The Bush administration is taking heat from WTO negotiators for standing by its October 2005 proposal to limit its farm subsidies to $22 billion, as it only paid about $15 billion in subsidies last year. With that much room to spare, the US could easily make a more generous offer in an attempt to restart the WTO negotiations. On the other hand, trading partners are well aware that the first $7 billion in cuts offered by the US won’t actually improve their lot.
Author Archives: jdingel
Don’t underestimate migrant workers
Michael Clemens:
You might have seen a recent New York Times Magazine cover story (subscription req.) about Filipinos working overseas… The author, Jason Deparle, recognizes the comparatively enormous salaries that Emmet Comodas and all five of his children have earned abroad, but urges us to remember that “competing with the literature of gain is a parallel literature of loss.” Any good journalist lays out the pros and cons of phenomena, inviting readers to reach their own conclusions. But one straightforward fact should stare any reader directly in the eyes: The Comodas family has reached its own decision about whether the gains are worth the losses. They have decided that the losses do not even come close to paralleling the gains, and their conclusion matters infinitely more than yours or mine…
Emmet Comodas’ salary in Saudi Arabia was ten times what he could have earned at home. He and his wife Tita invested the extra pay in food, medicine, and school supplies for their children. Though neither Emmet nor Tita had finished high school, four of their five children now have college degrees. Deparle grimly notes that “Emmet, overseas paying the bills, missed every graduation”. So what? Evidently Emmet and Tita decided that it would be better for their children if Emmet were absent at their children’s college graduations than present to watch them drop out of high school only to perpetuate their family’s poverty. Who are you and I to tut-tut them for this decision?
Do read the full post.
Don't underestimate migrant workers
Michael Clemens:
You might have seen a recent New York Times Magazine cover story (subscription req.) about Filipinos working overseas… The author, Jason Deparle, recognizes the comparatively enormous salaries that Emmet Comodas and all five of his children have earned abroad, but urges us to remember that “competing with the literature of gain is a parallel literature of loss.” Any good journalist lays out the pros and cons of phenomena, inviting readers to reach their own conclusions. But one straightforward fact should stare any reader directly in the eyes: The Comodas family has reached its own decision about whether the gains are worth the losses. They have decided that the losses do not even come close to paralleling the gains, and their conclusion matters infinitely more than yours or mine…
Emmet Comodas’ salary in Saudi Arabia was ten times what he could have earned at home. He and his wife Tita invested the extra pay in food, medicine, and school supplies for their children. Though neither Emmet nor Tita had finished high school, four of their five children now have college degrees. Deparle grimly notes that “Emmet, overseas paying the bills, missed every graduation”. So what? Evidently Emmet and Tita decided that it would be better for their children if Emmet were absent at their children’s college graduations than present to watch them drop out of high school only to perpetuate their family’s poverty. Who are you and I to tut-tut them for this decision?
Do read the full post.
Don't underestimate migrant workers
Michael Clemens:
You might have seen a recent New York Times Magazine cover story (subscription req.) about Filipinos working overseas… The author, Jason Deparle, recognizes the comparatively enormous salaries that Emmet Comodas and all five of his children have earned abroad, but urges us to remember that “competing with the literature of gain is a parallel literature of loss.” Any good journalist lays out the pros and cons of phenomena, inviting readers to reach their own conclusions. But one straightforward fact should stare any reader directly in the eyes: The Comodas family has reached its own decision about whether the gains are worth the losses. They have decided that the losses do not even come close to paralleling the gains, and their conclusion matters infinitely more than yours or mine…
Emmet Comodas’ salary in Saudi Arabia was ten times what he could have earned at home. He and his wife Tita invested the extra pay in food, medicine, and school supplies for their children. Though neither Emmet nor Tita had finished high school, four of their five children now have college degrees. Deparle grimly notes that “Emmet, overseas paying the bills, missed every graduation”. So what? Evidently Emmet and Tita decided that it would be better for their children if Emmet were absent at their children’s college graduations than present to watch them drop out of high school only to perpetuate their family’s poverty. Who are you and I to tut-tut them for this decision?
Do read the full post.
FA articles of interest
The latest issue of Foreign Affairs contains a number of articles related to the international economy:
Smooth Sailing:The World’s Shipping Lanes Are Safe. Those who worry about the vulnerability of the world’s oil shipping lanes should calm down. Oil tankers are more resilient than often presumed, and only the United States has the capability to seriously disrupt maritime traffic — which it will not do.
Ending the Trade War in Washington: Saving the Trade Agenda by Protecting Workers. Protectionist sentiment on Capitol Hill threatens to scuttle Washington’s free-trade agenda. A bipartisan consensus on trade could emerge, but only if the White House and the Democrats can reach a compromise on labor issues.
The End of National Currency. Global financial instability has sparked a surge in “monetary nationalism” — the idea that countries must make and control their own currencies. But globalization and monetary nationalism are a dangerous combination, a cause of financial crises and geopolitical tension. The world needs to abandon unwanted currencies, replacing them with dollars, euros, and multinational currencies as yet unborn.
What is the role of an economist in public debates?
Dani Rodrik is racking up a string of interesting posts in his first week in the blogosphere:
Can the wrong answer in the classroom be the right answer in public debate?…
[Greg Mankiw’s] position seems to be this: Look, these anti-trade guys don’t understand comparative advantage anyhow, and it is pointless to waste our breath trying to explain it to them. So let’s instead argue our case in “their” language and within “their” framework. Never mind that Professor Greg Mankiw would flunk us if we ever gave the same answer in Ec. 10.
I am not sure I like this stance very much. For one thing, it goes against the grain of what I think is the most important job of economists in public debate–to educate and not simply to be an advocate. Second, it is bound to backfire, and ultimately undercut the credibility of economists…
Many of my colleagues are of the view that economists should just stick to their bottom line, and not “confuse” the public with the caveats and limitations of their arguments. Moreover, since anti-market views have enough supporters out there, economists often see their role as one of unqualified advocacy of the opposite position. I tend to disagree with this, which is why I am often accused of “giving ammunition to the barbarians.”
More here.
Activity here at Trade Diversion has been light recently due to the fact that I am on holiday. Regular content provision will resume Wednesday.
Trade liberalization and prices
Advocates of globalization love to argue that free trade lowers prices, and the argument seems sensible enough. Think of all the cheap goods from China that we can buy at Wal-Mart. But anyone who understands comparative advantage knows that free trade affects relative prices, not the price level (the latter being the province of macro and monetary factors). When a country opens up to trade (or liberalizes its trade), it is the relative price of imports that comes down; by necessity, the relative prices of its exports must go up! Consumers are better off to the extent that their consumption basket is weighted towards importables, but we cannot always rely on this to be the case.
If Rodrik comes to play the same role in the blogosphere that he has in academia, I expect that many free traders will take an extra moment of reflection before hitting “post.”
Public opinion of farm subsidies
Bryan Caplan: “In the sector closest to perfect competition, where economists truly have to think hard even to imagine a case against laissez-faire, Americans favor heavy intervention nevertheless.”
Dani Rodrik enters blogosphere
Korea-US PTA spurs discussions
Plenty of chatter about PTAs:
Japan Times: Prime Minister Shinzo Abe and U.S. President George W. Bush are likely to discuss making a bilateral free-trade agreement the subject of future negotiations when they meet next week.
Yonhap: South Korea and the European Union will start discussions in early May on forging a free trade agreement.
These announcements are support for those who argued that the Korea-US PTA would galvanize more trade talks, but, as I commented earlier, talk is cheap.
Trade Diversion 