Protectionism

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Protectionism

Post by ghariton » 04 Feb 2009 01:00

I've been worried about growing American protectionism for some time now. The crop of American Congressmen and Senators elected in 2006 sounded decidedly anti-free-trade, and that is particularly worrying for Canada.

Now, with the threat of Buy American legislation before Congress, many others are worried. I know President Obama has made reassuring statements recently, but we have yet to see how strong his commitment to free trade is. And anyway it is not clear how much he can do against Cngress.

Jeffrey Simpson:
Governments and business around the world, including Canada, are worried about protectionism in the United States. They should be, because what the world sees now is likely a harbinger of more.

Americans are in a hurting, inward-looking mood. The Democratic Party they elected is strongly protectionist. Their new President has to listen to - and act on - at least some of the hurting.
Marcus Gee:
Preventing this destructive protectionist spiral will take cool heads and strong leadership, most of it from the United States. President Barack Obama must make it clear that he won't dig the United States out of recession at the expense of its trade partners. A trip to Beijing to meet with his counterpart, Hu Jintao, about a co-ordinated response to the global crisis would go a long way to calming fears of a trade war. Throwing his weight behind a move to conclude the Doha round of world trade talks would help, too. Above all, Mr. Obama must make it clear to Congress that he will oppose beggar-thy-neighbour policies that could spark a global trade war.

In a storm like this, it is not enough that right-thinking people agree on the necessity of open trade. In 1930, 1,028 economists signed a petition against the protectionist Smoot-Hawley Tariff Act. When it was signed into law regardless, it set off a round of retaliatory tariffs by trade partners. Global trade fell by two-thirds between 1929 and 1933.

Everyone agrees now (as many agreed then) that it was a huge mistake. That doesn't mean it can't happen.
Of course, not everyone is worried. From the Red Star:
Instead of complaining "in no uncertain terms" to Washington about the proposed multi-billion-dollar "Buy America" stimulus plan, International Trade Minister Stockwell Day should read Canada's trade pacts and review the precedents.

He might discover the North American Free Trade Agreement (among other treaties) allows an exemption for procurement contracts to allow only American iron and steel, a provision contained in last week's $819 billion stimulus package passed by the House of Representatives.

Moreover, Day might learn the U.S. exempted NAFTA partners Canada and Mexico from tariffs on foreign steel in 2002 – and might do so again.

But by using "trade war" rhetoric, Day appears to have positioned the Conservative government with big American corporations already gunning for new President Barack Obama by attacking the package now being worked out by Congress in response to Obama's election pledges. News emerged yesterday that Canada's ambassador to the U.S., Michael Wilson, has fired off a letter to U.S. legislators warning the rules would be a disaster for business and workers in both countries.

"Unfortunately, rather than working co-operatively and practically for an exemption, Canadians politicians ... have been publicly lecturing Americans about their `international obligations' and the theoretical virtues of global free trade," wrote Erin Weir, economist with the United Steelworkers' Canadian arm, in The Progressive Economics Forum.

"This argument is not correct in the current economic context and certainly will not be very persuasive south of the border."

Scott Sinclair, senior trade analyst with the Canadian Centre for Policy Alternatives, agrees. "As far as I can tell," he says, "the provision included in the stimulus package will not violate U.S. international treaty obligations." He cautions that Day "should know better," adding: "I think there is a back story here."
It sounds as if they think that Canadian lobbying against protectionism is misplaced, because it would align Canada with reactionary American forces. They do not seem to care about the impact on our economy, or indeed on jobs. But maybe I'm interpreting them wrongly -- gosh, I really, really hope I'm interpreting them wrongly.

From the same article:
Weir argues that, where trade law might be violated (as potentially in the case of other goods), Canada is positioned well to push for exemptions. He sees countries like China and India as targets.
Yeah, Canada might (or might not) get exemptions. But that's not the point. If trade wars come, they will be global, and thw whole global economy will be hurt. Canada's exemptions will be of very little use then.

Oh, well, we can always fight fire with fire. From the same article:
NDP Leader Jack Layton agrees Ottawa is "failing to do what other countries are doing to ensure some of the work in government procurement has a big Canadian component."
In other words, rather than trying to stop the trade war, let's arm ourselves.

But maybe I'm being unfair getting all my material from the Red Star. Here's Ken Lewenza in the Financial Post:
If governments are using public funds to purchase goods and services in an effort to stimulate a depressed economy, then it's a no-brainer that those products should be made at home. When governments build infrastructure or purchase equipment, they must steer maximum benefit toward taxpaying citizens: creating jobs, stimulating industries and strengthening communities.

