Author Archives: jdingel

EU opposes climate change CVDs

Joe Stiglitz’s suggestion that countervailing duties apply to exports from countries not participating in the Kyoto protocol has been rejected by Peter Mandelson:

The European Union’s trade commissioner will on Monday dismiss French proposals for a “green” tax on goods from countries that have not ratified the Kyoto treaty as not only a probable breach of trade rules but also “not good politics”…

“Not participating in the Kyoto process is not illegal. Nor is it a subsidy under WTO rules,” Mr Mandelson will warn in a podcast speech to 50,000 subscribers. “How would we choose what goods to target? China has ratified Kyoto but has no Kyoto targets because of its developing country status. The US has not ratified but states like California have ambitious climate change policies.”

Above all, he says, it would undermine the international co-operation required to combat climate change…

Mr Mandelson backs a plan, to be unveiled this week, to include in the EU’s carbon emissions trading scheme all airlines landing or taking off in the EU, even though it is likely to antagonise the US and Asian countries.

Mr Mandelson, who favours a positive rather than punitive approach, is also writing to Pascal Lamy, WTO director-general, to suggest talks on scrapping tariffs on renewable energy and clean power generation equipment worldwide.

The D-word Round

Andrew Leonard finds more reasons to think the DDA’s stall will last quite a while:

Buried at the very end of a Wall Street Journal article on the possibility that the U.S. might lead a new effort to restart the stalled Doha trade talks comes a tidbit too revealing to pass up.

The administration’s fresh focus on Doha hasn’t necessarily won the same level of attention from its chief executive. Joining visiting South African President Mbeki in the Oval Office Friday, President Bush told reporters that the two talked about “the necessity of trade.”

“We talked about, interestingly enough, the Darfur round,” Mr. Bush said, apparently confusing the Qatar city with the Sudanese region beset by violence.

Sure, sure, anyone can make an honest mistake. Why pick on the poor man, who clearly has much more important things to worry about than getting the details right about trade and genocide. Doha, Darfur — it’s a lot to ask, keeping these strangely named foreign cities straight. But it’s impossible to resist the feeling that Bush just doesn’t give a damn.

Chat with Pascal Lamy

WTO online event:

On 18 December from 17:00-18:00 Geneva time WTO Director-General Pascal Lamy will host an on-line chat to discuss this suspension, the prospects for relaunching the talks and the future of the WTO and the global trading system… Please note that to keep the event manageable there is a limit of 500 participants, on a first-come first-served basis… To send advance questions that will be answered during the chat: dgchat@wto.org.

Steel AD & CVD rescinded

Nice:

This morning, pursuant to a five-year “Sunset Review,” the U.S. International Trade Commission voted to revoke longstanding antidumping and countervailing duty restrictions against imported carbon steel plate and corrosion-resistant steel from 15 different countries. The ITC also voted to continue the measures against corrosion-resistant steel from Korea and Germany for at least another five years.

While not perfect, today’s outcome is something to rejoice. Revocation of trade remedy restrictions is rare, indeed, and rarer still where steel is concerned.

Brazilian cotton two years after WTO victory

Here’s an interesting story following up on yesteryear’s Brazilian cotton subsidy case:

The future loomed bright for Brazilian cotton growers after their government won a headline-grabbing victory at the World Trade Organization, which declared some U.S. cotton subsidies illegal… And there were predictions that Brazil’s cheaper labor and land would make it even more competitive on the world market.

It hasn’t worked out that way. Some Brazilian farmers, including former top producers, have quit cotton altogether. The WTO frowned on several U.S. cotton subsidies but singled out only “Step-Two” payments, those made to exporters and domestic mills for buying higher-priced American cotton. That represented just about 7 percent of the $3.7 billion that Washington planned to spend on cotton programs this year…

On top of the subsidy issue and the drop in Chinese purchases, Brazil also has a poor road system and high transportation costs. And India has emerged as a competitive threat, with its better transport network. India has also embraced genetically modified cotton, which requires less insecticide. Brazilian farmers will soon be able to plant genetically modified cotton, but it won’t be enough incentive for some.

Although Brazil grabbed much of the spotlight in recent years, the real competitive threat to Texas cotton producers is India, a Texas Tech University agricultural economist says. “We don’t see a big expansion for Brazilian cotton in the future,” Samerendu “Sam” Mohintu said. “It’s going to grow, but at a very slow rate. China is buying from India, which has a transportation advantage” over the United States and Brazil. India’s cotton quality “isn’t as good, but it’s cheap,” Mohintu said.

The EPL’s gains from trade

To follow up on the previous discussion of football protectionism, the Economist has a piece on the infusion of foreign cash into the English Premiership. It concludes:

The truth is that the Premiership is thriving because it is open to global markets. Since its formation in 1992 it has proved a magnet for foreign talent and capital. Around half the registered players now hail from overseas. Foreign players may crowd out English talent at the top of the game and some are accused of lacking commitment to the clubs the temporarily serve. But no one disputes the improved level of skill and professionalism now displayed on English pitches. Foreign managers have also brought new expertise to the game (no English-born manager has yet led a side to the Premiership title). No wonder the high-intensity action of the Premiership draws millions of fans from all over the world each week. The soul of English football, whatever Mr Wenger says, seems to be full of life.

