Dan Griswold argues that Barack Obama’s trade policy is regressive.
Author Archives: jdingel
Crisis-induced poverty
William Easterly and Laura Freschi follow up on the barrage of inconsistent numbers that I previously lamented.
Does increasing litigation dampen increasing protectionism?
Joseph Sternberg has an optimistic column in the WSJ in which he hails American-Chinese trade conflicts taken to the WTO DSM: “Trade tensions between the two economic behemoths are definitely rising. But the advent of trade litigation is a healthy development.”
Migrant workers in the crisis
The Financial Times has multimedia coverage of the impact of the crisis on migrant workers:
The economic downturn has inevitably hit migrant workers hard. Here, reporters from the FT’s foreign bureaux investigate the plight of migrants from Poland and the US to Brazil and China, to see which groups are returning home and which are finding innovative ways to survive the downturn abroad.
- Downturn slows tide of US-bound workers, by Matthew Garrahan
- Families struggle to survive as flow of dollars dries up by Adam Thomson
- Downturn hastens Nigeria’s ‘brain gain’, by Matthew Green
- Thoughts turn to home for white South Africans by Richard Lapper
- Sun sets on migrants’ Japanese dreams by Lindsay Whipp and Jonathan Wheatley
- China schools offer parents incentive to stay put by Tom Mitchell
- Downturn puts paid to Polish mobility by Jan Cienski
- Ukrainians forced to cross border for work by Jan Cienski
Hat tip: Laurence.
Would any economist defend “Buy American”?
Jagdish Bhagwati, Douglas Irwin, and Susan Schwab are debating the merits of “Buy American” against Leo Gerard (United Steelworkers), John MacArthur (Harper’s Magazine), and Jeff Madrick (New York Review of Books) at NYU on Monday evening. NPR should post the podcast shortly thereafter.
The opposition’s lack of economists is notable, but I have yet to read an economist defend the “Buy American” clause, so you can’t blame the Intelligence Squared event organizers for the unbalanced panel. When Bhagwati and Stiglitz agree that a policy is foolish, you can be pretty confident it is.
Economist: “Barack Obama and free trade: Economic vandalism”
Contra Doug Irwin, the Economist is quite pessimistic about President Obama’s tire tariffs: “A protectionist move that is bad politics, bad economics, bad diplomacy and hurts America. Did we miss anything?”
One might argue that these tariffs don’t matter much. They apply, after all, only to imports worth a couple of billion dollars last year, hardly the stuff of a great trade war… Presidents, after all, sometimes have to throw a bit of red meat to their supporters: Mr Obama needs to keep the unions on side to help his health-reform bill.
That view seems naive. It is not just that workers in all sorts of other industries that have suffered at the hands of Chinese competitors will now be emboldened to seek the same kind of protection from a president who has given in to the unions at the first opportunity. The tyre decision needs to be set into the context of a string of ominously protectionist policies which started within weeks of the inauguration with a nasty set of “Buy America” provisions for public-works contracts. The president watered these down a bit, but was not brave enough to veto. Next, the president stayed silent as Congress shut down a project that was meant to lead to the opening of the border to Mexican trucks, something promised in the NAFTA agreement of 1994. Besides these sins of commission sit the sins of omission: the president has done nothing at all to advance the three free-trade packages that are pending in Congress, with Colombia, Panama and South Korea, three solid American allies who deserve much better. And much more serious than that, because it affects the whole world, is his failure to put anything worthwhile on the table to help revive the moribund Doha round of trade talks. Mr Bush’s tariffs, like the Reagan-era export restraints on Japanese cars and semiconductors, came from a president who was fundamentally committed to free trade. Mr Obama’s, it seems, do not.
One might argue that these tariffs don’t matter much. They apply, after all, only to imports worth a couple of billion dollars last year, hardly the stuff of a great trade war… Presidents, after all, sometimes have to throw a bit of red meat to their supporters: Mr Obama needs to keep the unions on side to help his health-reform bill.
That view seems naive. It is not just that workers in all sorts of other industries that have suffered at the hands of Chinese competitors will now be emboldened to seek the same kind of protection from a president who has given in to the unions at the first opportunity. The tyre decision needs to be set into the context of a string of ominously protectionist policies which started within weeks of the inauguration with a nasty set of “Buy America” provisions for public-works contracts. The president watered these down a bit, but was not brave enough to veto. Next, the president stayed silent as Congress shut down a project that was meant to lead to the opening of the border to Mexican trucks, something promised in the NAFTA agreement of 1994. Besides these sins of commission sit the sins of omission: the president has done nothing at all to advance the three free-trade packages that are pending in Congress, with Colombia, Panama and South Korea, three solid American allies who deserve much better. And much more serious than that, because it affects the whole world, is his failure to put anything worthwhile on the table to help revive the moribund Doha round of trade talks. Mr Bush’s tariffs, like the Reagan-era export restraints on Japanese cars and semiconductors, came from a president who was fundamentally committed to free trade. Mr Obama’s, it seems, do not.
Easterly on Chang
Bill Easterly, writing on the “anarchy of success” in the New York Review of Books, isn’t very fond of the policy recommendations in Ha-Joon Chang’s Bad Samaritans. As the book has been out for nearly two years, I suspect that his criticisms won’t deter many sales. Easterly’s bottom line is that “third-world growth seems to have been fairly expert-proof.”
The invisible Smoot-Hawley?
This Vox column makes the surprising claim that trade costs have risen significantly during the crisis, so much that they match the rise of trade costs in 1929:
The measured trade-cost rise is estimated to be similar in the two events, yet tariffs have not risen in today’s crisis in anywhere near the extent to which they did in the 1930s. This seems to indicate that a good fraction of today’s trade drop is due to non-tariff trade policy and other trade frictions – e.g. evaporating trade credit, credit constraints in the market for consumer durables, and other reported changes in policy have been of equal magnitude (see Ferrantino 2009 on the latter).
The best evidence we have on new trade barriers, the Global Trade Alert initiative, does not suggest a rise in measured protectionism anywhere near that observed in the 1930s. There must be something else driving the rise in trade frictions. Perhaps the protection is so murky that even GTA cannot document it? Perhaps the trade credit problem is the culprit and thus more important than many argue (Chauffour and Farole 2009)?
I’ll have to take a look at the underlying methodology that disaggregates the trade collapse into demand-driven and trade-cost-driven elements before I comment further.
Disaggregated production and the big drop in trade flows
A host of economists have pointed at the disaggregation of supply chains as one of the key reasons. A combination of just-in-time logistics and the digitisation of information has helped fracture supply chains… But as Prof O’Rourke notes, this theory shows why trade volume is higher relative to output; it does not necessarily explain why it falls faster in percentage terms. He has another explanation based on outsourcing: that manufactured goods comprise a bigger proportion of trade today than in the 1930s, when basic commodities had a larger share. Commerce in manufactured goods is more volatile and subject to shifts in demand than commodities, and trade in turn becomes more variable.
G20 nations breaking ‘no protectionism’ vow
Alan Beattie: “The world’s leading economies have continued to break their pledge of no protectionism with a raft of restrictions on trade and investment, say two authoritative reports.”
Trade Diversion 