The practice of domestic procurement is both logical and common. It's widely used by countries throughout the world. And, for the most part, it's totally legal: Even under the terms of NAFTA and the WTO, sub-national governments have full powers to source locally, and national level governments have great leeway to favour domestic suppliers.

<snip>

Instead of putting on a Boy Scout's uniform and wringing our hands about others' domestic-sourcing practices, Canadian officials should play hardball. They must defend our jobs with just as much determination as the Americans defend theirs.

Indeed, Canadian governments at all levels are squandering the opportunity to support the economy through public purchases. In recent years, billions have been sent offshore to purchase new buses for the Department of National Defense, ferries that ply the B. C. coastline, transit infrastructure in Ottawa and even uniforms for our Olympians in Beijing.

<snip>

The damage that the U. S. provisions would do to our Canadian industries has been overstated. In fact, if we implemented our own buy-domestic strategy, we'd have a bargaining chip to negotiate sectoral partnerships or mutual exemptions (in steel, auto, and other key sectors) with the Americans that make better sense for our hard-pressed industries than the current free-trade free-for-all. That would give manufacturers on both sides of the border a chance to compete with the offshore imports that are destroying hundreds of thousands of jobs in both Canada and the United States.
Trade war? Bring it on!

Now I'm scared.

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Post by worthy » 04 Feb 2009 01:11

Word from Europe is that the Imperium is backing off.

It's always fascinating how the economic ignoramuses of the Right and Left join hands in devising arguments to protect their respective constituencies of inefficient producers and national labour unions.

And you can see by the specific exemptions cited in NAFTA why the agreement was ridiculed by strict free traders such as Murray Rothbard.

Professor Bhagwati describes the many variants of protectionism.

As has been true for nearly 200 years, Bhagwati observes that:
Protectionism arises in ingenious ways. When free-trade advocates squelch it in one place, it pops up in another. Protectionists seem to always be one step ahead of free traders in creating new ways to protect against foreign competitors.


Protectionism's appeal is universal. It is the ally of the nationalist state, self-interested capitalists, national monopolies and labour unions whose very raison d'tre is the restriction of competition. It is literally atavistic, regarding the "other", foreigners, uitlanders as bent on destroying the volk with, on the one hand, cheap goods, paltry diversions and amusements that sap the national spirit; and, on the other, their cheaper high-grade goods threatening "essential" national industries, such as steel and energy.

If protectionism were presented as what it really is--a war of, by and for the producers against captive consumers--it might not look like such a noble cause.

_______________________
Protectionist economists--I'm not counting the propagandists with economics degrees shilling for the labour unions and industries--still flourish on the fringes of economic thought. Their argument is based on the fact of widespread protectionism employed by Western nations in their development. It worked for them, why should it be denied developing countries today?

Is it only coincidence that Abraham Lincoln, the Blessed Barrack's oft quoted model politician, was a fierce protectionist who supported, extended and imposed the "American System", a three-legged stool of tariff walls, national improvements and central banking, on the nation. Indeed, he spent hundreds of thousands of lives on that vision.

What will be the price for this generation?

Where trade stops, wars begin.
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Post by biker » 04 Feb 2009 08:26

I don't recall any quotes from the Canadian Steel producers on this issue.I was of the opinion that steel girders and Rebar are not big item for Canadian mills ! But I maybe out of touch.
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Post by worthy » 04 Feb 2009 10:52

They areconcerned. They've been cut out for years. I suspect the outrage is muted, as the big producers are foreign-owned and have the ability to supply from less impacted plants.

_____________
The worst part about the "war" analogy applied to trade among willing buyers and sellers is that it confounds voluntary mutually beneficial transactions with state-commanded and organized destruction, theft and murder. When trade is free, consumers on all sides are the winners. In war, everyone but the war profiteers and strutting generals and politicians are losers.

All sides win when trade is free. This is not to say that all actors are beneficiaries. As in any free market society, those who are not productive must seek other lines of work; some industries will rise, others fall. Free trade is part and parcel of the most efficient means of allocating scarce capital yet devised. It is the international equivalent of domestic free markets.

So, naturally, it raises the invincible ire of producer interests; and the special contempt of the chattering classes, who are by and large supporters of centralized command economies. These "intellectuals" always seem to imagine themselves at the right hand of the dictator, privileged confidantes advising, consulting and directing the drones.
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Post by ghariton » 05 Feb 2009 01:55

Financial Times:
Strikes against the use of foreign workers in the UK; French carmakers told to buy domestic components and not close factories in France; a minister in Spain urging consumers to buy Spanish: protectionism in Europe appears to be rising by the day.

