Author Archives: jdingel

Subramanian proposes a “China round”

Arvind Subramanian (pdf):

China has become too economically dominant for the United States to engage with China on its own. That is one of the major changes that has occurred in the world economy over the last decade. Fortunately, the desire and concern to ensure that China’s rise will remain a force for good is widely shared amongst other industrial and developing countries. This provides an opportunity for the United States to lead a collective effort—muscular multilateralism—to engage with China on trade issues. Moreover, because China’s economic development has benefited enormously from an
open trade system, it will have a stake in preserving it.

A concrete way to realize this is to move beyond the Doha Round to start a new round of multilateral trade negotiations — a possible “China Round” — that would focus on the issues — exchange rates, government procurement, services, technology policy, commodities, and climate change — which are particularly crucial for China’s trade relations with the US and with other large trading nations.

Previously:

In your book, you talk about the importance of tethering China to a multilateral system. Why should China be interested if it’s inevitably number one?

We need to bind China today to the multilateral system so a kind of habit and incentive builds up. Then repudiation of the system would be more difficult. We need to do this before China becomes a hegemon

Everyone has to come together to do this well. If every country tries to make its own deal with China, no one will have any leverage.

Think about exchange rates. If the world came together now and said let’s do a deal on exchange rates, China would be more likely to participate. It doesn’t want to be seen as deviant from international system. The opprobrium of the world is the biggest carrot and stick to use with China.

One of your main policy recommendations is to start a China round of trade negotiations. What could that accomplish?

When China joined World Trade Organization in 2001, people said we tied China to the global economic system (because of the commitments it made to open its markets and follow international rules). But through its exchange rate policy, China has unraveled parts of its commitments. What that signifies is that Chinese leaders at the time were overreaching in terms of domestic political support. Evidently, WTO accession wasn’t politically sustainable internally.

Over time, China will move away from mercantilism. They would then have an incentive to make a deal. A deal could involve government procurement – other countries opening their bidding for China—as well as commitments by China involving control of natural resources and the exchange rate.

Now in Econometrica

A couple of trade papers that have been circulating for a long time are now finally in published form in this month’s issue of Econometrica:

New US trade measures against China TBA

Reuters:

U.S. trade officials will announce a major trade enforcement action against China on Tuesday, according to an advisory from the U.S. Trade Representative’s office. The advisory, which was obtained from a business group, said U.S. Trade Representative Ron Kirk “will hold a press conference to announce a major trade enforcement action against China.” It gave no other details.

via Scott Lincocome.

Johnson-Noguera over four decades

Rob Johnson and Guillermo Noguera describing not-yet-posted research:

[W]e combine time series data on sectoral production and bilateral trade with benchmark input-output tables for the OECD and major emerging markets, covering 80-90% of world trade and GDP. We find rapid and accelerating declines in the domestic content of exports of most countries. Preliminary results suggest that the value added content of trade declined by nearly twice as much in the decade from 1995-2005 than in the prior two decades. These declines are concentrated within manufacturing sectors, and not due to the changing composition of world trade. At the bilateral level, there are large differences in the rate and timing of changes across trading partners. Further, we detect cyclical patterns in the value added content of trade, which tends to rise in recessions due to the compression of demand in sectors that are most vertically specialized.

The Panama Canal expansion

The Panama Canal is being expanded; the $5b construction of larger locks is due to be completed in 2014. As the Financial Times describes, that’s expected to shake up the east coast shipping scene.

Scenes like the one at Baltimore are being played out all along the east and gulf coasts ahead of what promises to be the biggest shake-up in US distribution since the advent of shipping containers 50 years ago.

Ports, terminal operators, rail companies and state governments are jostling to win the new traffic they expect to be generated by the bigger ships. Billions of dollars are being spent to build new quays, deepen channels and expand rail tunnels. Consumers, manufacturers and retailers in the US mid-west and inland eastern cities could all benefit.

Containers heading to these areas will have the option of going via east-coast ports then heading west on trains. Their traditional route has been eastward from California, where larger ships free of Panama Canal restrictions already dock.

Here’s James Feyrer on the closing of the Suez Canal. Feyrer is also working on a paper titled “The Opening of the Panama Canal as a Natural Experiment in Trade”.

[HT for FT to Seb]

Clemens “Economics and Emigration: Trillion-Dollar Bills on the Sidewalk?”

It’s Michael Clemens on labor mobility, so I can recommend it without having read it yet:

Clemens, Michael A.. 2011. “Economics and Emigration: Trillion-Dollar Bills on the Sidewalk?” Journal of Economic Perspectives, 25(3): 83–106.

Abstract: What is the greatest single class of distortions in the global economy? One contender for this title is the tightly binding constraints on emigration from poor countries. Vast numbers of people in low-income countries want to emigrate from those countries but cannot. How large are the economic losses caused by barriers to emigration? Research on this question has been distinguished by its rarity and obscurity, but the few estimates we have should make economists’ jaws hit their desks. The gains to eliminating migration barriers amount to large fractions of world GDP—one or two orders of magnitude larger than the gains from dropping all remaining restrictions on international flows of goods and capital. When it comes to policies that restrict emigration, there appear to be trillion-dollar bills on the sidewalk.

Most protectionist post-war action?

Fred Bergsten says:

“China has intervened massively in the foreign exchange markets for at least five years, buying at least $1 billion every day to keep the dollar strong and its own renminbi weak… This is by far the largest protectionist measure adopted by any country since the Second World War — and probably in all of history.”

All of history? What about periods of autarky?