Monday, April 14, 2008
Trade politics and embarrassing biographical details You can hear me talk about the merits, demerits and politics of the proposed free trade agreement with Colombia on PRI's Fair Game with Faith Salie. As an added bonus, embarrassing biographical details of your humble blogger are revealed at the very end of the discussion. UPDATE: Wow, I had no idea who Faith Salie was when this was recorded -- and a good thing, too, or I would have been way more nervous and way less coherent. Thursday, April 10, 2008
Thoughts on the Colombia trade deal Kevin Drum and Matthew Yglesias have posts up on the free trade agreement with Colombia and wonder whether it's worth all the trouble it's going to create. Let's respond! Kevin's post boils down to the following facts: a) Trade contributes somewhat to rising inequality and stagnant wage growth at the lower end of the wage spectrum; b) There's little appetite among the American people for freer trade; and c) Trade is pretty free anyway, so why worry about piddling deals like the one with Colombia. In conclusion, Kevin paraphrases Senator Clinton: "Taking a breather to rethink how we approach trade seems pretty reasonable at the moment." Matt's post helps to rebut the first charge. As he observes: [The FTA] actually involves very little changes on the US side at all. In essence, Colombian goods already flow very freely into the United States except for in our more famously protected sectors (agriculture, etc.) and what we're offering Colombia here is a very solemn promise to keep it that way.The Colombia FTA is hardly unique in this regard -- this is pretty much what the state of play was prior to NAFTA as well. So the effect of these kind of FTAs on U.S. wages is less than minimal. It also explains why ratifying this FTA is a good idea -- it locks in U.S. policy. As I've posted previously, the reason these agreements are a good idea is precisely because they prevent the drift towards protectionism that is otherwise inevitable in a pluralist political system. As for Kevin's desired "pause," let's face it, there is going to be zero momentum towards further liberalization beginning in 2009 regardless of whether this FTA is passed. Kevin's pause is happening whether anyone likes it or not. After analyzing the content of the deal, Yglesias concludes the following: All things considered, this seems to have almost no implications for American well-being, and if I were a member of congress I think I would consider this an excellent moment to let me vote be dictated by pure partisan politics or possibly corruption. If I were a blogger, I would say that lowering barriers to the importation of foreign goods on a unilateral basis would be good policy for the United States and that using bi- or multi-lateral trade negotiations to try to get other countries to adopt "pro-business" policies is a pretty dubious undertaking.The first point is incomplete and the second point is factually incorrect. The biggest benefit of the FTA with Colombia has little to do with economics and everything to do with our bilateral and regional relationships. Go back to NAFTA. Kevin is right to point out that the agreement's economic effects were not terribly large. On the other hand, even skeptics of trade liberalization -- Dani Rodrik, Paul Krugman, and Joseph Stiglitz -- supported NAFTA because it locked Mexican economic reforms, promoted political reforms, and cemented a stronger bilateral relaionship. There's no reason to believe that the same effects would not take place with Colombia. Matt has been stressing the killings of labor activists in Colombia. However, the EPI graph he highlights shows a pretty dramatic reduction in these killings since 2003. Question to Matt: what's the best way for the United States to help reduce those killings even further -- ratifying or rejecting the FTA? I'd argue the former. FTAs matter more than unilateral reductions of trade barriers because they decrease the likelihood of policy reversals (which, again, is why Hillary Clinton's proposals to renegotiate FTAs every five years or so is such a God-awful idea). Ratifying the FTA with Colombia increases the likelihood that labor killings will continue to decline. A final point: for freer trade to be politically sustainable, there needs to be some kind of reciprocity, which can't happen via unilateral reductions in trade barriers. Historically, unilateral reductions have had a minimal impact on the openness of the global economy. In the 19th century, the repeal of the Corn Laws mattered a hell of a lot less than the Cobden-Chevalier treaty in opening up European economies to each other. In the 20th century, GATT mattered a hell of a lot more than any unilateral U.S. policy in leaving the misbegotten trade policies of the Depression behind. UPDATE: On the other hand, I should point out that Drum is 100% correct on this point he makes in a follow-up post: Question: which is more important to the cause of free trade: (a) passage of the Colombian trade pact or (b) reining in the monstrosity that is U.S. farm policy? The answer is (b) by several light years. So why do we hear so much about the dire consequences of failing to pass a piddling bilateral trade deal... but almost nothing about the dire consequences of the hideous $300 billion distortion caused by the latest round of farm subsidies — most of which goes to big agribusiness, not struggling family farms? How about a little more noise on the farm front?The problem is even bigger than Drum realizes, since cutting back agricultural subsidies are also the key to completing the Doha round. ANOTHER UPDATE: I just want to point out that the initial version of this set a new personal record for number of typos in a single blog post. Wednesday, December 19, 2007
A good policymaking day Today, the Eisenhower Executive Office Building is on fire. Yesterday, in what is strictly a coincidence, the U.S. Trade Representative, Secretary of Commerce, and Deputy Secretary of State had a little get together in the EEOB on planning U.S. trade policy for the rest of the Bush administration's term of office. The idea was to talk with both trade and Latin American experts from the think tank and academic worlds to see whether/how the Colombian, Panamanian and Korean FTAs will be passed by Congress in 2008. I know all this because I was in the room as an expert. And you can cue massive waves of imposter syndrome here.... These kind of get-togethers are unusual, but those who had attended sessions like this in the past thought this one was similar to what prior administrations would have done. For yours truly, it was an interesting session for two reasons. First, the meeting bore a passing resemblance to a class in my Statecraft course. Imagine students putting together a 15-minute PowerPoint presentation to advocate for a particular policy, and then soliciting feedback from the rest of the class. Now replace students with policy principals and you get a sense of this meeting (by my grading, the USTR received an A, the dSOS an A-, and the Secretary of Commerce a B+). Second, I remembered the sense of accomplishment one occasionally experiences as an actual policymaker. Without getting into specifics, I made a suggestion that caused various people in the room to scribble something down. It wasn't a brilliant idea that would cause people to rethink trade as we know it, it was just a small point. But it was a point that was accepted as useful. Those of you who go into policymaking, however, will discover that the times when you can suggest an idea and get consensus on it immediately are few and far between. When those moments do occur, savor them, no matter how small the success. Thursday, November 29, 2007
Another exercise in ranking generosity One of pieces of accepted wisdom among policy cognoscenti is that while the United States is not terribly generous in terms of foreign aid, it does excel in niche areas, like providing providing relief for humanitarian disasters. The Financial Times' Quentin Peel reports on a new ranking exercise that suggests this perception might not match.... other people's perception: Sweden, Norway, Denmark and the Netherlands have been ranked as the top four aid donors in providing relief for humanitarian disasters, according to a new index published on Thursday.I tried to access the actual report, but Dara's web site, while quite fancy, is also maddeningly short on detail or methodology. Still, two quick thoughts: 1) Are the evaluations of aid agencies really the only metric being used here? Surely some of these agencies were on the losing end of various funding decisions by major power donors. Might that not affect their responses? Friday, November 9, 2007