The Economist on food politics

The Economist has an excellent article (subscription required) this week on the appeal of organic foods and fair trade products. It also introduces us to the local-food movement, with which I was previously unfamiliar:

The rise of “Big Organic”, the large-scale production of organic food to meet growing demand, has produced a backlash and claims that the organic movement has sold its soul. Purists worry that the organic movement’s original ideals have been forgotten…

Local food need not be organic, but buying direct from small farmers short-circuits industrial production and distribution systems in the same way that buying organic used to. As a result, local food appears to be immune to being industrialised or corporatised.

The discussion of fair trade coffee echoes the objections documented in Kerry Howley’s piece for Reason, “Absolution in Your Cup.” So does the conclusion:

The idea of saving the world by shopping is appealing; but tackling climate change, boosting development and reforming the global trade system will require difficult political choices… Conventional political activity may not be as enjoyable as shopping, but it is far more likely to make a difference.

Trade preferences & heterogenous firms

Contra the Washington Post’s editorial, Svetlana Demidova, Hiau Looi Kee, and Kala Krishna provide additional evidence that trade preferences aren’t obviously beneficial to development in their newest NBER working paper:

This paper models the responses of firms that are heterogenous in productivity to the different types of trade policies they face in different product and export destinations. It presents direct evidence supportive of the model’s predictions using a dataset of Bangladeshi garments exporters. In particular, it focuses on the effect of differences in trade polices, trade preferences, and the rules of origin (ROOs) needed to obtain them, on the pattern of firm exports and performance…

[O]ur work suggests that trade preferences granted to developing countries that favor more capital intensive sectors can distort their pattern of investment and trade. While such preferences tend to spur investment and exports of the more capital intensive sectors, they also reduce the average productivity of exporters and bias export away from the direction of natural comparative advantage. Consequently, even liberal preferences may be far less effective in promoting development than expected…

Thus, the contribution of this paper is as follows. First, our heterogenous firm model shows how differences in trade policy of the EU and US and in the preferences granted by them to Bangladesh, in combination with the ROOs needed to access them, act as a sorting mechanism for firms. This results in productivity differences between firms that differ in their product lines and markets. We are able to capture both how firm productivity differs according to the toughness of the exporting market, and how the toughness of the market depends on ROOs and trade policy. The former channel is missing in homogenous firm models… Finally, in the area of trade policy-for-growth, our paper suggests that liberal preferences given by the EU to Bangladesh, while spurring exports of the non-woven sector, may reduce its average productivity. Given that the non-woven sector is twice as capital intensive as the woven sector, our result further implies that exports of Bangladesh are biased away from the direction of its natural comparative advantage, and as a result, may be less effective in promoting development.

Two objections to fair trade

Bhagwati on fair trade:

The “fair trade” lobbying, on the other hand, is something that I find ill-advised. Oxfam and other charities use the phrase to argue that we should subsidize the producers so as to give them a “just” price that exceeds the market price. But we have two serious problems here. This phrase has been long used in United States discourse as a code word for protectionism. By bringing all kinds of extraneous issues as preconditions for freer trade, the proponents of so-called “fair trade” essentially mask their protectionism in the language of “fairness”, a tactic that has been exposed and denounced for decades in the U.S. but which now is in danger of being legitimated by the witless adoption of the “fair trade” terminology for altruism. Next, if the “fair trade” lobbies want to bamboozle us into being altruistic by channeling subsidies to the producers of commodities such as coffee designated as “fair trade” coffee, we then must confront the fact that many of us prefer to direct our altruism to the poor countries instead in myriad other ways which we consider to be both more desirable and even more efficacious. We need to look in the eye therefore the growing pressures on retailers to violate restraint-of-trade practices by stocking only “fair trade” goods.

Trade politics: anti-liberalization is bipartisan

In his latest Slate piece, Daniel Gross concurs with my election week reflection upon the state of trade politics:

Since the elections, concerned internationalists have fretted that the newly Democratic Congress will curtail the nation’s free-trade policies… these arguments overlook or misunderstand the new politics of trade. It’s not a left-right split. Since 2000, Bush Republicans have done as much as Democrats to throw up trade barriers and tariffs. President Bush has generally spoken a good game about free trade, and his administration has concluded bilateral free-trade agreements with Morocco, Australia, Colombia, and several other countries. But just as free trade was a bipartisan project in the 1990s, the backlash to free trade has been bipartisan in this decade. Sens. Charles Schumer, D-N.Y., and Lindsey Graham, R-S.C., share little in common except their desire to slap huge protective tariffs on Chinese goods. And, all by themselves, the Republicans have done a great deal to damage the cause of free trade in the last several years.

[HT: CGD]