Author Archives: jdingel

Krugman's James Meade Memorial Lecture

In the LSE’s James Meade Memorial Lecture from June 2007, Paul Krugman discusses three trade topics on which he has been “chastened.” [90 min, 21 MB mp3]

The first topic is trade and growth. This is a masterful discussion, in which Krugman explores the relationship between economic theory, evidence, and economists’ gut instincts. It is a worthy successor to Anne O. Krueger’s 1997 AEA presidential address. In the same fashion that she tried to explain why import substitution industrialisation was approved by economists in the 1950s and ’60s, Krugman tackles the beliefs of economists who were overenthusiastic in translating economic theory about the gains from trade into supposedly “rigorous” support for claims that trade openness could boost easily boost growth by a few percentage points.

The second topic is trade and income inequality. Much of this is covered in Krugman’s Vox column that ran the day after the lecture. There are a few more details, such as Krugman’s insightful rebuttal to the fact that Stolper-Samuelson effects no longer bite once there is complete specialization. (The fragmentation of production processes enlarges the spectrum of tradables, extending that limit.)

The third topic (income inequality in developing countries) is not very interesting, partly because Krugman only comments briefly on the subject and partly because I think that growth matters more than equality in countries that are desperately poor.

Krugman thinks we really face a problem of political economy with regard to trade and inequality, rather than a purely economic one. Interesting, he is skeptical of labour standards and fair trade, as they don’t address the underlying economic forces (comparative advantage) that are driving the big trends.

A few of the questions from some of the heavyweights in the LSE audience aren’t bad either.

If you don’t have much time to spare, I recommend at least the first twenty minutes of the lecture.

Krugman's James Meade Memorial Lecture

In the LSE’s James Meade Memorial Lecture from June 2007, Paul Krugman discusses three trade topics on which he has been “chastened.” [90 min, 21 MB mp3]

The first topic is trade and growth. This is a masterful discussion, in which Krugman explores the relationship between economic theory, evidence, and economists’ gut instincts. It is a worthy successor to Anne O. Krueger’s 1997 AEA presidential address. In the same fashion that she tried to explain why import substitution industrialisation was approved by economists in the 1950s and ’60s, Krugman tackles the beliefs of economists who were overenthusiastic in translating economic theory about the gains from trade into supposedly “rigorous” support for claims that trade openness could boost easily boost growth by a few percentage points.

The second topic is trade and income inequality. Much of this is covered in Krugman’s Vox column that ran the day after the lecture. There are a few more details, such as Krugman’s insightful rebuttal to the fact that Stolper-Samuelson effects no longer bite once there is complete specialization. (The fragmentation of production processes enlarges the spectrum of tradables, extending that limit.)

The third topic (income inequality in developing countries) is not very interesting, partly because Krugman only comments briefly on the subject and partly because I think that growth matters more than equality in countries that are desperately poor.

Krugman thinks we really face a problem of political economy with regard to trade and inequality, rather than a purely economic one. Interesting, he is skeptical of labour standards and fair trade, as they don’t address the underlying economic forces (comparative advantage) that are driving the big trends.

A few of the questions from some of the heavyweights in the LSE audience aren’t bad either.

If you don’t have much time to spare, I recommend at least the first twenty minutes of the lecture.

Lamy’s optimism

FT:

Pascal Lamy, the director-general of the World Trade Organisation, insisted at the weekend that the politics were right to achieve a global trade deal this year.

I’ll believe it when I see it. Until then, Lamy is simply doing his job.

Lamy's optimism

FT:

Pascal Lamy, the director-general of the World Trade Organisation, insisted at the weekend that the politics were right to achieve a global trade deal this year.

I’ll believe it when I see it. Until then, Lamy is simply doing his job.

Lamy's optimism

FT:

Pascal Lamy, the director-general of the World Trade Organisation, insisted at the weekend that the politics were right to achieve a global trade deal this year.

I’ll believe it when I see it. Until then, Lamy is simply doing his job.

Tax breaks for offshoring companies?

Barack Obama’s victory speech in South Carolina included the following line:

The Maytag worker who is now competing with his own teenager for a $7-an-hour job at Wal-Mart because the factory he gave his life to shut its doors – he needs us to stop giving tax breaks to companies that ship our jobs overseas and start putting them in the pockets of working Americans who deserve it.

Presumably this refers to the United States not collecting corporate taxes on unrepatriated overseas earnings, which encourages investment abroad when foreign corporate tax rates are lower. Is it really a tax “break” if those taxes have never been collected? Significant structural changes in the global economy are driving recent outsourcing and offshoring trends, not the tax code.

And how will Obama remedy this problem? He can’t tell Democrats the fix is to lower the US corporate tax rate, and imposing taxes on foreign-incorporated subsidiaries would likely encourage parents to go abroad too.

As best I can tell, this an applause line that bears little relation to the economic issues Obama would actually need to address as president.

EU-India FTA unlikely to be WTO-plus

Fredrik Erixon says that a EU-India FTA faces a number of difficulties:

A strong, commercially-relevant FTA would focus primarily on services and investments – which are two areas that are not really part of centralised EU trade policy. The EU does not have a single market for services, and certainly has no centralised policy for investment agreements. So there has to be a lot of internal negotiations in Europe before it can agree to any real commitments. But the problem is that it is highly unlikely that they will come to common to a position that will support a strong, deep-integrating FTA. Similarly, many aspects of these areas do not fall under the federal competence in India, and policies are rather organised at states level.

NAFTA implementation, 14 years later

Remember those NAFTA trucking provisions that were never implemented (and thus make fears of a North American Union or NAFTA Superhighway particularly ridiculous)? Ben Muse reports that the US Department of Transportation has moved to implement them during the last three months, despite the efforts of Congress to stymie the project.

Along related lines, recall that NAFTA’s sugar provisions might finally be implemented this year.