An optimistic post on trade It's no secret that I've been in a sour mood as of late on the future of U.S. trade policy. Today's New York Times story on the House's passage of the Peru FTA didn't cheer me up either, because the takeaway point is that its passage was the exception and not the rule. Eoin Callan, however, lifts me from complete and total despair with this Financial Times story: Diplomats from the US and European Union are laying the groundwork for an unprecedented round of bilateral bargaining in which all of the main transatlantic trade disputes would be put on the table and negotiated in one go.If this works -- and given the interest groups at play, I'd put the odds of success at about 35% -- then it's win-win-win-win-win. Both the United States and European Union would score some policy victories, and remove some major irritants to the transatlatic relationship. The business community on both sides of the Atlantic would benefit from greater policy certainty. Consumers would gain from increased levels of exchange The biggest winner, however, would likely be the WTO -- because it would save the dispute settlement body from having to decide cases that are way beyond its pay grade. Wednesday, October 24, 2007
My not-so-sunny predictions for U.S. trade policy Policy Innovations -- "The central address for a fairer globalization" asked three trade experts what they see for the future of U.S. trade policy. It appears that Mac Destler and Gary Hufbauer were too busy, so unfortunately for their readers I'm one of the experts, along with Susan Aaronson and Kevin Gallagher. Go check it out -- you can guess my mood about the future. My basic point: In a jittery economy, neither Americans nor members of Congress care about how globalization affects the rest of the world. Their primary concern is how imports are destabilizing their jobs and depressing their wages.I should have put "allegedly" somewhere in that sentence, but you get the basic idea. Friday, October 19, 2007
Hear me do my best NPR voice My media whoredom conquers another platform, as today I have an audio commentary for NPR's Marketplace. I talk about Hillary Clinton's trade proposals and the bang-up job they would do in improving America's image. Discerning readers will observe echoes from this blog post of last week -- but with less snark and more lilting irony. [Sounds like NPR's new motto!!--ed.] Click here to listen and tell me if my voice can cut it on NPR. Wednesday, October 10, 2007
Grading out the GOP debate on trade I didn't see the GOP debate yesterday, but looking through the transcipt, I was surprised to see trade came up as an issue. According to the Wall Street Journal's Jackie Calmes and Amy Shatz: {S]everal [candidates] reflected skepticism about free trade that is gaining hold in both political parties. The others, while professedly free-traders, acknowledged widespread job losses as a consequence of globalism and a public sense that trading partners, particularly China, are taking advantage of the U.S.Looking at the transcript, I think Calmes and Shatz are overinterpreting what was said. The fringe candidates (Hunter, Tancredo) were perfectly happy to sound protectionist. But they're not going to win, so let's skip them. Some of the mainstream candidates (Romney, Giuliani, Huckabee) had some caveats: Romney: "We need to make sure that the Chinese begin to float their currency and they protect our designs and our patents and our technology."The other candidates (Paul, McCain, Thompson) didn't pander at all on this question. Which, of course, means they're doomed. So, on the whole, the only possible nominee who scared me was Huckabee. The rest of the field sounded relatively sane on the topic. And, credit where it's due, Giuliani scored the best combination of sound policy and sound politics on the issue. Oh, one last thing -- no one let Ron Paul anywhere near the Federal Reserve. Tuesday, October 9, 2007
Hillary Clinton really wants to improve America's standing abroad Last week I asked which major party was going to be more trade-friendly. Yesterday, Hillary Clinton provided part of the answer. The Financial Times' Edward Luce summarizes: Hillary Clinton, frontrunner for the Democratic party’s presidential nomination, on Monday said that all US trade agreements should be evaluated every five years and, if necessary, amended.Click here for more details (it's not all bad; the proposal to expand trade adjustment assistance to cover service-sector workers makes sense). For a party that claims it wants to burnish America's image abroad, the Democrats sure know how to propose specific steps that will piss off our trading partners. Seriously, if this kind of review is proposed, what incentive would any country have to sign an FTA with the United States? The major benefit of a free-trade agreement with the United States is less economic than political. An FTA increases the certainty of the bilateral relationship. Clinton's "review process" essentially strips away that certainty. Does Hillary Clinton really want to return Mexican-American relations to the bad old pre-NAFTA days? As for a "trade enforcement officer," this is the trade equivalent of Michael Dukakis' pledge from 1988 to balance the federal budget deficit through improved tax collection. It's nice politics, but it ain't going to mean a damn thing in terms of reducing the trade deficit or protecting American jobs. Look, trade expansion does have distributional effects, and it makes sense to expand programs that try to compensate for those effects. Clinton's ham-handed idea is not the answer, however. This will play great on the hustings and contribute to an eroding image of the United States abroad. Clinton should -- and does -- know better. Friday, October 5, 2007
A small question about trade and parties If you believe that trade liberalization benefits both the U.S. and global economy, which party is the party for you? When I came of voting age, the answer was pretty obvious -- the GOP. Now we live in a world where Obama's chief economic advisor is making more sense on the trade issue than rank-and-file Republicans. (both links courtesy of Greg Mankiw) Obviously, it is slightly unfair to compare advisors with voters -- and the WSJ article linked above points out that the GOP frontrunners are still talking the talk on trade. I'm beginning to wonder, however, whether either party will walk the walk. Question to free traders -- which party do you think is likelier to promote trade liberalization? Thursday, August 9, 2007
Is Nick Kristof insane? A popular definition of insanity is doing the same thing over and over and expecting different results (intriguingly, the same website attributes this definition to both Benjamin Franklin and Albert Einstein). That definition came back to me after reading the opening of Nick Kristof's NYT ($$) column today: Almost nobody has campaigned so energetically for the poor in Africa as Bono, but when Bono spoke at a conference in Africa recently, he was heckled. Several Africans scolded him for demanding more foreign aid, saying that’s not what Africa needs.You can see why I would question Kristof's mental status. To be fair, however, Kristof would argue that he's not proposing doing the same thing again. The rest of his essay basically argues that while the macro picture suggests aid does not work, the concentration of aid into certain sectors (health and education) and focused programs (the Millennium Challenge Account) has yielded greater gains (eradication of smallpox, etc.). He has a point, but it's not as big a point as he thinks. Yes, health initiatives have yielded some impressive results, but they're often subject to similar screw-ups. As William Easterly pointed out in The White Man's Burden, foreign aid has distorted efforts to combat the spread of AIDS. By focusing on treatment of those already suffering from HIV, there has been underinvestment in public goods that would get a bigger bang for the buck -- like efforts to prevent the spread of AIDS or to encourage vaccination for other diseases. So Kristof is not insane... but he might be a little funny in the head.
