Protectionism by Other Means

As the Democrats in Congress fret and fuss about "globalization," the Bush administration responds by moving to increase barriers to Chinese imports. The U.S. Court of International Trade released an important opinion yesterday concerning how the Commerce Department handles "unfair trade" complaints against China. This morning, "The administration of George W. Bush, escalating its trade dispute with China, announced ... that it would impose potentially steep tariffs on Chinese manufactured goods, with a move to protect American paper producers from unfair Chinese government subsidies.

The action reverses 23 years of U.S. trade policy by treating China, which is classified as a "nonmarket economy," in the same way that other U.S. trading partners are treated in disputes involving government subsidies."

The ability to treat China "like other U.S. trading partners" also implies that we can look forward to rising tariffs on a lot of the manufactured goods we import from China.

Blinder , Trade and Jobs, Again

Alan Blinder, along with C. Fred Bergsten and Jeff Faux, discussed trade and jobs today on the Diane Rehm Show today (direct to the audio file here or here).

Given Blinder's ties to the Democrats, and his relationship with Robert Rubin, I can't help but think that this is likely to be an issue in the '08 election.

Jeff Faux is an economist at the Economic Policy Institute.

Passive Voice

The passive voice was finally addressed by the Grammar Girl. The mp3 file can be downloaded at the link above or the post can be read here.

Outsourcing the Service Sector?

It's rare to find respected academic economists voicing public skepticism about the virtues of free trade. Hence, when one does so, as Alan Blinder (Princeton, formerly a Governor on the Federal Reserve Board) has, people notice. An article in today's Wall Street Journal summarizes the evolution of and the reasons for his skepticism.

Blinder, "whose trenchant writing style and phrase-making add to his influence, remains an implacable opponent of tariffs and trade barriers. But now he is saying loudly that a new industrial revolution -- communication technology that allows services to be delivered electronically from afar -- will put as many as 40 million American jobs at risk of being shipped out of the country in the next decade or two. That's more than double the total of workers employed in manufacturing today. The job insecurity those workers face today is "only the tip of a very big iceberg," Mr. Blinder says." Blinder elaborates his views in a recent Foreign Affairs article.

Is he right? I don't know, but 40 million jobs seems high to me--the total US active labor force is 139 million. Hence, 40 million is just shy of 30 percent of total jobs and about half of service sector jobs. One must also recognize that labor is finite, even in India and China; hence, as demand for labor in those countries rises, wages will rise. This will reduce the incentive to outsource.

Update: Greg Mankiw responds to Binder (yes, the same Mankiw that Blinder cites in his Foreign Affairs article).

U.S.-China Trade

Political Calculations has an interesting discussion of the growth of U.S. exports to China and Chinese exports to the U.S. They suggest that each country's exports are growing by about 22 percent per year, therefore doubling every three years or so.

Linking Trade and Labor Standards

Congressional Democrats are pushing to link trade agreements to labor and environmental standards. Efforts to do so during the 1990s ran into opposition from developing countries (remember the "Battle in Seattle?"). New public opinion data from the World Public Opinion.org suggests that this may no longer be the case. "Strong majorities in developing nations around the world support requiring countries that sign trade agreements to meet minimum labor and environmental standards."

One can't help but be struck, however, by the negative correlation between per capita income and support for such linkage.

Home Ownership and Labor Mobility

Most of our discussion of labor mobility focused on skill specificity. Some recent research highlights one non-skill based source of immobility: Home Ownership. It seems that across the advanced industrialized countries, unemployment rates are higher in communities in which a large proportion of the residents own their own homes than in communities in which residents rent. Because people own their homes, they find it difficult to move when they lose a job because it is difficult to sell the home. Hence, home ownership reduces labor mobility. Or does it?

John Edwards on Global Poverty

"John Edwards believes that the United States must be a global leader in the fight against poverty. If elected President, he "will fundamentally transform America's approach to the world. As part of his $5 billion initiative, he will bring high-level attention to help people in three priority areas: primary education, preventive health, and greater economic and political opportunity."

I wonder how he reconciles such leadership with his more skeptical view of free trade. I am still searching for a recent clear statement of his position concerning the link between trade and poverty reduction.

Track MDG Progress

The World Bank has a useful webpage that allows one to see where we stand relative to the Millennium Development Goals.

Rising Land Prices in Iowa

And finally, while the rest of the country struggles with a sagging real estate market, the returns to land owners in Iowa rise.. According to the Des Moines local news, "the value of the best Iowa farmland -- which produces 160 bushes of corn an acre -- rose in the past six months from about $3,800 an acre to $4,300." Who was it that said government policies affect factor prices?

Trade Politics by Any Other Name Would Still Smell as ...

As we shift our attention to exchange rates and trade imbalances, it will be helpful to bear in mind that from the perspective of many (most?) American legislators, exchange rate policy is just another term for "Trade Policy." One illustration of this appeared in the Detroit News today.

"Accusing China of "cheating," Democratic U.S. Sen. Debbie Stabenow of Michigan Wednesday introduced legislation to make it easier for U.S. manufacturers to prove they're being injured by currency manipulation and impose sanctions on guilty foreign competitors.

