ICTSD: “Congress Votes to Preserve US Subsidies for Brazilian Cotton Farmers”
A proposal in the US Congress to end annual payments of $147 million to Brazilian cotton farmers, an obligation arising from a WTO dispute, was shot down in the House of Representatives last Friday, after Republicans voted against it by more than a two-to-one margin.
Three pieces worth reading in full:
Chinese furniture producers made direct payments to a group of 20 US furniture makers (about $13 million over the last four years) in exchange for those companies not listing them as exporters to be reviewed by the Commerce Department for antidumping charges.
The WSJ story, via Simon Lester, who got it from Doug Jacobson.
Tyler Cowen on exports and development:
Have you ever wondered why so many developing economies—the successful ones, I mean—rise to prosperity through exports and tradable goods? There are a few reasons for this, but one is that the external world market provides a real measure of value. If you are exporting successfully, it’s not based on privilege, connections, corruption, or fakery. Someone who has no stake in your country and no concern for your welfare is spending his or her own money to buy your product. Trying to export is putting your economy to the test with measurable results. If you can pass this test, it is a sign of better things to come.
There’s a massive debate about whether exports are a cause or symptom of good growth, but I think both sides agree with this point about the export market test.
Studying Mexican laborers, Steffen Reinhold and Kevin Thom estimate a substantial return to US work experience, possibly as large as the return to Mexican education.
There is a growing literature assessing the effects of out-migration on the economies of migrant-sending countries. Research on this topic has been dominated by two main strands: one exploring the consequences of skilled migration (the “brain drain”), and one focusing on the determinants and effects of remittances. However, if migration is temporary and migrants eventually return home, there is another channel at work, which we call the skill-upgrading of return migrants. Migrants may be accumulating skills while working abroad that are transferable to the labor markets in their home country. If these individuals eventually move back home, they return as potentially more skilled and productive workers. This paper presents an empirical analysis of this phenomenon among migrants who return to Mexico after spending some time abroad in the United States…
We use data from the Mexican Migrant Project (MMP) and the Mexican Census to document the relationship between past U.S. migration experience and the labor market earnings of return migrants in Mexico. Our baseline specification suggests that there is a 2.7% return to a year of U.S. migration experience in the Mexican labor market. This exceeds the estimated return to age at every point in the life-cycle, and we cannot reject the null hypothesis that this is equal to the return to education…
We find evidence that much of the return to migration can be accounted for by occupation-specific job experience. The return to migration experience is largest for migrants who worked in occupations in the United States that match their current occupation in Mexico. Indeed, the return to a year of this kind of job-relevant migration experience is estimated to be a little less than 5.2% in the whole sample, and as high as 9.3% when restricting the sample to unskilled manufacturing workers. It is noteworthy that our basic estimate of the return to a year of job-relevant migration experience is almost twice as large as our estimate of the return to a year of education…
We also find a greater return to years of documented migration experience, but this seems to be related to the accumulation of relevant job experience. Individuals on documented migratory trips are more likely to find jobs that end up matching their occupation back in Mexico, and there also appears to be a greater return to relevant migration experience if it is accumulated with legal documents…
If job-relevant migration experience is highly rewarded in the Mexican labor market, policymakers interested in encouraging return migration and limiting visa overstaying might wish to design temporary worker programs with the skill-upgrading incentive in mind. For example, programs that allow workers to move between employers and otherwise place less restrictions on job search might allow workers to more easily find jobs similar to those available to them in Mexico.
The authors use a model and several controls to try to address concerns about self-selection amongst migrants and the endogeneity of trip duration; check out the full paper to judge for yourself.
Rosa Whitaker, who helped create the African Growth and Opportunity Act (AGOA) as assistant USTR for Africa under President Clinton, thinks that AGOA may not be renewed.
Instead, the idea gaining currency in Washington is a version of trade preference reform in which Agoa-like benefits are extended to all “least developed countries”, leaving Africa with no exclusive trade benefits and SA [South Africa], with its middle-income status, completely out of the loop.
Though a relaxed rule of origin for fabric inputs will expire at the end of 2012, AGOA won’t expire until 2015, so I think it’s a bit early to be sounding alarm bells. The US is supposed to strike a Doha deal in the meantime, for example.
Previous posts on AGOA include thinking about identification, dynamic vs static gains, and binding constraints.