Thursday, July 26, 2007
The power of the farm lobby The New York Times' David Herszenhorn explains in depressing detail why farm subsidies will not be cut back anytime soon -- despite the fact that market conditions are at an ideal point for doing so: For the many critics of farm subsidies, including President Bush and Speaker Nancy Pelosi, this seemed like the ideal year for Congress to tackle the federal payments long criticized as enriching big farm interests, violating trade agreements and neglecting small family farms. Monday, July 23, 2007
Why TAA is not a valuable bargaining chip I've had enough conversations with Hill staffers to know the political lay of the land on expanding Trade Adjustment Assistance to service sector workers: 1) Everyone recognizes that the current TAA rules -- which only apply to the manufacturing sector -- make little sense in a world where more and more services are tradeable;I bring all this up because of Lori Montgomery's front-pager in the Washington Post today: As part of their campaign to soothe an anxious middle class, congressional Democrats are preparing legislation that would significantly expand federal aid to the most obvious victims of the global economy: workers whose jobs move offshore or are lost to foreign imports.I'd love it if the GOP could get this quid pro quo, but it ain't gonna happen. I can't see any TAA program that would convince Democrats to renew fast track. This is so partly because although many Democrats genuinely want to expand the program, others are offering it only lip service. Unions, in particular, loathe TAA, because even if it provides fiscal relief to their members, it also facilitates the movement of workers to non-union sectors. In other words, TAA undercuts the organizational power of unions. They can't outright oppose it, because they've been calling for it for decades now, but they don't love it. So, an interesting question -- knowing that fast track ain't happening, should TAA be exapanded? I say yes, because of the poll numbers discussed in the last post. My hunch, however, is that GOP congressmen are going to say no. The two direct losers from this kind of impasse: service sector workers displaced by offshore outsourcing, and free trade advocates. The first group is small -- the second group is smaller. Tuesday, May 29, 2007
On the optimistic side of cautious optimism George W. Bush will put forward former US Trade Representative and Deputy Secretary of State Robert Zoellick to become the next president of the World Bank. The FT's Krishna Guha and Eoin Callan report on the reactions: Hank Paulson, the US treasury secretary, said he recommended Mr Zoellick to the White House following consultations with the bank’s other shareholder governments. Mr Paulson told the Financial Times: “Bob Zoellick is someone who has a passion for development. He has trust, respect and support from all the regions of the world.”I've heard this last concern voiced by others in the know. To wich I'd say the following: 1) Having seen and interacted with Zoellick in the past month, he strikes me as being on the calmer side of the DC heavyweight spectrum. He's smart, he knows he's smart, and he does not suffer fools gladly. By beltway standards, however, abrasive does not spring to mind.Brad DeLong is pessimistic: If Robert Zoellick had not served the Bush administration without distinction as Special Trade Representative and as Deputy Secretary of State, I would be enthusiastic about his World Bank President candidacy. But the fact that he has done nothing in his last two government jobs makes me wonder whether an alternative candidate should be found.In the past, I've disagreed with DeLong about Zoellick on precisely this point. He's a thoroughly competent man who has served a thoroughly incompetent administration. When Zoellick served in a competent administration, he accomplished only some minor things -- like helping to reunify Germany. Actually, by moving to the bank, Zoellick will provide an ideal "natural experiment" to test out Brad and my takes on him. So I extend the following challenge to DeLong: if, in three years time, Zoellick is judged as having been successful by, say, Ken Rogoff, William Easterly, and Dani Rodrik, DeLong will owe me 100 units of Special Drawing Rights. If they judge him a failure, I'll pay DeLong. UPDATE: Philip Levy makes the case for Zoellick over at America.com. Tuesday, May 15, 2007
The The pressure is growing on Paul Wolfowitz to leave the World Bank. The Financial Times' Krishna Guha and Eoin Callan -- rapidly becoming the World Bank's internal newsletter -- lays out the situation: Paul Wolfowitz’s handling of a secondment deal for his girlfriend Shaha Riza broke the World Bank’s code of conduct, three staff rules and the terms of his contract as bank president, the final report by a panel investigating his role has concluded.Tyler Cowen sums up the problem with Wolfowitz: As an outsider it is hard to judge many aspects of Wolfowitz's tenure. I take his continuing unwillingness to resign to be the biggest argument against his managerial abilities. He has lost the public relations battle and can no longer be effective. Why should he want the job any more? The obvious hypothesis is that he is emotionally committed to a losing battle, and is not placing much weight on the long-term interests of the institution he is running.Cowen's argument could be extrapolate to apply to the Bush administration as well. Consider the Justice Department. At this juncture, it appears that the White House's revealed preference is to have a loyal but incapacitated and incompetent leader of that department over making any kind of concession to Congress. What's so amazingly boneheaded about this "double-down" strategy is that, inevitably, the White House will lose on both issues. Which means they will not only lose on these personnel questions, they will lose in a way that further exposes their unique mixture of incompetence and political weakness. Oh, and lest one think that Wolfowitz's insistence o keeping his job is not hurting the Bank's mission, click here. UPDATE: The Economist's Free Exchange blog provides another knock against Wolfowitz. Sunday, May 13, 2007
