Author Archives: jdingel

How many pirated movies is $21 million worth?

If Antigua imposes its retaliatory damages against the United States for banning internet gambling, it’s going to get really messy. Cato’s Sallie James explains:

Antigua has strongly rejected the WTO arbitrators’ decision about the level of damages — a decision that is made especially controversial given that one of the three panelists dissented from the opinion, a rare occurrence in WTO jurisprudence, and by their own admission that they were on “shaky grounds” in determining the level of damages. According to Antigua, by basing their analysis on the “most likely scenario of compliance” by the United States rather than the export opportunities foregone, the arbitrators were showing unfair sympathy to the American case. The Americans were pleased that the $21 million in annual damages was well below the figure sought by Antigua ($3.4 billion), but expressed concern over the form of retaliation authorized. The United States had originally argued that their restrictions were worth only $500,000 in damages.

Notwithstanding the back-and-forth over the amount of sanctions, a couple of problems remain. First, who is to say how much it is worth to, say, download illegally a new CD or movie. Is it equivalent to the market value of buying a legal copy of the material? Or is it worth the cost of the download itself (less than a penny, I imagine). That is important because the WTO would limit Antigua to $21 million fairly strictly, and the U.S., under instruction from Hollywood and the software industry, would be expected to pounce if they saw the limit violated. There is also the question of whether Antigua would be able to export the fruits of its copyright violation to other countries and “earn” the $21 million that way.

Previous coverage of this case: background, the ruling, WTO credibility

US tariffs on socks

Nothing surprising here, but it’s worth keeping an eye on protectionism. Cato’s Dan Griswold summarizes the Bush administration’s latest protectionist indulgences:

Under a provision of the Central American Free Trade Agreement approved by Congress in 2005, the Bush administration is weighing whether to impose special duties on socks imported from Honduras. According to today’s Wall Street Journal, the move would placate a particular lawmaker in Alabama with several sock factories in his district and a few other, mostly southern lawmakers whose votes may be necessary for upcoming trade deals the administration wants.

Has U.S. trade policy come to this? For the sake of a domestic sock industry that, by its own count, employs only 20,000 workers, the U.S. government would impose a temporary 13.5 percent tariff on the 8.3 percent of imported socks that come from the small neighboring democracy of Honduras—a country that entered into a free trade agreement with the United States only two years ago.

The World Economy on sequencing regionalism

The latest issue of The World Economy looks at economic integration agreements (EIAs), which include PTAs, RTAs, FTAs, CUs, etc:

In light of the continuing proliferation of EIAs worldwide, it would seem that policy makers, businesses and consumers would all benefit from a better map guiding the sequencing of EIAs, a map that better addresses the choice of EIA partners, the breadth of agreements, the depth of integration, etc. With few exceptions, there is a virtual dearth of analyses of the sequencing of economic integration agreements. The 50-year anniversary of the most successful EIA in world history provides an opportune moment to consider lessons to be learned as other continents – the Americas, Asia and Africa – move forward with their own economic integration agendas.

This special issue of The World Economy includes seven papers that were presented at a symposium, ‘The Sequencing of Regional Economic Integration: Issues in the Depth and Breadth of Economic Integration in the Americas’, which was held at the Kellogg Institute for International Studies at the University of Notre Dame on 9–10 September 2005…

I have not yet had time to read any of the papers yet, but they’re likely worth a peek. I’ve highlighted Simon J. Evenett and Michael Meier’s article on the US strategy of competitive liberalisation in the past.

Facts matter: On PPP GDP estimates

The recent revisions of PPP GDP estimates have been widely discussed, which puzzles Daniel Altman:

[P]urchasing power figures are not, by themselves, a good measure of a country’s economic importance in the world. They are only an interesting abstract notion. So, when the World Bank said that China’s purchasing power was smaller than it had previously thought, the announcement didn’t change anyone’s lives, nor did it affect the timeline for China becoming the world’s dominant economy. Just ask the people in French’s article; they were poor before, and they’re still poor now.

Now, I rarely dabble in epistemology, but I think that people care about what they believe. Though poor people exist even if you forget to count them, people care when we find out that millions more persons are in poverty than previously estimated. Some lives ought to be affected by these estimates, because when the facts change, some people change their actions. One has to be strangely captivated by the thing-in-itself to believe that it’s no big deal whether we accurately perceive it or not.