[HT: LWS]
At VoxEU, Shimelse Ali and Uri Dadush talk about the policy implications of how we measure trade flows of intermediate inputs, a topic I’ve been covering a lot recently. They say: “Bilateral trade balances are not appropriately measured, the costs of protection are higher than often understood, trade is more volatile, and the importance of exports as drivers of short-term demand is overestimated.”
Yesterday, President Obama said at the Chamber of Commerce:
We finalized a trade agreement with South Korea that will support at least 70,000 American jobs. And by the way, it’s a deal that has unprecedented support from business and labor, Democrats and Republicans. That’s the kind of deal that I will be looking for as we pursue trade agreements with Panama and Colombia, as we work to bring Russia into the international trading system.
Keith Hennessey, Director of the NEC under President Bush, says:
The problem is that the U.S. already has trade agreements with Panama and Colombia. The President is in reality saying that he is undoing those deals… When President Obama arrived, he said the South Korea FTA negotiated during the Bush Administration was a bad deal for the United States. Rather than submitting it to Congress for approval, he directed his USTR Ron Kirk to renegotiate certain parts of it with the Koreans… We see from yesterday’s remarks that the President wants this to be the model for future trade agreements. This gives labor unions and their Congressional allies tremendous leverage to water down or even block FTAs they don’t like.
That’s one interpretation of the remarks. It’ll be interesting to see what the administration actually does on trade going forward. Given the relative economic unimportance of these PTAs, I think the efforts to wrap up the WTO’s Doha negotiations this year may be more interesting.
An ADB report summarizes surveys of firms about their preference utilization under Asian PTAs:
ADB conducted firm-level surveys in six countries, the results of which are published in the book Asia’s Free Trade Agreements: How is Business Responding? Experts in the region looked at the issues using firm surveys in Japan, China, Korea, Singapore, Thailand and the Philippines.
This book asks four important questions concerning the spread of FTAs and the Asian noodle bowl: Are FTA preferences being used by firms? What are their costs and benefits? Are multiple ROOs a burden to business? Is there enough business support for firms to use FTAs?
[HT: LWS]
Judge Vinson of the Northern District of Florida has ruled the federal individual health insurance mandate unconstitutional. His decision contains a bit of commentary about the Boston Tea Party. This isn’t a law blog, but I do cover economic history and protectionism. Vinson wrote:
It is difficult to imagine that a nation which began, at least in part, as the result of opposition to a British mandate giving the East India Company a monopoly and imposing a nominal tax on all tea sold in America would have set out to create a government with the power to force people to buy tea in the first place.
The 1773 Boston Tea Party was not a response to monopolization. The English Parliament had given the East India Company a monopoly on British tea since 1698; the American colonies had been required to import their tea only from Britain since 1721. It also wasn’t a response to a price hike. The nominal tax of three pence per pound was imposed by the Townshend Revenue Act of 1767 and renewed in 1773 (though most of the Townshend Act’s other taxes were repealed, the tea tax continued).
So what did cause the Boston Tea Party? A major source of opposition to the 1773 Tea Act was the fact that it lowered the price of imported tea and therefore hurt smugglers who had been illegally importing Dutch tea:
The Townshend Act forbade the [East India] Company from selling its goods directly to the colonists. Instead, the EIC had to auction merchandise to middlemen, who then shipped the cargoes to American wholesalers, who finally sold to local shop owners. In May 1773, Parliament, at the request of the EIC, passed the Tea Act. It imposed no new taxes, but rather allowed the Company, for the first time, to import tea directly from Asia into America. The act cut the price of tea in half and was therefore a boon to colonial consumers. The middlemen cut out by the act, local smugglers and tea merchants, were not as happy…
In November 1773, the East Indiamen Dartmouth, Beaver, and Eleanor entered Boston Harbor with the first loads of the EIC’s tea. The conspirators, probably led by Samuel Adams, were well prepared and highly disciplined: they cleaned the decks when they were finished and took no tea for personal use or later sale. [William Bernstein, A Splendid Exchange: How Trade Shaped the World
, 2008, p.242]
Of course, the British claim to have the authority to tax the colonists also produced opposition, but they had been doing so for years. The most proximate change in 1773 was the threat to the economic self-interest of the middlemen and smugglers.
Addendum: LWS suggests this longer treatment of the topic in the New Yorker.
Trade Diversion 