Warnings over the attendant risks are also on the increase. “Protectionism would be a sure-fire way of turning recession into depression,” says Lord Mandelson, the UK business secretary


<snip>

Governments across Europe do indeed face a juggling act as they try to protect their citizens from the full force of the economic downturn. Yet so far, the signs are that trade protectionism is unlikely to make a comeback, due largely to World Trade Organisation and European Union rules that limit the scope for tariffs to be raised.

Instead, other forms of economic nationalism are coming to the fore, from demands to reserve “British jobs for British workers” to invocations to patriotic consumption. Most insidious of all, say some observers, is the threat of what has been dubbed financial protectionism. Banks are withdrawing to their home markets as government rescues force them to think more along national lines. That, in turn, is adding to the political pressure for bail-outs of other industries.

“There is a very strong law of unintended consequences taking place after all the bank bail-outs. We will see more and more activist government policies that distinguish economic activities according to the nationality of the actors. It should be a big concern to everybody,” says Nicolas Véron of the Bruegel think-tank in Brussels.
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Post by ghariton » 05 Feb 2009 13:15

Mixed messages from the U.S.:
The U.S. Senate rejected an amendment put forward by Republican Senator John McCain to strip the "Buy American" provision from the huge U.S. stimulus bill while agreeing to soften the language that had given rise to concerns of pending trade wars.

<snip>

During a series of television interviews on Tuesday, Obama did not insist that the "Buy American" provisions currently being debated in Congress be removed from the stimulus package altogether.

"But I think it would be a mistake, though, at a time when worldwide trade is declining, for us to start sending a message that somehow we're just looking after ourselves," Obama said.

But some U.S. legislators said they would not have allowed the legislation to move forward without the "Buy American" clause.

"I have no belief that it will be taken out or weakened," said Indiana Democrat Pete Visclosky following the vote.

"If it's not in, I'm not supporting this package and I'll bring a lot of votes with me," said Minnesota Democrat James Obestar.
Meanwhile Jack Layton is all in favour of a trade war:
Canada should adopt a "Buy Canadian" strategy in response to the "Buy American" clause included in the proposed U.S. stimulus package, NDP Leader Jack Layton urged Tuesday.

During question period in the House of Commons, Layton said that there's a "golden opportunity" to boost slumping domestic sales with a "perfectly legal and appropriately designed 'Buy Canadian' strategy."
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Post by Scanman » 05 Feb 2009 14:14

Meanwhile Jack Layton is all in favour of a trade war:
I quite agree with Jack. Lets start with the items below which are growing so abundantly Oct thru May here in Canada. Support our agriculture. Buy Canadian Produce
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:wink:
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Post by Dennis » 05 Feb 2009 14:52

Good things groooow, in Ontario :lol: :lol: :lol:
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Post by parvus » 05 Feb 2009 21:28

Hmmm. If the U.S. refuses Chinese goods, should China revoke vendor financing?
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Post by worthy » 22 Feb 2009 21:12

"perfectly legal and appropriately designed 'Buy Canadian' strategy."
says Smilin' Jack.

The only perfectly legal and appropriately designed "Buy Canadian" strategy I can think of is when Canadian consumers voluntarily and of their own accord choose Canadian over "foreign" goods. I doubt that's what the man with the moustache is thinking of.

The problem with most politicians arguing against protectionism is that they are half-hearted free-traders at best.

In their hearts, they know Buying Canadian, or better yet, Buying Ontario (Alberta etc. etc.) is the "best" strategy, but that for other reasons--mainly fear of US protectionist retaliation--they best keep mum. So you get formulations such as "in these recessionary times" it's better that protectionism be placed on the back burner.

Despite its Constitution prohibiting internal tariffs, US politicians have been devising clever "beggar your fellow states" protectionism for more than 200 years. The same spirit of beggar your countrymen applies north of the border too.

Rabid populist protectionists such as Lou Dobbs (gosh, is that guy smooth and authoritative!) or the otherwise very estimable Pat Buchanan have no such qualms. We will hear lots more from them and the temptation to join them will eventually prove irresistible. Who's afraid of Smoot-Hawley? mocks Buchanan.
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Post by worthy » 23 Feb 2009 09:42

Hey, what fun is this place?

Why haven't the usual suspects jumped in with "free trade is another name for:

a) capitalist exploitation,

b) libertarian fundamentalism,

c) dog-eat-dog ethics,

d) airy-fairy theory when we all know that protecting home industries simply means looking after your own,

e) environmental degradation,

f) manmade global warming,

f) a "race to the bottom" with regard to labour laws and protection of exploited workers,

g) Western imperialism,

h) Western neo-colonialism ("I really miss those Oxford-accented African dictators in their Saville Row suits pronouncing that term with authority and offended dignity.)

