Author Archives: jdingel

NZ-China PTA

The Australiasian noodle bowl is heating up! China has signed a bilateral PTA with an OECD member.

New Zealand signed a comprehensive trade agreement with China on Monday, the first developed nation to seal such a deal with the world’s largest developing economy.

Helen Clark, New Zealand’s prime minister, and Wen Jiabao, the Chinese premier, attended a signing ceremony in Beijing to mark the agreement, completed after three years and more than 15 rounds of negotiations.

Phil Goff, New Zealand’s trade minister, has claimed China’s maiden trade agreement with a developed nation as a coup for his country and a potential framework for others.

“Just about every country in the world wants a trade agreement with China. New Zealand was important because we set the basis for the future negotiations and we have tried to come up with a high quality and comprehensive deal,” he said.

Food prices & Doha

Robert Zoellick spoke at CGD a few days ago. Dani Rodrik summarizes:

So challenge number one is that world food prices are too high, but challenge number two is the need to get rid of developed country policies so that food prices can rise even more? …

The truth, I fear, is that Zoellick’s faith in trade agreements has little to do with the underlying economics and like many ideological free traders he is willing to latch on to the economic arguments only when they serve the cause (and to discard them just as easily when they no longer do).

As for the real impact of food prices on poverty, we can avoid much confusion by recognizing the diverse and heterogeneous effects that food prices have on poverty around the world.

Might high food prices make Doha round liberalisation more feasible? Some think so. Zoellick can’t have it both ways.

Reason magazine repeatedly misleads readers on NAFTA

Dave Weigel comes dangerously close to saying things we know are untrue in this Reason story:

The main selling point of Hillary Clinton’s campaign, ratcheted up after Barack Obama started scaring her up a ladder, had been her “35 years of experience,” along with a certain nostalgia for the 1990s, which both Hillary and Bill smugly described on the campaign trail as having been “pretty good.” The linchpin of that claim was the economic boom of the Bill years. Yet last fall Hillary began to soft-pedal or sweep under the carpet the very policies that made the boom possible…

It’s not a mystery how NAFTA is working, actually. America’s GDP and industrial production have grown about 50 percent since the trade pact took effect. Total U.S. unemployment was 6.9 percent in 1993, before NAFTA went into effect; today it’s 4.9 percent. Hillary Clinton once considered this an accomplishment.

The correct way to write that paragraph would have been:

But it’s hard to believe the doom and gloom. America’s GDP and industrial production have grown about 50 percent since the trade pact took effect. Total U.S. unemployment was 6.9 percent in 1993, before NAFTA went into effect; today it’s 4.9 percent. How much damage could NAFTA have done?

But Weigel didn’t write the paragraph to deny the claims of NAFTA opponents; he wrote it in a way that implies a causal relationship between NAFTA and overall US economic performance. Are we meant to believe that NAFTA is one of the policies that made the productivity boom possible? That an agreement that barely lowered trade barriers and was phased in over 15 years reduced unemployment by two percent?

THESE CLAIMS ARE NOT TRUE AND NO RESPECTABLE ECONOMIST HAS DEFENDED THEM. Paul Krugman has been debunking them since 1993: “NAFTA will have virtually no effect on the U.S. economy, good or bad.” Repeat after me: Trade affects the composition, not the number, of jobs. In theory, this is because trade economists very frequently assume perfectly competitive factor markets. In practice, this is because the Fed controls employment via monetary policy.

NAFTA opponents aren’t pretending that the agreement affects total employment, but Reason has printed three articles in the last seven months (Weigel in September, Steve Chapman in December) that imply that NAFTA had significant macroeconomic effects. Why is the magazine running stories about international trade that will mislead readers who don’t follow the issue?

PTAs: So many, so fast

John Whalley:

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.

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.

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.