In this paper I seek to both characterise and assess the recent wave of regional agreements in the trading system which has accelerated since 2000. Nearly 400 agreements now exist, and, according to WTO analysis, by 2008 a significant number of countries will be party to more than 30 agreements. I suggest these agreements are characterised by several central features: substantial diversity in form, broadened coverage of issues to the degree that RTAs seemingly now provide a platform to which a range of issues are appended; vagueness in language and commitment so that they should be understood as much as process agreements as mutual limitations on trade restriction measures; and in may cases sharp asymmetries of partner size.
I suggest that a number of factors account for growth in these agreements. These include the use of RTAs as a platform to append a range of issues for targeted bilateral negotiation; the failure of multilateral negotiation to extend bargaining to non-trade issues since the Uruguay Round; the prospect of limited failure of the multilateral process; the demonstration effect of large entities going regional and smaller entities seeking safe-haven agreements with their most important large partners; and the uses of agreements by politicians and negotiators to demonstrate action and negotiation seeking advancement.
I conclude by suggesting that, after a minimalist conclusion to the Doha Round, weakened multilateralism may well only accelerate this process.
Author Archives: jdingel
For academics
In the World Economy, Simon Evenett provides some advice on surviving the trade policy jungle:
The rules of the trade policy arena differ from those in academia. How can an economic researcher survive, let alone thrive, in what may appear to be a trade policy jungle? The purpose of this paper is not just to offer guidance in this respect but also to think through the factors that determine the supply and demand for timely, relevant, policy-relevant insights into commercial policy matters. Understanding the latter provides much of the rationale for the former. Advice follows analysis, as it should do. Economic researchers have certain advantages that they can make immediate use of in the jungle and some baggage that they would do well to shed.
The article is a practical guide for academics.
The power of the phone
A very interesting QJE article: Mobile phones massively improve fish market arbitrage in Kerala, India, leading to lower price variability, fewer wasted fish, lower average price and greater profits.
“Why the euro is unlikely to eclipse the dollar”
“Reports of the dollar’s death are greatly exaggerated.” — Barry Eichengreen and Marc Flandreau
"Why the euro is unlikely to eclipse the dollar"
“Reports of the dollar’s death are greatly exaggerated.” — Barry Eichengreen and Marc Flandreau
Binding quotas
Cato’s Ilya Shapiro reports on the binding H-1B quota:
April 1st is the day each fiscal year when employers are allowed to begin filing petitions with the US Citizen and Immigration Services for highly skilled workers to be given what are known as H-1B visas. For the second consecutive year, the quota of these visas was reached on this first day of eligibility…
As for the vast majority of employers and employees who will be out of luck, the immigration laws say, like so many “rebuilding” baseball teams this opening week, “wait till next year.” Except, in this case, next year means putting your business or career on hold until October 1, 2009—the day people who secure H-1Bs for fiscal year 2010 can start work.
Poor immigrants raise income inequality?
Will Wilkinson gives nationalist analyses of immigration’s effects on inequality a cosmopolitan smackdown.
Disputes as a sign of success?
Why does Charles Rangel think that the number of complaints filed at the WTO is a good measure of the quality of our trade policy?
Income Per Natural
As usual, excellent and exciting work from Michael Clemens and Lant Pritchett:
Income Per Natural: Measuring Development as if People Mattered More Than Places
It is easy to learn the average income of a resident of El Salvador or Albania. But there is no systematic source of information on the average income of a Salvadoran or Albanian. In this new working paper, research fellow Michael Clemens and non-resident fellow Lant Pritchett create a new statistic: income per natural — the mean annual income of persons born in a given country, regardless of where that person now resides. If income per capita has any interpretation as a welfare measure, exclusive focus on the nationally resident population can lead to substantial errors of the income of the natural population for countries where emigration is an important path to greater welfare. The estimates differ substantially from traditional measures of GDP or GNI per resident, and not just for a handful of tiny countries. Almost 43 million people live in a group of countries whose income per natural collectively is 50 percent higher than GDP per resident. For 1.1 billion people the difference exceeds 10 percent. The authors also show that poverty estimates are different for national residents and naturals; for example, 26 percent of Haitian naturals who are not poor by the two-dollar-a-day standard live in the United States. These estimates are simply descriptive statistics and do not depend on any assumptions about how much of observed income differences across naturals is selection and how much is a pure location effect. Our conservative, if rough, estimate is that three quarters of this difference represents the effect of international migration on income per natural.
