Author Archives: jdingel

Dukakis on immigration

This strikes me as a terrible argument:

If we are really serious about turning back the tide of illegal immigration, we should start by raising the minimum wage from $5.15 per hour to something closer to $8. The Massachusetts legislature recently voted to raise the state minimum to $8 and California may soon set its minimum even higher. Once the minimum wage has been significantly increased, we can begin vigorously enforcing the wage law and other basic labor standards.

Millions of illegal immigrants work for minimum and even sub-minimum wages in workplaces that don’t come close to meeting health and safety standards. It is nonsense to say, as President Bush did recently, that these jobs are filled by illegal immigrants because Americans won’t do them. Before we had mass illegal immigration in this country, hotel beds were made, office floors were cleaned, restaurant dishes were washed and crops were picked — by Americans…

However, Americans won’t work for peanuts, and these days the national minimum wage is less than peanuts. For full-time work, it doesn’t even come close to the poverty line for an individual, let alone provide a family with a living wage. It hasn’t been raised since 1997 and isn’t enforced even at its currently ridiculous level.

Yet enforcing the minimum wage doesn’t require walling off a porous border or trying to distinguish yesterday’s illegal immigrant from tomorrow’s “guest worker.” All it takes is a willingness by the federal government to inspect workplaces to determine which employers obey the law.

I’ll outsource the fisking to other folks.

Mandelson favors preferential unilateral liberalization on LDC exports

In the Doha talks, the so-called Least- Developed Countries, many in Africa, were to get quota-free and duty-free access to sell products in wealthy markets without being asked to open up their economies. Mandelson said Tuesday that he favored pushing ahead with these measures – agreed to at a WTO ministers meeting late year in Hong Kong – even without a full Doha agreement. “We should extract from the rubble a significant development package,” he said. [IHT]

Since both the US AGOA and EU EBA preferential programs have limitations (AGOA has tariff rate quotas; EBA delays liberalizing sugar, rice, and bananas), there is room for this brand of trade liberalization. Does “pushing ahead with these measures” mean coordinated unilateralism by the rich countries or low-level activity at the WTO?

(Based on the work I’ve done on AGOA’s impact on beneficiaries’ exports, I’m skeptical of characterizing its expansion as “a significant development package.”)

FTAs & the TPA deadline

Now that the WTO negotiations are taking a “time out,” as Pascal Lamy has characterized the suspension of scheduled talks, the attention of both analysts and policymakers will shift to bilateral and regional trade deals. The United States has eleven months to complete its FTAs before Bush’s trade promotion authority expires.

I’m told that, by law, the President is merely required to notify Congress of his intent to sign an FTA 30 days prior to voting on it (and therefore 30 days prior to the expiration of his authority). The actual, signed agreement can be submitted at any time. [UPDATE: There are additional notification obligations, which are outlined in this CRS report.] But for logistical and political reasons, the administration won’t abuse that flexibility by waiting until the last minute. It’s hoping to wrap up trade talks by the end of 2006 so that it can introduce legislation to Congress around March.

Talks are underway with Malaysia, South Korea, and Thailand, though the latter stalled earlier this year. Ben Muse has set up a page to track the development of the US-Korea deal. Estimates of the likelihood of completing these agreements on time vary.

Of course, there’s not much reason to worry about the timetable if Congress renews TPA. Richard Baldwin comments on my prior post, suggesting that Congress will not want to lose the “competitive liberalization” race with the EU and therefore will extend the president’s negotiating authority. Most analysts seem to be leaning the other way:

America’s top trade official says the collapse of global trade talks means the US presidential trade deal authority will now likely expire, before any WTO deal can be saved and sent to the US Congress… The last time the TPA expired in the mid-90s it took about eight years to renew it, which many pro-trade lawmakers fear could happen again, leaving the US unable to negotiate even bilateral deals. [abc.net.au]

The White House’s authority from the US Congress to negotiate trade deals expires next year. Most experts and officials think Congress unlikely to renew that authority, rendering any near-term agreement impossible. [Finfacts]

Without the so-called ’fast-track’ authority, which Congress is seen as unlikely to renew, Washington is in effect unable to negotiate international trade deals. [Reuters]

Of course, noting popular opinion without explaining why many people hold that view isn’t terribly convincing. Most newspaper accounts aren’t giving a very good account of the political factors in play.

I haven’t strongly committed to an opinion on the subject, but at this point I am not expecting TPA renewal. First, Jagdish Bhagwati previously commented that making progress at Doha was key to any bid for renewal so as to demonstrate to the Congress that value of granting TPA. Second, Chuck Grassley told Pascal Lamy it won’t happen.

What other evidence is available on this question?

