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United Press international

Wednesday, 7 March 2001 12:21 (ET)

UPI hears ...
Insider notes from United Press International for March 7

     Why do the Cayman Islands love Jesse Helms? Because relief may be at hand for those offshore tax havens targeted by the Organization for Economic cooperation and Development. Although Paris based, the OECD is an international body, and the highest dues are paid by the United States. So the arrival of a letter from heavyweight Congressman Sam Johnson, R-Texas, of the powerful Ways and Means Committee, should have rung an alarm bell at rue Andre Pascal in Paris. But Johnson's polite enquiry about the OECD's jihad against "harmful tax competition" got the bureaucratic equivalent of the brush-off, with none of his six questions answered. So Johnson and some powerful chums, including Sen. Jesse Helms, R-N.C., chairman of the foreign relations committee, and Senator Judd Gregg, chief deputy whip, have now written to U.S. Treasury secretary Paul O'Neill, asking him to remind the OECD who pays its bills. "If high-tax countries are worried that they are losing their tax base, the proper response is lowering their tax burdens rather than trying to force low-tax nations to raise tax rates or serve as vassal tax collectors", they warn. O'Neill, who has told Republicans he is looking for ways to break with Clinton-era policies at the Treasury, may have found his cause.

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     Germany's answer to Helms is a mild-mannered socialist called Hans-Ulrich Klose, who runs the foreign affairs committee on the Bundestag. Klose just visited Washington to assure the United States that the Germans would back the Bush administration's plans for a National Missile defense system. Citing German intelligence reports on Iraq's rebuilding of its missile capabilities, Klose told U.S. policymakers, "I understand the American position and I think we should participate." Klose's other message went down less well. Trying to fend off complaints that German defense spending had been cut too far, to barely 1.5 per cent of GDP (half the U.S. spending), Klose claimed that the $700 billion Germany had spent on rebuilding former communist East Germany should also be seen as a contribution to European security.

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     Given the way the once-vibrant Japanese economy has been stuck between dead slow and stop for the past decade, this may be shifting deckchairs on the Titanic, but the Tokyo government is debating knocking two zeros off the Yen. Instead of the current 118 yen to the US dollar, there would be 1.18 new Yen, and 1.1 new Yen to the euro. The reform is one of the measures expected to be unveiled in an economic recovery package later this week. The interesting implication is that with a little more weakening of the dollar against the Euro, and a little strengthening of the Yen, the world's currency markets could yet find themselves dealing with a virtual single currency, in which one Yen equals one dollar equal one euro.

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     Big smiles in Moscow at Beijing's announcement that China is to increase its defense spending by 18 percent. Russia's arms export agency, Rosoboroneksport, has managed to build itself the perfect marketing symbiosis through the arms race under way between India and China. Having just delivered the second of its 'Sovremenny' class anti-submarine frigates to China, Rosoboroneksport is now offering two more from the same Severnaya Verf shipyard in St. Petersburg, of an advanced design. Why do the Chinese want two more? Because Rosoboroneksport's deputy director Viktor Komarin announced last month that Russia was now prepared to sell India a nuclear submarine.

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     The cleaners at Britain's Ministry of Defense in Whitehall have been taking a horrified interest in the gruesome reports of decapitations by the Dayaks of Borneo, as they have driven out the Madurese settlers who were moved into their territory by the Indonesian government. Back in the 1960s, when British troops were supporting the newly independent government of Malaysia against Indonesian border incursions, the elite SAS worked closely with Dayak trackers. Denis Healey, then minister of defense, was given a traditional token of Dayak esteem during an inspection tour. The shrunken human head, claimed to be that of a senior Indonesian officer who had run afoul of the Dayaks, was taken back to his Whitehall office, and on one busy evening, rolled off its place of honor on the sideboard and under a sofa. It was found by a dutiful cleaner, who fainted.

     -- Copyright 2001 by United Press International. All rights reserved.

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