The bottom line: migration is one of the most important sources of poverty reduction for a large portion of the developing world. If economic development is defined as rising human well being, then a residence-neutral measure of well-being emphasizes that crossing international borders is not an alternative to economic development, it is economic development.
Hat tip to Wilkinson.
Obama on trade: An in-depth look
About a month ago, while the candidates were spending lots of time in Texas and Ohio, the economics blogosphere and press discussed Barack Obama’s views on trade liberalisation. Unfortunately, most of the analysis relied on inferring Obama’s views from his choice of economic advisers or legislative proposals. Moreover, political speeches tend to be short on details.
But there is one place where Obama has laid out his views on trade in detail: his 2006 book The Audacity of Hope
CAFTA. Viewed in isolation, the agreement posed little threat to American workers — the combined economies of the Central American countries involved were roughly the same as that of New Haven, Connecticut… There were some problems with the agreement, but overall, CAFTA was probably a net plus for the US economy…
stronger labor protections… improved environmental standards… stronger protections for US intellectual property… Like most Democrats, I strongly support all these things. And yet, I felt obliged to say to the union reps that none of those measures would change the underlying realities of globalization… [T]hey won’t eliminate the enormous gap in hourly wages between US workers and workers in Honduras, Indonesia, Mozambique, or Bangladesh, countries where work in a dirty factory or overheated sweatshop is often considered a step up on the economic ladder…
And my union brothers and sisters would nod and say that they were interested in talking to me about my ideas — but in the meantime, could they mark me as a ‘no’ vote on CAFTA?…
As the pace of globalization has picked up, though, it’s not just unions that are worrying about the long-term prospects for US workers. Economists have noted that throughout the world — including China and India — it seems to take more economic growth each year to produce the same number of jobs, a consequence of ever-increasing automation and higher productivity…
We can try to slow globalization, but we can’t stop it. The US economy is now so integrated with the rest of the world, and digital commerce so widespread, that it’s hard to even imagine, much less enforce, an effective regime of protectionism. A tariff on imported steel may give temporary relief to US steel producers, but it will make every US manufacturer that uses steel in its products less competitive on the world market…
I told the President that I believed in the benefits of trade… But I said that resistance to CAFTA had less to do with the specifics of the agreement and more to do with the growing insecurities the American worker. Unless we found strategies to allay those fears, and sent a strong signal to American workers that the federal government was on their side, protectionist sentiment would only grow…
I ended up voting against CAFTA… My vote gave me no satisfaction, but I felt it was the only way to register a protest against what I considered to be the White House’s inattention to the losers from free trade.
I think we learn more from these pages than by other attempts to read Obama’s mind.
1. Obama is not a protectionist. Obama clearly understands the benefits of globalisation and the infeasibility of economic isolation. While he may not favor liberalisation at high speed, he would still infuriate real protectionists like Lou Dobbs.
2. Obama understands public opinion on trade. Obama realises that popular concerns about economic insecurity and income inequality are projected onto trade, even when trade itself is not the primary cause of such disruptions. This accords with the basic message you’d find from a pro-trade shop like the Peterson Institute.
3. Obama is a politician. In the end, Obama voted against a policy that he thought would be a net plus in order to signal his political commitments.
4. Obama is a politician. These days, Obama’s campaign website says that the candidate “will use trade agreements to spread good labor and environmental standards around the world and stand firm against agreements like the Central American Free Trade Agreement that fail to live up to those important benchmarks.” So much for “no satisfaction.”
5. Obama is not an economist. Expressing concern about productivity gains — “it seems to take more economic growth each year to produce the same number of jobs” — exactly inverts the view of economists, who see output and not input as desirable. This is an age-old fallacy.
Barack Obama’s views on trade are far from “reactionary, populist, xenophobic and just plain silly.” But they don’t inspire great confidence either.
Trade Diversion 