Reactions to the trade deal I still haven't seen any specifics on the trade deal between Bush and congressional Democrats. I have, however, seen a lot of criticism from across the board -- which either suggests its a really bad deal or it's the optimal outcome given the tight bargaining constraints involved. In the Wall Street Journal, John D. McKinnon and Greg Hitt look at the usual suspects to see who's upset: [A]s details of the agreement emerged, some labor and environmental groups pointed to what they viewed as some significant limitations.Free trade promoters? They're not too thrilled either. The Cato Institute's Center for Trade Policy Studies issued the following press release: The deal constitutes a political victory for Democrats in Congress, who compelled the administration to swallow U.S. union demands, but is unlikely to lead to any new trade liberalization (another union wish). Forging trade policy is a balancing act: the more an agreement is limited to reflect domestic political demands, the less likely prospective trade partners are to see the benefit of agreeing. With respect to the three Latin American agreements, those countries will now have to reopen debate in their legislatures, which might reject the terms.Maybe, maybe not. As James Surowiecki points out in The New Yorker, the U.S. can get countries to swallow an awful lot of domestic political demands: Free trade is supposed to be a win-win situation. You sell me your televisions, I sell you my software, and we both prosper. In practice, free-trade agreements are messier than that. Since all industries crave foreign markets to expand into but fear foreign competitors encroaching on their home turf, they lobby their governments to tilt the rules in their favor. Usually, this involves manipulating tariffs and quotas. But, of late, a troubling twist in the game has become more common, as countries use free-trade agreements to rewrite the laws of their trading partners. And the country that is doing this most aggressively is the United States.The power asymmetries are such that the U.S. can muscle its domestic preferences into an FTA when it can't do the same thing in the WTO. Is ability this a good thing? Dani Rodrik doubts it: [T]his new direction is full of pitfalls--not just disguised protectionism as free-trade fundamentalists fear, but also an inevitable tendency to want to impose our own ways of organizing society on our trade partners. The principle of the right to organize is fine, but different democratic societies have different labor laws, all arguably equally "democratic." If we start judging the adequacy of other countries' laws from the perspective of what WE think is the right set of requirements, we will soon be in trouble.I was originally opposed to these provisions, but have become more agnostic about them over time. On the one hand, there's decent evidence that the best way to eliminate labor and environmental abuses is to have countries grow more quickly, thus causing them to treat their workers and their environment better. On the other hand, there's also decent evidence that including these provisions has an actual effect on trading partners. In a perfect world, I wouldn't clutter trade agreements with these provisions. In the world in which we live, I'll take these provisions as politically necessary -- so long as they are not so onerous that the proposed FTA partner nixes the deal. UPDATE: My inside-the-beltway source on trade policy e-mailed me the following reaction: The typical reactions around town last week... were highly skeptical about applicability, implementation, reaction of countries with recently "closed" FTAs, reaction of countries with ratified FTAs who now want might better deal (specifically with regard to pharmaceuticals), and about the methods by which the new dispute settlement mechanisms for labor and environment might actually work. You could probably sum the reaction of many trade pros as follows: "they're making it up as they go along." Friday, May 11, 2007
There's a domestic deal on trade I still need to look at the fine print, but this Steven Weisman story in the New York Times suggests that a deal has been cut on trade deals for the future: The Bush administration reached agreement on Thursday with the House speaker, Nancy Pelosi, and other Democrats to attach environmental and worker protections in several pending trade accords, clearing the way for early passage of some pacts and improving prospects for others.Pelosi's presence at this announcement suggests that the dynamics I discussed back in late March kicked in. Developing..... UPDATE: Here are links to the Financial Times and Washington Post stories. The Post highlights the key concession: The key to the agreement, said those involved, was the Bush administration's reluctant assent to Democratic demands for more stringent labor rules. Under the new policy, enforceable labor provisions will be written into the texts of trade deals to protect the rights of workers abroad to organize unions and bargain collectively, while banning forced labor, child labor and workplace discrimination.This should make Dani Rodrik very happy. Predictably, it's pissed off both David Sirota and organized labor.
