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December 17, 2010 View this newsletter as a web page on CFR's website. EXECUTIVE SUMMARY - Obama to Sign Tax Cut Deal - North Korea Threatens South over Drill - Chinese PM Arrives in Pakistan - Death Toll Tops 30,000 in Mexican Drug War Top of the Agenda: Obama to Sign Tax Cut Deal The U.S. House of Representatives gave final approval late Thursday night to the $858 billion tax deal (CNN) struck by the Obama administration and Senate Republican leaders. The president is scheduled to sign the bill late this afternoon. The bulk of the package will provide a two-year extension to the Bush-era tax cuts set to expire at the end of the year, and will extend unemployment benefits for an additional thirteen months. Other provisions include a reduction in the payroll tax of two percentage points for one year and a decrease in the estate tax. The White House and Republicans praised the deal as a bipartisan success (NYT) and a possible model for future cooperation when the parties begin to share power in 2011. Some Republican detractors wanted a permanent extension of the tax-cuts, but a looming deficit crisis swayed many critics to compromise. With the reduction in payroll tax and an increased level of economic certainty, some observers predict the stimulus could add up to one percentage point of growth next year (FT). However, some critics suggest that the bill does not go far enough to instill financial confidence in U.S. corporations, citing the short-term nature (WSJ) of the extensions. Analysis: Bill House writes on TheAtlantic.com that the tax deal represents a refreshing new brand of D.C. politics but falls short of substantial policy. Laura Saunders of the Wall Street Journal discusses the financial winners and losers of the new tax legislation. This CFR Analysis Brief examines the ongoing debate about potential tradeoffs between tackling U.S. debt and bolstering the U.S. economic recovery. MIDDLE EAST: Israeli Spying Devices Found in Lebanon The Lebanese army says it has dismantled two Israeli surveillance devices (BBC) found by Hezbollah in the mountains surrounding Beirut. Israel denies any involvement. Iraq: The private security group formerly known as Blackwater (al-Jazeera) told a U.S. federal court that the U.S. government should be held accountable for a 2007 shooting by its contractors that killed seventeen Iraqis. The company argues that the contractors were acting as employees of the government because they were providing security to U.S. State Department personnel. PACIFIC RIM: North Korea Threatens South over Drill PACIFIC RIM: North Korea Threatens South over Drill North Korea said it will retaliate if South Korea follows through on plans for a live-fire drill (Yonhap). North Korea said any firing from Yeonpyeong Island will violate its waters because the country does not respect the Yellow Sea border drawn at the end of the Korean War. With tensions on the Korean peninsula continuing to arouse U.S. concern, expert Leon Sigal calls for the United States and South Korea to support a peace process and political and economic engagement with North Korea. Japan: Japan unveiled new National Defense Program Guidelines (NYT) in an effort to respond to China's growing military strength. The plan calls for building more submarines and other mobile forces capable of defending Japan's southernmost islands. SOUTH AND CENTRAL ASIA: Chinese PM Arrives in Pakistan Chinese Premier Wen Jiabao arrived in Pakistan on a trip to expand economic and defense ties, and alleviate concerns over Beijing's growing relationship with India. The two countries are expected to sign trade deals (al-Jazeera) estimated between $10 and $14 billion. Pakistan: U.S. officials cautiously urge Pakistan to take action on militants in North Waziristan (Dawn). The region is known to be a strategic safe haven for insurgents to rest and re-arm after carrying out attacks on Western forces. The Afghan strategy review stresses destroying Taliban havens in Pakistan's tribal areas, but Pakistan isn't likely to take an aggressive stand without certainty that the U.S. is committed to both Afghan stability and eliminating extremists, says CFR's Daniel Markey. AFRICA: Post Election Deaths in Ivory Coast Several protestors died in street demonstrations (BBC) calling for contested President Laurent Gbagbo to concede power. A delegation from the African Union and the Economic Community of West African States are expected to arrive in Abidjan to mediate the situation. Sudan: UN peacekeepers warn of potential violence (UNNews) ahead of Sudan's referendum on independence of the country's south. Concerns remain over the lack of agreement on the terms of the final status of Abyei, an oil-rich region which spans northern and southern Sudan. AMERICAS: Death Toll Tops 30,000 in Mexican Drug War Over thirty thousand people have died in drug-related violence (CNN) in Mexico since President Felipe Calderon took office four years ago and began cracking down on cartels, says Attorney General Arturo Chavez. Chavez outlined "three principle poles" of Mexican crime: the border city of Juarez, Calderon's home state of Michoacan, and the border state of Tamaulipas. EUROPE: EU Agrees on New Bailout System European Union leaders meeting in Brussels agreed to replace the region's current emergency rescue fund, which expires in 2013, with a permanent crisis-finance program (WSJ). Longtime backers of European integration would like more aggressive political action to show Europe will take all measures to defend the euro. Kosovo: Kosovo's prime minister, Hashim Thaci, denied allegations that he and other Kosovo leaders were involved in organ trafficking (DeutscheWelle) during the country's struggle for liberation from Serbia. Presented to the Council of Europe, the report says that Thaci's Kosovo Liberation Army operated several unofficial prisons in Albania where organs were forcibly extracted from prisoners.

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