I guess I'll have to check out the Canadian Centre for Policy Alternatives, the Red Star's "go to" source for economic commentary.
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Post by Brix » 23 Feb 2009 12:37

worthy wrote:free trade is another name for:
(a) Trade. (Most 'free trade' agreements negotiated worldwide are simply trade agreements.)

(b) An ideal (rarely, if ever, fully realized in trade agreements, though these commonly include a mutual reduction of restrictions leading to 'freer' trade.)

(c) A slogan phrase.

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Post by worthy » 23 Feb 2009 12:50

Good Rothbardian points! I choose b.
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Post by worthy » 23 Feb 2009 12:52

xxxx
Last edited by worthy on 23 Feb 2009 15:45, edited 1 time in total.
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Post by WishingWealth » 23 Feb 2009 14:52

worthy:
Hey, what fun is this place?
Why haven't the usual suspects jumped in with "free trade is another name for:
I just saw a recent interview of Y. Michaud from the QC MEDAC.
This is an organization that tries to organize the shareowners into shareowners advocates i.e. people who would go to annual meetings, vote for/against the wannabe Royalty aka CEOs etc... etc...
He just resigned because he came to the realization that his aggressive/caustic style was totally counter-productive. That is, despite the best of intentions and [sometimes] solid arguments he ended up alone while assaulting the castles.

I know this has nothing to do with the above quote but I just decided to post in that thread since it was convenient.

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Post by parvus » 23 Feb 2009 22:04

worthy wrote:I guess I'll have to check out the Canadian Centre for Policy Alternatives, the Red Star's "go to" source for economic commentary.
The linked blogspot on the left nav bar might prove more interesting, tempered (somewhat) by Worthwhile Canadian Initiative.
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Post by ghariton » 23 Feb 2009 23:31

parvus wrote:The linked blogspot
From the Progressive Economics Forum's home page:
Membership is invited from progressive economists and others representing a wide range of intellectual and political traditions including but not limited to Keynesian, post-Keynesian, Marxian, structuralist, institutional, feminist, ecologist, and post-modern.
I've been meaning to ask you, parvus, what is the difference between Marxist and Marxian? Is a Marxian a Marxist who is too embarassed to say so?

BTW, interesting to see how all the loonies heterodox hang out together. There's no conformism like non-conformism...

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Post by parvus » 24 Feb 2009 19:19

I'm probably not going to be offer a satisfying answer, but I think it all depends on the labour theory of value. As you know, I'm not an economist, and as I read the blog disputes between leading economists, it's fairly clear to me that there is no consensus on macroeconomics. (But the disputes are fascinating to read.) :wink:

Back to your point: it used to be that a Marxist wasn't a dogmatic Communist, but, like the Monthly Review types, used Marx's economic categories. (Perhaps it's the distinction between Old Left and New Left.) But that sort of dichotomization disappeared in the 1980s, what with André Gorz's analysis of class-based politics ("Which Side Are You On," as it were), culminating, I think, in John Roemer's recasting of the language of Marxism into the lexicon of game theory. By that point, Marxism ceases to be heterodox (or gnostic, in Voegelin's term) analysis: it is using the dictionary of the mainstream, rather than denouncing it. There's more to it than this, of course.

A key may be found in the heterodox thinkers of post-WWI Marxism — the Frankfurt School, Gramsci, Lukács, Merleau-Ponty, Althusser, among others, some of whom were members of their respective national CPs, others of whom were not. (The Italian CP seems to have been more open-minded in this regard.) This certainly gave rise to an extra-economic analysis and a focus on culture and the state, with New Left Review as its primary forum. Whether this was a matter of anti-Copernican epicycles is for the reader to judge. Of course, Leszek Kolakowski, a Pole in the mould of Gellner, dismissed most of this as so much nonsense. (Popper, you may recall, had done much the same earlier, although Ralf Dahrendorf, in moderating the dispute, commented that there was little difference between Popper's position and Adorno's.)

Now, I think, it's a Marxian is not a dogmatic Marxist. By that I mean analysis is no longer refracted through the prism of class, or indeed, economics. (We can thank post-modernism and identity politics for that.) I would like to think that a Marxian, or marxisant synthesis builds on Weber and Durkheim as well, to create a fluid picture rather than hypostatizing reality into rigid categories, but I'm afraid I have not kept up on the literature. (I did, however, encounter this piece recently.)

