Author Archives: jdingel

WaPo calls for trade preference renewal

WaPo editorial:

It shouldn’t matter whether you’re conservative or liberal, for globalization or against: Some trade bills are so obviously beneficial and unobjectionable that there’s no excuse for letting them languish. This is the case with a raft of measures that would extend trade preferences for poor countries — preferences due to expire at the end of the year. Failing to renew them would not save American jobs or advance any other national interest; rather, it would disrupt the economies of U.S. trading partners and create another excuse for foreigners to resent the United States…

These trade measures might founder partly because anti-globalization sentiment is growing in Congress, causing a minority of members to oppose all trade deals, no matter how routine…

But the biggest reason these trade measures may fail is the most scandalous: Most members of Congress know that they ought to be extended, but institutional inertia is stopping them from doing the right thing. For the past several months, Congress has put off dealing with the trade preferences, even though their expiration at the end of the year was no secret. Now the deadline is approaching, and members of Congress complain that they lack time to craft the legislation. What Congress is saying is that leaving town for the holidays is more important than jobs in developing countries. No wonder the United States is seen as arrogant.

It’s not true that trade preferences for poor countries are obviously beneficial and unobjectionable, but I agree that congressional procrastination is inexcusable. Moreover, the unwillingness to renew previously granted tariff cuts (even if ill-advised) may be a first sign of protectionist backsliding, which I worried about after the election.

Bad policy caused China’s great famine

Here’s an interesting tidbit from a paper (pdf) on the impacts of China’s great famine in 1959-61 by Xin Meng and Nancy Qian that’s full of interesting stuff:

Officially, the cause of the famine was a fall in grain output due to bad weather. Several recent studies have argued that although there was a fall in output, the “three years of natural disasters” (san nian zi ran zai hai ), was largely driven by a set of misguided policies (Kueh, 1995; Li and Yang, 2005; Peng, 1987; Yao, 1999; Yang, 1996; Chang and Wen, 1997; Perkins and
Yusuf, 1984; Lin, 1990). Using official aggregated data on historical weather conditions, Kueh (1995) finds that although bad weather was a contributing factor, it was unlikely to have caused the full extent of the grain reduction necessary to explain the severity of the famine…

We obtained historical climate data from China’s 205 permanent weather stations and county level data on non-famine grain output and survival. Figure 3A plots the annual mean precipitation and mean temperature by year in the eight provinces included in this study. There is no noticeable difference during the famine years. The relationship between natural conditions and grain output can be examined more directly. We use county-level grain output and weather conditions for non-famine years to estimate the correlation between natural conditions and output. We then use these estimates and climate data from 1959-1961 to predict output during the famine years. If the famine was caused by natural conditions, the predicted output for famine years should be significantly different from normal output. Instead, we find that the predicted output is highly correlated to actual non-famine output. Alternatively, we can also examine the correlation between survival and historical weather conditions. Figure 3B plots a proxy for survival at the county level (the ratio of famine birth cohort population in 1990 to non-famine birth cohort population in 1990) against weather conditions during the famine relative to normal periods (the ratio of famine period rainfall to non-famine rainfall, and the ratio of famine period temperature to non-famine temperature). There is no visible correlation. These results all show that the famine was unlikely to have been caused by “natural” disasters.

It seems that the real question is how much did Mao know?

The future of trade policy analysis

Professor Ross Garnaut:

Some economists warned of the emerging dangers of proliferation of preferential trading arrangements when they became apparent from late 2000, and argued against the early and decisive steps that Australia took to hasten the Asia Pacific region down the preferential path. But that debate has come and gone. Mark Antony would have said that it was time to bury the old traditions of free trade, not to praise them. The task now is to analyse the emerging realities, and to apply the lessons to ongoing policy development. [PDF]

Public opinion on trade

An interesting divide in feelings about the level and rate of change of economic openness:

The survey, by the German Marshall Fund of the US, a transatlantic think-tank, shows that public opinion across a range of European countries and America has become more confident over the past year about economic growth and the positive effects of existing international trade. But there is much less support for more trade liberalisation, with 59 per cent of American respondents and 58 per cent of French thinking that freer trade will cost them more jobs than it creates. [FT]

“Trade Obstructionism”

Robert Samuelson voices concern over the risk of protectionist backsliding in the next Congress:

Just last week, Democratic congressional leaders signaled they might oppose new trade agreements with Colombia and Peru. Who, if anyone, would benefit is unclear…

We are dealing with something new here. It transcends traditional protectionism, which tries to shield specific industries and workers from imports. It’s trade obstructionism: a reflexive reaction against almost any trade agreement. The idea is that much trade is inherently “unfair.” …

Every three months, 7 million to 8 million U.S. jobs disappear, and roughly an equal or greater number are created. Trade is a relatively minor factor in job loss.

It is, however, an easy scapegoat. It enables critics to blame foreigners and suggest a solution — restrict trade. Globalization becomes a convenient explanation for many economic discontents, from job insecurity to squeezed living standards.

Hence, trade obstructionism…

The next Congress must decide whether it embraces the symbolism or reality of trade. If it chooses symbolism, it will perversely harm many of the workers it’s trying to help.

[HT: Mankiw]

Shopping for tariff preferences

I find the thrust of this paper by Hiau Looi Kee, Marcelo Olarreaga & Peri Silva entirely unsurprising, but it’s worth passing along nonetheless:

This paper addresses two main questions: Can lobbying by Latin America’s exporters in the US explain the observed pattern of tariff preferences? And if yes, what is the return on $1 dollar of lobbying in the United States by Latin American exporters?

Results suggests (sic) that lobbying by Latin American exporters to the US government can indeed help explain the variation in tariff preferences across products and countries. Moreover, the returns to foreign lobbying seem to be relatively high, around 50 percent. Finally, contrary to the empirical literature for the United States described above we found very low values for the estimates of the weight granted to social welfare in the government’s objective function (around two times the weight granted to foreign lobbying contributions), which underscores the importance of foreign (and domestic) lobbying in determining US trade policies.