Doha collapse to be formalized soon

CNN:

Global free trade talks collapsed on Monday after nearly five years of on-off haggling and resuming them could take years, officials and diplomats said.

The suspension of the World Trade Organization’s (WTO) Doha round, which was expected to be announced formally by WTO chief Pascal Lamy later on Monday, came after major trading powers failed in a last ditch bid to overcome differences on reforming world farm trade, which lies at the heart of the round.

“The WTO negotiations are suspended,” Indian Commerce and Industry Minister Kamal Nath told journalists. When asked how long the suspension could last, he replied: “Anywhere from months to years,” he said.

UPDATE: There doesn’t seem to be much to say. We all saw this coming. And there’s plenty of blame to go around. You could attack Susan Schwab for not accepting a minimalist outcome or the US for not being willing to move first so as to put the focus on countries who are clearly more protectionist or those nations for being the worst offenders or the special interests for being special interests or Bush for being Bush.

Regardless, no allocation of blame is likely to restart the negotiations. It’s time to start pursuing other strategies.

Now that’s an import barrier

In one decade in the eighteenth century, according to the Swedish economist and historian Eli Heckscher in his book of 1932, Mercantilism, the French government sent tens of thousands of souls to the galleys and executed 16,000 (that’s about 4.4 people a day over the ten years…) for the hideous crime of importing printed calico cloth. [McCloskey]

Strong Export Growth Lately

I haven’t seen other trade bloggers mention it yet, so I’ll just pass on the word in case you missed it earlier this week: US export growth has outpaced import growth so far this year, by a score of something like 10 percent to 6 percent. That mildly reduces the trade deficit. Typical coverage available here.

Does Doha’s collapse mean a resurgence of protectionism?

The Doha round is likely to stall out by the end of the summer. In that light, this FT piece by Alan Beattie from last summer is relevant:

The Doha round of multilateral liberalisation talks is behind schedule and in trouble. Prospects for trade seem bleak.

But are they? In practice, according to many trade officials, experts and practitioners, the World Trade Organisation system has so far done a good job of holding protectionist sentiment in check. Some warn that the system will start to give way, or at least that further liberalisation is in jeopardy. Yet, in spite of the stress induced by rapid change in the global economy, there is little sign that the gains from previous advances are being lost.

The bare statistics do not support the idea that a wave of protectionism has swept over the global economy. There has been no rise in the use of “anti-dumping” or “safeguards” actions – emergency limits used by countries to prevent surges in imports. The most recent figures from the WTO, for the second half of last year, showed new anti-dumping actions falling to 103 from 135 a year earlier.

Experts attribute much of the gap between protectionist rhetoric and (generally) laisser-faire practice to the rules of WTO agreements and particularly the judgments of its disputes settlements mechanism, involving three-person panels sitting in Geneva…

Peter Mandelson… believes in the power of global trade rules. “The barriers against protectionism we have put in place over the past decade are strong enough to stand immense pressures and indeed ratchet up liberalisation.”…

Given the slowness of the negotiations so far, it would be a brave observer who bet on rapid progress. But at a time when the world economy is coping with stalling jobs growth in some of the richest nations, colossal global current account imbalances and the emergence of China as a fearsomely huge and efficient competitor across a range of industries, the freedom to trade – so painfully achieved over previous decades – has yet to receive a serious challenge.

Will the WTO’s institutional credibility hold up when there are no ongoing negotiations to futher liberalize trade? Or should we expect backsliding in the wake of Doha’s failure?

What does the Asian FTA explosion look like?

One of the graphics that immediately pops out at you when you skim through Richard Baldwin’s new paper (pdf) is this:

20060719noodlebowl

As Baldwin commented back in May:

On paper, East Asian regionalism looks rather tidy…A very neat hub-and-spoke arrangement with ASEAN at the center… While this tidy description is attractive, the reality is quite different.

ASEAN has a rather unique method of negotiating FTAs. Every nation defines its own sensitive list. And preferences are only granted on goods that are on neither partner’s list. This means that the actual tariffs applied on any given good can be quite different for each of the 45 bilateral trade flows among ASEAN nations.

What this means is that AFTA actually should be thought of as 45 separate bilateral agreements, although of course the existence of ASEAN means that the 45 are coordinated to some extent. For the same reason, the China-ASEAN and Korea-ASEAN are likely to operate like 10 separate bilaterals with limited coordination.

Thus the real picture is marked by what might be called “the Noodle Bowl Syndrome”.

Many of those FTAs are still being negotiated. Even most of the already completed FTAs haven’t fully kicked in: real tariff discrimination will be phased in between now and 2010.

The liberalization that created the massive intra-regional trade we see today was mostly unilateral liberalization not preferential liberalization. East Asia has yet to see what real discriminatory trade liberalization means, but it is scheduled to find out soon.

Oh boy.