh the potential sanction any single member would face from the group. 

[Image thanks to EVWorld.com]

Germany’s Volkswagen opened a production plant in Kaluga, about 125 miles southwest of Moscow, signaling increased foreign confidence in Russia as an investment destination.

Reuters delivers the stats: Foreign direct investment surged 91.3 percent in the first nine months of this year to $19.6 billion and capital investment are up by 19.6 percent year-on-year in October, far above overall economic growth of 7.5 percent.

The auto market in Russia is expected to be Europe’s biggest by 2011, according to analysis by PriceWaterhouseCoopers.

“We are convinced that the Russian car market has huge potential and you can be sure that Volkswagen will make it a priority target,” VW Chief Executive Martin Winterkorn told Reuters. He expects 45 million Russian households to own a car by 2010.

Oskar Akhmedov, director of VW Group Russia, foresees dramatic growth in the Russian automobile market in coming years, according to a story in BusinessWeek: “The population is under-motorized,” he says. While Germany has 500 cars for every 1,000 people, Russia has only 190. Even in other former communist countries in Central Europe, the number is between 300 and 350. In Russia today there are 2.25 million vehicles sold annually. By 2015 that number will be 3 million. “Conservatively speaking,” Akhmedov adds.

[Image from TheLightIsGreen.com]

Canadian regulators have launched an investigation into Nestlé, Cadbury, Hershey, Mars and others that may have been involved in a price-fixing chocolate cartel that bilked consumers out of billions of dollars.

CBC has the news [via Fark]: “We can confirm that we are investigating alleged anti-competitive practices in the chocolate confectionery industry,” said John Pecman, the bureau’s assistant deputy commissioner in the criminal matters branch. “The volume of commerce affected here is definitely potentially in the billions of dollars per year.”

Another rich case study chance for some graduate student some place. Throw it on the pile, next to the airline price-fixing scandals we reported on earlier this week.

[Image from PhillipsChocolate.com]

Poland has dropped its opposition to Russia joining the Organization of Economic Co-Operation and Development, a move that’s sure to make economists happy the world over.

The organization doesn’t have much in the way of real power, but it does do data. The OECD collects data from its members and puts it through rigorous testing and analysis. Then we get it and the real fun begins.

Still, joining the OECD could be a step toward economic clarity and economic efficiency. One of the organization’s programs is its Anti-Bribery Convention, which went into effect in 1999.

Coverage of the news from RussiaToday. The AFP has this useful bit of context: Relations between Warsaw and Moscow have been at their lowest ebb since Poland broke free from the communist bloc in 1989, notably because the Kremlin was riled by what proved to be crucial Polish support for the pro-Western “Orange Revolution” in Ukraine in 2004.

[Image from Wikipedia]

There is, no doubt, a graduate student somewhere who is working on a paper about airline price fixing. Now he or she has at least one more set of data to analyze thanks to Austrailia’s Qantas.

The AP reports: Qantas sought to eliminate competition by fixing the rates for shipments of cargo to and from the U.S and elsewhere from at least January 2000 through February 2006, according to the charges filed in the U.S. District Court for the District of Columbia.

The story goes on to point out that this case is one of three this year. British Airways and Korean Air Lines each plead guilty to price fixing of both passenger and cargo flights. Each paid $300 million in criminal fines for their actions (not that it means much to companies recording their profits in currencies other than the U.S. Dollar).

The cause for the price fixing? Good old fashioned greed mixed with the increased cost of fuel. The price of fuel is up 44% this year, according to reports. Read our story about it from earlier this month.

[Image thanks to tsvc.com]

The United Arab Emirates is considering ending its 30-year peg to the dollar, citing falling currency concerns that are driving inflation and an increasing price of imports for the country. Bloomberg covered the story earlier this month.

The move would not be unprecedented. Kuwait dropped its U.S. Dollar peg in May. OPEC is also considering dropping the dollar in favor of a basket of currencies, as we’ve written about earlier this month. The U.A.E.’s move is unlikely to upset the U.S. applecart just as the OPEC move is similarly unlikely to.

President Bush called for strict import supervision and the expansion of both the FDA and Health and Human Services to monitor products coming into the U.S. (Thanks to Lolpresident.com for the image.)

Free market economists can’t be too keen on the measure, which would act as a barrier to trade and prevent an efficient long-term equilibrium.

“For many years we have relied on a strategy based on identifying unsafe products at the border,” Bush said and Reuters reported. “The problem is that the growing volume of products coming into our country makes this approach increasingly unreliable.”

If unsafe products are truly a problem the U.S. public should be concerned about, why has no business developed to independently inspect and certify the goods coming in? Silicon Valley developed just such a company during the dotcom boom. Remember Verisign? One of the company’s many businesses is its VeriSign Secured Seal, which says that a business is what it says it is and any transactions you make on its site will be safe. It is a Certificate Authority.

Certifying is a good business to be in, unless you’re the government. Private businesses step in to help when people have real concerns about doing business with a group, country, or business that they’ve never worked with before—as VeriSign did during the nascent days of eCommerce.

But is this really designed to protect American consumers? It’s pandering to the least common denominator: the mid-west mother of two-point-five children who is freaked out about Chinese-made toys containing lead paint.

“This is not about China,” Health and Human Services Secretary Mike Leavitt said and Reuters reported. “This is about insuring that we have safe products.”

Right…you can just imagine him cutting his eyes when he says it. You can bet China will be pissed off about this though.