Monday, May 7, 2007
Do I have blinders about Blinder? Over the weekend, Alan Blinder once again vented his concerns about the future of offshoring, this time in the Washington Post: [T]wo powerful, historical forces are driving these changes, and both are virtually certain to grow stronger over time.I've read Blinder's longer paper on this topic, and I must confess -- again -- that I don't see how he's coming to this "large, lengthy and painful" conclusion. As Greg Mankiw points out: Alan says the transition to the new equilibrium will be "large, lengthy and painful." When he spoke at Harvard last week, he said the transition would take about 30 years. But the very length of the transition will make it less painful. Over the course of a generation, workers can gradually retire from shrinking industries, and new workers can be trained for the growing industries that take their place. Of course, some individuals will experience painful transitions, but that is always the case in a dynamic market economy. I don't expect future transitions to be macroeconomically different than past transitions. Even if imports as a percentage of GDP continue to rise as Alan predicts, I would nonetheless expect the average rate of unemployment for the U.S. economy to be about the same over the next thirty years as it has been over the past thirty.This brings us to a point that Dani Rodrik raised earlier in the week about what happens when economists start debating public policy: Finally, let me note the irony in how a discussion on free trade among economists quickly ends up being a debate on its politics—that is, a debate on whether this or that trade policy which on economic grounds is actually desirable can also be politically feasible. We are way beyond our area of expertise. Your hand-waving is as good as mine.If you eliminate the word "free" from both paragraphs, then I agree 100 percent with Rodrik. By economist standards, Alan Blinder is remarkably sophisticated about the ways in which politics and economics intersect. What puzzles me, therefore, is why he is making Cassandra-like noises about a phenomenon that does not justify such warnings if it takes place over several decades (and there's decent evidence that this is the case). As a political scientist, I have two hypotheses: 1) Blinder believes that the political effects of increased offshoring will be substantial enough to make the current tide of protectionist sentiment seem like a baby wave. To prevent a stronger backlash, he feels it necessary to warn people with Very Scary Numbers to prompt action.My concern is that however well-intentioned Blinder's tactics might be, he's overlooking another possible outcome of his self-proclaimed apostasy, which is that it empowers economic populists with the mantle of intellectual respectability. Saying that upwards of 40 million jobs will be threatened by offshoring sounds scary, even if the data as of yet doesn't show those jobs have actually been offshored. As some other economists have observed, entrenched interests will always exploit these kind of economic fears to implement policies that serve their own interests. Furthermore, some political scientists have pointed out that these protectionist policies will also be far from transparent. Maybe Blinder is speaking truth to power and I am simply adopting too static a view of trade policy. But I can't shake the feeling that Blinder has adopted the Jeffrey Sachs theory of political change. UPDATE: Robin Toner has an excellent front-pager in the New York Times today that gets at how these political questions are playing out among House Democrats. Some of them clearly share the Blinder view of what to do. What disturbs me, however, are passages like this: Since the Democrats took control of the committee in January, the 75-year-old Mr. [Sander] Levin has met with restless Democratic freshmen who helped their party regain the majority by promising to “do something” about the job losses caused by a globalized economy — and who now want to deliver....Whenever a politician presents a demand or proffers a promise to "do something" about trade, I get hives. Tuesday, May 1, 2007
As Rogoff goes.... It's a bad, bad sign for Paul Wolfowitz when Kenneth Rogoff decides to write a satirical memo in Wolfowitz's name for ForeignPolicy.com. It's an even worse sign when he can write the following paragraph: I trust you [the staff] have not been unduly influenced by the recent letter calling for my immediate resignation, signed by forty-two former World Bank managing directors, senior vice-presidents, vice-presidents, and directors. You and I can surely see through this thinly-veiled attempt to manipulate the value of “Paul Wolfowitz resignation” claims [on TradeSports]. I want to assure you that the World Bank Internal Investigations Unit will look into this matter. If any of the letter’s signatories are found guilty of price manipulation, they will be dealt with harshly. Let’s not forget who is paying their pensions.Wolfowitz has argued that he's the victim of a smear campaign, and there's a small grain of truth to that charge in that he is not solely responsible for the current imbroglio over his paramour. However, when the staff that runs Wolfowitz's signature initiative indicates that his problems are compromising that initiative, it's time to say adieu. Wednesday, March 28, 2007
An odd, optimistic moment on trade policy The Financial Times' Eoin Callan reports that with deadlines on the horizon, suddenly Congress and the President are getting serious about trade policy: Hank Paulson, Treasury secretary, on Tuesday intervened in negotiations with Congress over US trade policy in a bid to save President George W. Bush’s economic agenda for his last two years in office.You can access the Democrat talking points here (link courtesy of Salon's Andrew Leonard). Most of it screams "boilerplate" -- the question is how much of it will come to fruition and whether it represents a shift in the Democrats' bargaining position. Leonard believes that,"most of it is a restatement of the American labor agenda." but Chris Nelson takes a dissenting view his latest Nelson Report: Notice that this very clearly does not call for “passage into law all of the basic ILO conventions”...something which has been a standard part of Democratic and Labor rhetoric for years.If Nelson's read of the language is correct, I suspect a deal will be done. This is now less about trade and a lot about politics. With the administration and Congress deadlocked on Iraq, the U.S. attorneys, and just about every other policy imaginable, the poll ratings for both branches of government are below 40%. Both the administration and the Congress need to look like they're actually governing. If they can sign a deal on something -- anything -- then they can counter this deadlock perception. Ordinarily, this desire to cut a deal just to get something done is anathema to me, because what usually gets done is some God-awful piece is legislation that everyone regrets a few months later. It also feeds the bias that action is always better than inaction in politics. Ironically, however, this could actually lead to something constructive accomplished on trade policy. Developing..... Wednesday, January 10, 2007
You have to have AAFTA The Wall Street Journal op-ed page is currently the Beltway bulletin board on trade. A few days ago, former USTR and deputy Secretary of State Robert Zoellick wrote an essay proposing that the United States consolidate our trade diplomacy in the region: This year President Bush and the Democratic-led Congress should launch a new Association of American Free Trade Agreements (AAFTA). The AAFTA could shape the future of the Western Hemisphere, while offering a new foreign and economic policy design that combines trade, open societies, development and democracy. In concert with successful immigration reform, the AAFTA would signal to the Americas that, despite the trials of war and Asia's rising economic influence, U.S. global strategy must have a hemispheric foundation.I'm curious to see how Democrats like Sherrod Brown would react to this, since in many ways, Zoellick is simply proposing a political trade with our FTA partners -- deeper economic integration in return for adding on stringent labor and environmental standards. Nominally, at least, this is what populists like Brown claim to want. However, I confess that the real point of the post, if you've read this far, is to see how Lou Dobbs covers this sort of proposal: The answer seems to be, "very, very poorly."Monday, January 8, 2007