An easy example of why this matters is that some people use the number of people exiting poverty during the last 25 years as a measurement of globalisation’s success. For example, see Surjit Bhalla’s Imagine There’s No Country: Poverty Inequality and Growth in the Era of Globalization.

Arvind Subramanian has a very insightful post on why the facts matter (over at Rodrik’s blog):

The reductions in GDP per capita imply a large increase in measured poverty, especially in China and India. Is this a problem? Yes, the new numbers are going to be awkward for the Bank because China and India cannot suddenly have hundreds of millions more poor people because new data have been produced. We are not quite in a Heisenberg quantum world where measurement affects underlying realities.

But the problem is less big than it appears. First, it should be emphasised that the new revisions change poverty rates according to the international one-dollar-a-day standard. But most researchers and policy-makers place far more faith in nationally determined poverty benchmarks and estimates. India’s poverty rate will always be determined by the NSS surveys (fraught and contentious though even they are) not by international measurements.

The international standard was created to facilitate cross-country comparisons. But it was always recognised that setting this standard was hazardous because of the difficulties in comparing poverty across borders and time. The new revisions have merely served to expose these difficulties, and it is going to be very interesting to see how the Bank extricates itself out of this problem…

The new data suggest that renminbi undervaluation is about 16%, which is not only substantially lower than most analysts’ estimates (of about 30-40 per cent) but also implausibly lower than the estimates for other countries, including India’s (undervaluation of about 26 per cent)…

The broader policy question that India and the world community should be asking is why nearly 15 years had to elapse before GDP data were updated. Had the Bank devoted more time, effort, and financial resources to doing more such exercises in the past, there would be fewer surprises today…

[A] large share of the Bank’s resources — substantially larger than currently foreseen — should be channelled to activities that produce global public goods. A great example of such goods is knowledge produced by the Bank, including the knowledge embodied in the new GDP data generated by the Bank’s statisticians…

We should therefore raise a toast to these humble folk, the bean counters, who beaver away at such unsexy but invaluable tasks. But as we do so, we should not shy away from asking this question: can the loanwallahs at the World Bank (and elsewhere) make comparable claims of adding value to the world.

AEA papers available

Many of conference papers from last week’s AEA meetings are now available. I haven’t looked at them yet, but over the coming week I’ll be checking out the sessions on The Economic Geography of Trade and Production (chaired by Stephen Redding), Firm Heterogeneity and International Trade (chaired by Kala Krishna), Reform: For Better or for Worse? (chaired by Gene Grossman), Offshoring and the Labor Market (chaired by Pol Antras), Trade and Political Economy (chaired by Giovanni Maggi), Innovation, Productivity, and Firm Behavior (chaired by Ralf Martin), and Anne Krueger’s piece on trade and development (pdf).

The roots of (some) public opinion about globalisation

What are French and German students learning about globalisation?

“Economic growth imposes a hectic form of life, producing overwork, stress, nervous depression, cardiovascular disease and, according to some, even the development of cancer,” asserts Histoire du XXe siècle, a text memorised by French high-school students as they prepare for entrance exams to prestigious universities…

In several texts, students are taught that globalisation leads to violence and armed resistance, requiring a new system of world governance. “Capitalism” is described as “brutal”, “savage” and “American”. French students do not learn economics so much as a highly biased discourse about economics…

German textbooks emphasise corporatist and collectivist traditions and the minutiae of employer-employee relations – a zero-sum world where one loses what the other gains. People who run companies are caricatured as idle, cigar-smoking plutocrats…

Describing globalisation, another text has sections headed “Revival of Manchester Capitalism”, “Brazilianisation of Europe” and “Return of the Dark Ages”. India and China are successful, the book explains, because they practise state ownership and protectionism, while the freest markets are in impoverished sub-Saharan Africa. Like many French and German books, it suggests students learn more by contacting the anti-globalisation group Attac.

It is no surprise that the continent’s schools teach through a left-of-centre lens. The surprise is the intensity of the anti-market bias. Students learn that companies destroy jobs, while government policy creates them. Globalisation is destructive, if not catastrophic. Business is a zero-sum game. If this is the belief system within which most students develop intellectually, is it any wonder French and German reformers are so easily shouted down?

That’s Stefan Theil in the Financial Times (sub. req.), but read the unabridged version at Foreign Policy.