Author Archives: jdingel

Projecting beliefs

Sallie James writes:

John Edwards had by far the worst trade policy proposals of the front-running Democrats. It says something good about America that Mr Edwards’ brand of populist nonsense has been rejected by the primary voters.

No way. Find me one piece of evidence that voters are choosing to prefer Clinton and Obama due to their trade policy proposals.

Or, as Adam Posen put it:

International economic issues will never be the decisive factor in a US national election, and in fact will be a lower priority on any candidate’s or new president’s agenda than discussions of Iraq withdrawal, broadening health care, tax reform, repairing America’s standing in the world, and decreasing partisanship in Washington.

Adam Posen on the next president

Adam Posen writes:

Unfortunately, a new US president of either party is likely to be more antiglobalization, or at least take a more defensive approach to it, than either of her or his predecessors was.

There are many reasons why. First, now that unemployment is rising, the US workforce has finally reacted to the economic insecurity caused by its lack of health insurance and job protections, all curtailed further by the Bush administration. Second, both parties have moved away from the center, especially in Congress, and it was always a coalition of moderates from both parties which supported trade liberalization. Third, the foreign policy misadventures of the Bush administration have fed isolationism and fear of the openness among the US electorate. Fourth, in the United States just as in Western Europe, there is a seductive—though fundamentally unfounded—belief that the economic emergence of China, India, Brazil, and the former Soviet Union has shifted the relative advantages of globalization away from the rich countries, so their approach to trade and investment should be more defensive.

American antiglobalization, however, will take different forms depending upon which party captures the White House. If a Democrat wins, there will be proposals to impose “minimum labor and environmental standards” on future trade agreements, and perhaps unilaterally on current trading partners. While these can be benignly motivated, in practice they will likely be hijacked by outright protectionist interests and used as an excuse to block imports or trade deals. In any event, such measures are likely to escalate a number of conflicts with major emerging markets and interfere with economic growth in the developing world…

If a Republican, particularly from the conservative majority wing of the party, wins the White House, then the new American antiglobalization stance will likely first take the form of anti-immigration measures…

Initially, such a Republican anti-immigration stance will be less directly disruptive of the global trading system, and less broadly confrontational with the developing world, than the Democratic labor standards for trade agreements would be. Ultimately, however, it will be more harmful to the US economy, which is increasingly short of labor at both the high- and low-ends of the skills distribution, will be even more encouraging of isolationist sentiment, and will be more likely to divide the United States from the rest of advanced economies as well as from it developing neighbors…

[W]hile outright protectionism and head-on assaults on economic integration thankfully are not in the cards, and whoever succeeds George Bush will inherently be an improvement in most areas, the United States probably will be moving backwards on globalization initially in the next administration.

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.

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.