A few good trade links A few if the saner things written about trade in the past few weeks: 1) William Overholt, "Globalization's Unequal Discontents," washingtonpost.com, December 21, 2006: Some manufacturing workers in the United States -- such as those who labored in huge factories making basic steel -- have suffered as they've seen their jobs leave America for low-wage countries. But for workers as a whole, the truth about globalization and inequality is the opposite of what the protectionists claim. There are three caveats to the steel worker's story and two larger perspectives on inequality.2) Jagdish Bhagwati, "Technology, not Globalisation, Drives Wages Down," Financial Times, January 3, 2007: Lou Dobbs of CNN, the labour groups’ think-tank Economic Policy Institute and nearly all the Democrats newly elected to Congress believe that globalisation has much to do with the economic distress of the working and middle classes. Therefore they have coherence on their side when they want to lean on the door – even to close it – on trade with poor countries and occasionally on unskilled immigration from them.One slight cavil -- that last paragraph by Bhagwati strikes me as a bit of a stretch. I have to think that globalization is one of the drivers for greater technical change. 3) Susan Aaronson, "Labor Rights Not Optional," TomPaine.com, January 5, 2007: [Both] the Democratic alternative and the current Bush administration approach do little to bolster the demand in developing countries for strong labor protections. Neither approach facilitates the ability of citizens in our trade partners to participate in and monitor labor rights enforcement. In countries such as Oman, a U.S. free trade partner, workers cannot easily influence their government or obtain due process in administrative procedures. In addition, some of America’s free trade agreement partners do not provide their citizens with full information about their labor rights under the law. As a result, it is difficult for activists to monitor their government and hold it accountable.UPDATE: Brad Setser protests in the comments about the Overholt piece -- which reminds me that I should have linked this post of his from last week. Thursday, January 4, 2007
The devil is in Max Baucus' details I've received more than one query about what to make of Max Maucus' Wall Street Journal op-ed on trade policy(subscription only). Here's an excerpt: Some think that the new Democratic congressional majority will be bad for trade policy. While it is true that some candidates criticized trade in their campaigns, I believe that the new Congress will have both the desire and opportunity to renew U.S. trade policy, with a unifying purpose that Americans can understand and support. Through trade, we must bolster the nation's innovative economy in an increasingly global marketplace. At the same time, we must tackle with equal vigor the negative domestic consequences of globalization, from trade deficits to job losses.There are three ways to interpret this essay: 1) Baucus, representing pro-trade Democrats, is laying down a marker against protectionist Democrats. For Sherrod Brown, Byron Dorgan, James Webb, etc., he's saying, "It's great that you won your elections with economic populism, but now you have to actually try and craft policy that does not trigger trade wars, runs on the dollar, global recessions, economic development, etc. We agree that cushioning the losers is important, and we're with you on bolstering labor and environmental standards, but let's play like grown ups, shall we?"I'll be charitable and say that the op-ed is 40% of (1), 25% of (2), and 35% of (3). One last point -- Baucus embrace of a service pact with the EU, coming so soon after Angela Merkel's quasi-TAFTA proposal, makes me wonder if the Bush administration will become more enthusiastic about the proposal -- or run away, scared it's an EU-Blue State conspiracy. Tuesday, January 2, 2007
The mother of all economic integrations Three months ago I discussed German enthusiasm for a transatlantic free trade area. Well, now Bertrand Benoit and Quentin Peel report in the Financial Times that Angela Merkel is planning on taking the next step -- not TAFTA exactly, but defintely liberalizing: Angela Merkel, German chancellor, will this month launch a sweeping initiative for the harmonisation of US and European legislation to boost investment flows and trade between the world’s largest economic blocs.Merkel talks about this in an interview with the FT's Quentin Peel. Some excerpts: At the forthcoming EU-US summit we want to talk about ever-closer economic co-operation. Our economic systems are based on the same values. The EU and the US have sophisticated patent legislation. We have regulatory mechanisms governing our financial markets. We should be looking for ways to keep developing these together at a transatlantic level. We must watch out that we do not drift apart, but instead come closer together, where there are clear advantages for both sides.Now I'm beginning to wonder if John O'Sullivan knew something I did not 18 months ago. I hope so -- for one thing, I could then look forward to Sherrod Brown complain about Polish plumbers. Friday, December 22, 2006
You mess with the wheat, you'll get the chaff The Washington Post wraps a series on federal farm subsidies with a story by Dan Morgan, Sarah Cohen and Gilbert M. Gaul on what happens when you mess with the trough. This part of the story goes back to 2001, and does something I would not have thought possible -- it makes me sympathize with Karl Rove: One of the most remarkable examples of the farm lobby's power came in 2001 and 2002, when the existing farm bill was written, expanding payments again over the opposition of the White House and key lawmakers. Reformers see it as a cautionary tale. Tuesday, December 12, 2006
Susan Schwab begins to answer my question When we last left our gripping narrative about the Doha round, I asked a question without an answer: ME: There seems to be a catch-22 on reviving Doha. Other countries won't negotiate seriously with the United States unless they believe that we can get TPA renewed. At the same time, the only way that TPA is likely to be renewed is if Congressmen seen the outline of a Doha deal. How does one escape this conundrum?In this Wall Street Journal story by Greg Hitt, I see that Schwab has a longer answer (hat tip: Glenn Reynolds): The Doha round of global trade talks stalled after hitting numerous roadblocks over the summer. Now the White House is working to revive negotiations, even as a new barrier looms: a Congress much more skeptical of free trade.This isn't the worst idea in the world -- though I expect David Sirota to be popping a blood vessel sometime in the next week. With regard to Bergsten's prediction, I actually think the crisis of confidence is already upon us, if this Economist Intelligence Unit survey is any indication: [T]he Economist Intelligence Unit conducted a wide-ranging survey of 286 executives spread across the world’s main trading regions. The key findings from the research are highlighted below. Thursday, December 7, 2006
Save the rust belt -- and screw western Washington The New York Times' Leslie Wayne looks at the renewed demand for Boein's 747 jet. Turns out that the expansion of trade has something to do with it: [A] funny thing happened to the 747 on the way to the graveyard: it found a new tailwind, and a strong one at that. Wednesday, November 22, 2006
I'm sure glad the Democrats are improving our standing in Latin America The Nelson Report has been assuring me repeatedly that the Democratic takeover of Congress will not mean the end of U.S. trade policy. Here's one example from a report from last week: It’s our contention that even if the Democrats had not swept the House and Senate elections, the US would still face increasing difficulty as the political arena wrestles over the challenges of adjustment to globalization, especially dealing with a downside which includes mitigating pain at home, and enforcing better behavior by trading partners.Nelson is correct to point out that trade integration was not exactly going gangbusters prior to the midterms -- but then again, this FT story by Eoin Callan points out that it's possible for integration to slow even further: The US Congress will reject two trade deals agreed with Colombia and Peru, leading Democrats said, in a significant blow to President George W. Bush’s agenda for his final two years in office.UPDATE: The Washington Post's Sibylla Brodzinsky and Peter S. Goodman summarize how this kind of thing is going to be perceived south of the border: "We watch the news and we're nervous about what might happen with what we send to the United States," said Janeth Palacio Ramirez, 35, who supports her 15-year-old daughter and her elderly parents by punching zipper stops onto 7,000 pairs of jeans a day, earning about $200 a month. "Everything we make here goes there, so if there are problems with exports, we'll all lose our jobs."....Hat tip: Pienso Friday, November 10, 2006
The trouble with fair trade, continued Two months ago I blogged about the serious pitfalls of implementing fair trade certifications in the coffee trade. Now I see that the Economist's business.viewhas an interesting story about the brewing battle between Starbucks and Oxfam: Coffee has become a big testing ground for what it means to be an ethical consumer. The hugely successful Fair Trade brand allows many coffee addicts to get their fix with a clearer conscience, safe in the belief that no farmers have been exploited in the growing of it.Who's right? Decide for yourselves! Here's a link to the Oxfam campagn, and here's a link to Starbucks web page on sustaining coffee-producing communities. UPDATE: Joshua Gans has some thoughts on the matter that are worth checking out.
