Author Archives: jdingel

The credit crisis hits international trade ports

International commodities trade is taking a hit as the credit markets freeze:

The credit crisis is spilling over into the grain industry as international buyers find themselves unable to come up with payment, forcing sellers to shoulder often substantial losses.

Before cargoes can be loaded at port, buyers typically must produce proof they are good for the money. But more deals are falling through as sellers decide they don’t trust the financial institution named in the buyer’s letter of credit, analysts said.

“There’s all kinds of stuff stacked up on docks right now that can’t be shipped because people can’t get letters of credit,” said Bill Gary, president of Commodity Information Systems in Oklahoma City. “The problem is not demand, and it’s not supply because we have plenty of supply. It’s finding anyone who can come up with the credit to buy.”

Where are you in the global income distribution?

Want to find your place in the world income distribution? Enter your annual income at globalrichlist.com to learn your percentile.

Of course, it’s not a perfect exercise. Their numbers are from Branko Milanovic’s 2000 World Bank working paper (later published in the Economic Journal in 2002). The distribution is for 1988 or 1993. Lots of work has been done on this topic since 2000 (notably by Milanovic himself). For example, Xavier Sala-i-Mation’s 2006 QJE paper on income inequality has a cumulative distribution function for world income in 2000.

Nonetheless, it’s a good exercise to help people think about the global economy and poverty.

Hat tip to Sabrina.

Personnel changes at the Doha negotiations

Peter Mandelson is stepping down from his position as EU trade commissioner to become Labour’s business minister in the UK. His replacement, Catherine Margaret Ashton, has been a midlevel minister in various UK governments. Emmanuel notes that she’s relatively unknown, comparing her to Sarah Palin (now that’s a bit unfair, I think).

Richard Baldwin notes that most of the people working on the round won’t be around much longer:

By the time the new American administration is in place, Dame Ashton’s term at the commission will be up. By late 2009 the US and EU will be restarting negotiations with fresh talent and limited institutional memory. That’s reason enough to be pessimistic, but if the WTO does not renew the term of Pascal Lamy, its director-general, next year (or if he doesn’t want another term), then it may be time to kiss this round goodbye.

Against the MDGs for Africa

Alan Beattie has an FT column summarizing what has been said before: the MDGs are bad benchmarks that won’t be met.

– Targets set in 2000 based on a 1990 baseline punish poor performance prior their establishment.
– The expected rate of progress defies previous development experience.
– They facilitate inappropriate cross-country comparisons.
– They are political measures, not economic or development assessments.

An alternative trigger formula for special safeguards for agriculture

So in the midst of the financial crisis hullabaloo (Vox ran 16 columns in the last seven days!), I forgot to mention that Robert Baldwin has a way to make progress at Doha.

Remember the special safeguard squabble? It may be largely attributable to a crummy formula:

Trigger levels for the special agricultural safeguard mechanism under negotiation in the Doha Round are expressed simply as percentage increases in the volume of imports over the preceding three years or percentage decreases in a product’s import price compared to its monthly average over the preceding three years.

But the effect of a given percentage increase in the volume of imports on the livelihood conditions of domestic farmers varies greatly depending on the level of import penetration…

A much better trigger mechanism that distinguishes between when developing countries do and do not need additional import protection to maintain food security and livelihood conditions of their poor farmers is simply the percentage increase in imports divided by the average consumption of the product over a recent period…

With a measure that indicates changes in market access opportunities for farmers much more accurately than relative changes in the volume of imports alone, the issue of whether safeguard actions should be permitted to raise import duties above pre-Doha Round levels should no longer be of major concern.

The shame is that all parties now agree on the need for a special safeguard mechanism, and they broadly agree on what it should achieve. The particular formula they have chosen, however, is too blunt to distinguish between safeguarding fragile livelihoods and old-fashioned protectionism.

Enough to get the talks back on track? Maybe not, but it sounds like a major improvement over the current formula.