So I would have to say that Marxian thought is not strictly Marxist — it's too inflected with idioms from other discourses, to put it politely — and analytically, once you dissolve the link with class, you fall into interest-group analysis (or rent-seeking). Further, once you destroy the notion of the state as the executive committee of the bourgeoisie, as Foucault did, and instead turn to a capillary system of power, which defines as much as it oppresses (a Freudian sort of thought) then we must conclude we are agents in our oppression. But if we are oppressed for no immediate or unitary end, then the conclusion is simply: "life sucks: how did I get here."

Not a very elegant way to end an answer, and maybe I'm overstating Foucault. Howbeit, a lot of progressive thinking is backward-looking, defining itself against the present through the recollection of prior grievances, without quite grasping the history that unfolds every day.

In this, progressives forget Marx's globalizing words: "all that is solid melts into air." We're not done with capitalism yet, nor its progressive withering of privilege. :wink:
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Post by ghariton » 24 Feb 2009 23:33

Thank you. :lol:

Reinforces my belief that the circle is the dominant geometric shape of our society, as Left shades into Right (via the Anarchists on the extreme left and the Libertarians on the extreme right :wink:) and as Progressives transmogrify into Reactionaries.

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Post by parvus » 25 Feb 2009 21:44

Hmm. Then you might like this:
Libertarian progressivism distrusts big increases in government spending because that spending is likely to favor the privileged. Was the Interstate Highway System such a boon for the urban poor? Has rebuilding New Orleans done much for the displaced and disadvantaged of that city? Small-government egalitarianism suggests that direct transfers of federal money to the less fortunate offer a surer path toward a fairer America.

Political divisions have not always pitted big-government egalitarians against small-government conservatives.

...
Targeted tax aid for poorer Americans would be far more egalitarian than most kinds of infrastructure spending, like broadband technology. Sensible infrastructure projects wouldn’t disproportionately employ the least-skilled Americans. Forgoing the payroll tax for households earning less than $75,000 a year is surer progressivism than bridge-building.

Economics has little say about how egalitarian society should be. That is a question for moral philosophers and the democratic process. However, economics does tell us to choose efficient means of redistribution, and cash transfers almost always involve less waste than the alternatives. Reducing the payroll tax not only avoids the problems inherent in trying to spend infrastructure money quickly, but it can also directly target aid to the poor, who need help more and will spend the cash more quickly.
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Post by ghariton » 26 Feb 2009 03:26

From the EU Observer:
French president Nicolas Sarkozy on Tuesday (24 February) called on the EU to protect its industry in the face of US protectionism, and said France and Italy would insist on this during a meeting of EU leaders in Brussels on Sunday.

"There must be competition, but competition to build big European groups, not to make the totalities of our industries delocalise. France and Italy will as soon as Sunday [at an emergency EU summit] speak with one voice to ask Europe to take decisions, strong decisions," Mr Sarkozy told the press following a meeting with Italian prime minister Silvio Berlusconi in Rome.
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Post by WishingWealth » 26 Feb 2009 11:14

But Mr. Sarkozy must have taken a lesson from Mr. Lessard (QC ag minister) who recently said that Obama should NOT erect any barriers to trade.

Image Image

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Post by worthy » 27 Mar 2009 20:43

Sit down.

Here's the Red Star's David Crane warning of the dangers of protectionism.

Crane points out that Barack the Blessed and his hit man are already proven protectionists. And the stimulus package administered by the states and municipalities, as well as assorted "green measures", are rife with protectionism.

As is usual in such warnings, Crane never gets down to the nitty gritty of exactly how and why protectionism is bad for consumers in both the "protected" and the "target" country/countries. But instead implies endorsement of the idea that protectionism does work for the "protecting" country by quoting the ex-president of a failing narco state, who says protectionism must be fought tooth and nail--with more protectionism. "There will be blood."

You can flip your radio dial from Astral to Corus and hear the same choir singing that "Buy Canada/Ontario/Alberta/Quebec" policies are only common sense in these tough times.

Times that will only get tougher as the ruling class flails for remedies for the bust they created in the first place.
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Post by WishingWealth » 27 Mar 2009 21:00

That should keep the rascals in their place.

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Pix from Boston.com
http://www.boston.com/bigpicture/2009/0 ... g_war.html

WW

And a good article at MarketWatch.
Grassfire of protectionism spreading around globe

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Post by worthy » 27 Mar 2009 23:40

The Federal Reserve of Dallas on protectionism.

It is a trite truth though that while most economists agree on the benefits of free trade, politicians and the public oppose it tooth and nail. And that's why the protectionist sentiment has already triumphed in the extensive Buy America and green provisions of the US$800 billion stimulus bill. Expect more to come.
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