"Countries like China are cheating, artificially lowering their prices… China and Japan together comprise the top offenders as it relates to currency manipulation," charged Stabenow, who introduced the bill with U.S. Sen. Jim Bunning, R-Ky. Both sit on the Finance Committee that handles trade.

"This practices creates an unfair subsidy for goods in those countries," said Stabenow, who claimed that China can sell an auto part actually valued at $100 for only $60 in the United States "because of the discount they get as the result of currency manipulation."

The House is looking at an identical bill at a time when the Democratic takeover of Congress is casting a huge spotlight on President Bush's trade policies, especially with regard to China. Many lawmakers from manufacturing states blame the loss of 3 million jobs to unfair trading practices by global competitors."

I will spend the six weeks following spring break trying to convince you that this may not be the best way to think about exchange rates and trade imbalances.

Giving Fish to the World's Poorest (but not too many)

While we are talking about programs that only pretend to be first and foremost about helping the world's poor (see previous post), I noticed this today.

"It seems that the "Red" campaign, launched by Bono to purge Africa of disease ...has, after all, been more about promoting Bono and his famous mates than raising cash for Africa. Advertising Age calculates that around $100 million has been spent blanketing billboards and magazines with images of Bono and other "celebrities", while the total sum raised for Africa is $18 million." (From "Hating Bono Again"). This makes me think about William Easterly; not sure why.

The Advertising Age article from which this fact comes had a nice quote from one of the Red campaign critics that is almost as depressing. "The Red campaign proposes consumption as the cure to the world's evils," said Ben Davis, creative director at Word Pictures Ideas..."Can't we just focus on the real solution -- giving money?"

The Domestic Politics of "Food For Peace"

And you thought foreign aid was primarily about helping the world's poor. National Public Radio had a great segment today on the domestic politics of U.S. food aid. This Food for Peace program provides food aid to developing societies. Currently, Congress requires that the money purchase American agricultural products and ship them in American-owned vessels. The Bush administration is proposing that some of the money allocated for this program be used to buy food "locally" (in the country or region receiving the assistance) rather than buying and shipping American food. Buying food locally would enable the money to buy more food, respond to crises more quickly, and support rather than depress local farm prices.

The congressional response is predictable; more surprising is the response from aid NGOs. The segment is short and quite interesting.

Linking Trade and Labor Standards (Again)

The new Democrat-controlled Congress has pushed the Bush Administration to consider linking labor protection agreements to free trade agreements with Panama, Colombia, and Peru. Such linkage was popular among Democrats during the 1990s, but largely and disappeared under Republican majorities during the Bush Administration. Such linkage, it seems, will be the price of renewed "Fast Track" authority (see entry for Sherrod Brown).

Sherrod Brown on American Trade Policy

Sherrod Brown, (D-OH) who I mentioned today in class, describes his trade policy orientation thusly:

• "In the past five years, Ohio has lost more than 200,000 manufacturing jobs because of the failed economic policies of George Bush and the Republicans in Congress.
• Under Republican rule, companies are rewarded for sending good-paying jobs overseas and replacing them with low-wage service positions, which provide little or no benefits to their employees.
• I led the fight in Congress against the fundamentally-flawed Central America Free Trade Agreement, securing more "no" votes against a trade agreement than any other time in modern U.S. history."
  

He has elaborated his thinking in a book Myths of Free Trade: Why American Trade Policy Has Failed. According to Publishers Weekly, Brown argues that "Our current free trade agenda...is an un-American departure from a history of tariffs and government intervention aimed at developing the nation’s economy and protecting workers and the environment from the excesses of the market...Indeed, in Brown’s view, no one benefits from unregulated trade except corporations and rich investors, eager to deploy their assets wherever labor and the environment are most profitably exploited."

Trade and Wage Insurance

Interesting story in today's Washington Post about wage insurance. "The nation's existing wage-insurance benefit was tucked into the federal Trade Adjustment Assistance program in 2002. It applies only to manufacturing workers 50 and older who are laid off as a direct result of international trade. They are eligible if they take a new job within six months of the layoff that pays less than $50,000 a year. The program, administered by the Labor Department, will make up half of a worker's lost wages for two years, up to $10,000."

One puzzle, though--why do many labor unions oppose such measures?

Still Negotiating...

"Ministers from world trade powers tried Sunday to advance stalled talks for a delayed deal to increase global commerce and ease poverty.

The top negotiators of the United States, European Union and India held discussions in London over the weekend, seeking to build on recent contacts by trade officials.

Mandelson, the French president asserted, "doesn't stop wanting to give away more" to the United States and developing countries "that have shown no intention to give the slightest concession" in the trade negotiations."

Eroding American Economic Sovereignty

Hillary Clinton delivered a speech on the Senate floor earlier this week and followed up with a letter to Treasury Secretary Paulson and Fed Chairman Bernanke. She "underscored that yesterday's stock market losses, the biggest point loss since September 11th, 2001, should be a wake-up call of the risk to our economy of the continuing erosion of our economic sovereignty."

Is she right?