Tuesday, October 3, 2006
What I asked the USTR When we last left your humble blogger, he was heading to DC to talk about trade with U.S. Trade Representative Susan Schwab and a few other folks at an AEI conference. Alas, I was unable to access the internet this morning, and so had no opportunity to view the range of questions that I could relay one to the USTR (it would have been Zathras'). However, the following exchange did take place: ME: There seems to be a catch-22 on reviving Doha. Other countries won't negotiate seriously with the United States unless they believe that we can get TPA renewed. At the same time, the only way that TPA is likely to be renewed is if Congressmen seen the outline of a Doha deal. How does one escape this conundrum?So, call me skeptical on the odds of Doha being completed anytime soon. I should stress that this isn't Schwab's fault... it's the hand she was dealt. One last thought: As David Kane has observed, both Schwab and I are graduates of Williams College. When I was intriduced to the ambassador, I mentioned that we shared the same alma mater. And, for just a brief second, the wised-up, cautious face of a politician was replaced by the joyful look of recognition when one Eph recognizes another Eph. Monday, October 2, 2006
Submit your question to the U.S. Trade Representative!! Tomorrow I'll be a panelist for an AEI symposium, "The World Trading System after the Collapse of Doha: The WTO, Developing Countries, and Regionalism." The highlight will be a speech by the Honorable Susan C. Schwab, U.S. Trade Representative. Other panelists include former under secretary of Commerce Grant D. Aldonas, AEI's Claude E. Barfield, former undersecretary of State Alan P. Larson, And Georgetown law professor Daniel K. Tarullo. I believe I'll be dining with the USTR before her speech. So, readers are encouraged to submit concise, issue-appropriate, and polite questions to pose during the lunch hour. UPDATE: OK, the lunch is over -- I'll be posting an after-action report later this evening. Thursday, September 28, 2006
What could be done on farm subsidies? If the Doha round is ever to be resuscitated, it will require the United States to rethink its agricultural subsidies. The Financial Times' Doug Cameron reports on one possible rethink: The US should offer to end distorting farm subsidies within five years in a bid to revive global trade talks and avoid a clampdown by the World Trade Organisation, according to a report released on Wednesday by an influential group of economists and agriculture officials.Here's a link to the report from the Institute for International Economics and We propose that the entire grouping of product-specific, tradedistorting income and support programs, including countercyclical and loan deficiency payments, price supports, and federal crop insurance and disaster payments, be replaced with a new portfolio of approaches that are nondistorting and compliant with WTO greenIf it was up to me, I'd transfer more money away from agricultural progams, but that's a political nonstarter. The Chicago Council ask force has a lot of pragmatic ideas. Unfortunately, given the American Farm Bureau's happiness with the status quo and opposition to any change in subsidies prior to Doha's completion, I fear this approach is a nonstarter as well. Thursday, September 14, 2006
Won't you take me to.... Think Tank Town? I was recently made aware of a place called Think Tank Town. Washingtonpost.com edits and publishes columns submitted by 10 prominent think tanks on a rotating basis every other weekday. Each think tank is free to choose its authors and the topics it believes are most important and timely. For better or for worse, the Council on Foreign Relations chose me to provide a precis of U.S. Trade Strategy: U.S. trade policy is at a crossroads between pursuing freer trade or fairer trade. A free trade approach would jumpstart Doha by cutting agricultural subsidies or allowing greater cross-border movement of foreign workers; pursuing free trade agreements with South Korea, India, or Japan if the Doha round cannot be restarted, and pledging an all-out political push for the renewal of TPA in early 2007. A fair trade approach would refuse to make further concessions in the Doha round of negotiations until developing countries and the European Union demonstrate a greater receptivity to American exports; halting bilateral free trade agreements with developing countries; and relying more on "managed trade" arrangements, unilateral trade sanctions, escape clauses and safeguard mechanisms to rebalance U.S. trade.Go check it out. Saturday, September 9, 2006
The trouble with implementing fair trade The Financial Times' Hal Weitzman has an interesting story about the failure to enforce "fair trade" labels on items like coffee: “Ethical” coffee is being produced in Peru, the world’s top exporter of Fairtrade coffee, by labourers paid less than the legal minimum wage. Industry insiders have also told the FT of non-certified coffee being marked and exported as Fairtrade, and of certified coffee being illegally planted in protected rainforest.Click here for a companion story by Weizman that gets at the details of the problem. The most interesting section of the latter piece comes here: “No certifier is able to check that at no time are workers paid below minimum wage,” says Luuk Zonneveld, Managing Director of Fairtrade Labelling Organizations International (FLO) in Bonn. “This issue comes up everywhere. Poor people struggle to pay their workers fairly.”This suggests the following: 1) If fair traders really want workers to receive what they believe is a living wage, they're going to have raise the price of properlylabeled coffee;Is there a solution to the problem? My solution would be to raise the price of fair trade coffee such that everyone in the distribution chain can receive higher wages, and let consumers decide whether the higher price is worth it. A perfect solution? Hardly -- but it's the one that is the most honest while not restricting employment in poor economies like Peru. Sunday, July 2, 2006
Time is running out before the panic button is pushed and we all go over the brink, fall off a cliff, and cross the Rubicon into the red part of the red zone Alas, it looks like the Doha round has come to a standstill. Actually, that's not fair -- the round has been at a standstill since the December 2005 Hong Kong Ministerial. This has made writing and blogging about the round somewhat difficult -- kinda like trying to describe the same traffic jam for nine months. However, props to AP writer Bradley Klapper for coming up with a novel angle (link via Megan McArdle): The WTO is surely one of the most cliche-riddled bodies in the world as diplomats compete in a game of words to describe sometimes impenetrably complex trade issues. Even if the metaphors only sometimes add substance, catchy phrases usually mean more to people outside the rarified air of global commerce.Despite my flippancy about the rhetoric, the collapse of the Doha round would be a very, very, very bad thing. To understand why, consider Greg Mankiw's point: [S]uccess in the Doha round of international trade talks would give the world more every year than what [Warren] Buffett can give once after a lifetime of being the world's most successful investor. Tuesday, April 18, 2006
So I'm thinking Doha is dead This morning George W. Bush announced a new director of the Office of Management and Budget: President Bush today selected U.S. Trade Representative Rob Portman to be the new director of the Office of Management and Budget, moving quickly to revamp his team now that his new chief of staff is in place....Here's a link to the transcript of the announcement. Portman has done an excellent job at USTR for the brief time he was there, and his move to OMB might be, on the whole, a good thing for fiscal policy. That said, Bush and Bolten have decided to switch teams at USTR in the weeks before various deadlines for the Doha round of trade talks come up. This is a bad, bad sign for the likelihood of those negotiations to succeed. UPDATE: Many commenters point out that Schwab will likely preserve continuity on trade talks. This may be true, but the optics look very bad to other countries and to Congress. Two FT reports -- one by Alan Beattie and one by Caroline Daniel -- make this point. Beattie first: Rob Portman’s unexpected removal from the post of US trade representative on Tuesday evoked concern among governments and trade experts that the US was downgrading the importance of the so-called “Doha round” of World Trade Organisation talks....The European carping should be taken with a small grain of salt -- they'll jump on any excuse to evade blame for Doha collapsing. Now Daniel: The US on Tuesday named Rob Portman, the politically savvy trade representative, to head the White House budget office, a move that signals growing concern over runaway federal spending and a downgrading of trade policy in the administration’s second term.... Friday, April 7, 2006
Trade, development... and free ponies!! The latest Cato Unbound features New York University's William Easterly, author of The White Man's Burden, on "Why Doesn't Aid Work?" There will also be reaction essays from the World Bank's Branko Milanovic, Deepak Lal of UCLA, and the Center for Global Development's Steve Radelet. Go check it out -- you can read my review of Easterly's book here. On a related topic, I see that Robert Reich reviewed Joseph Stiglitz and Andrew Charlton's new book Fair Trade for All. As Reich recounts the book's policy prescriptions, it appears that Stiglitz and Charlton believe in free ponies: Stiglitz and Charlton show that standard economic assumptions are wrong when it comes to many developing economies. When markets in sub-Saharan Africa and elsewhere are opened, people often can't move easily to new industries where the nation has a comparative advantage. Transportation systems that might get them there are often primitive, housing is inadequate and job training is scarce. They're vulnerable in the meantime because safety nets are weak or nonexistent. Most people lack access to credit or insurance because financial institutions are frail, so they're unable to start their own businesses or otherwise take advantage of new opportunities that trade might bring. Many poor countries are already plagued by high unemployment, and job losses in the newly traded sector might just add to it.The problem with this argument is the same as the problem with Stiglitz's Globalization and Its Discontents and Sachs' An End to Poverty -- they recognize that markets in the developing world lack vital infrastructure, but fail to recognize that developing governments suffer from even greater institutional deficits. Expecting these governments to determine when their proteted sectors should become unprotected from a welfare economic perspective is wishful thinking -- in large part because these governments will not want to give up the rents that they extract from trade protection. [But states like Japan and South Korea pulled this off!--ed. That's a matter of some debate, but accept the premise as given. The states that could pull this off have already done it. I ask my readers to identify states with well-developed institutional capabilities that have yet to hit the fast track of economic growth.] While Stiglitz and Charlton are at it, they should also wish for some ponies. Thursday, December 15, 2005
Everything you always wanted to know about Aid For Trade A big issue that's come up at the Hong Kong Ministerial is the idea of Aid For Trade. What is Aid for Trade? According to paragraph 51 of the draft Ministerial text of the WTO: Aid for Trade should aim to help developing countries, particularly LDCs [Least Developed Countries], to build the supply-side capacity and trade-related infrastructure that they need to assist them to implement and benefit from WTO Agreements and more broadly to expand their trade. Aid for Trade cannot be a substitute for the development benefits that will result from a successful conclusion to the DDA [Doha Development Agenda], particularly on market access. However, it can be a valuable complement to the DDA.That's still a bit vague, so I've asked Paul Applegarth, a Senior Transatlantic Fellow at the German Marshall Fund of the United States -- and the former CEO of the Millennium Challenge Corporation -- to explain the idea in a bit more detail: It has long been agreed that this WTO round should be a Development Round, benefiting the poorest people and the poorest countries in the world. Ironically, even as the on-going talks at the Hong Kong Ministerial struggle with issues important for development like agricultural Market Access and trade-distorting subsidies, there has been an increasing recognition that freer trade alone is not enough. Any trade agreement will need to be accompanied by a development financing package to help the poorest countries build the capacity to participate in freer markets. |
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