Author Archives: jdingel

Panitchpakdi: Regionalism for development

Former WTO DG and current UNCTAD Secretary-General Supachai Panitchpakdi on “regionalism for development“:

[D]eveloping countries should strengthen regional cooperation with other developing countries, and proceed carefully with regard to North-South bilateral agreements…

Bilateral FTAs often transform formerly non-reciprocal trade preferences between developed and developing countries into symmetric market access regulations; thus, the cornerstone of the post-war international trade system, the special and different treatment of developing countries, is continuously being eliminated…

developing countries often have to accept far-reaching commitments regarding formerly classical domestic policy without being adequately compensated in terms of warranted market access and market success…

Simultaneous participation in many FTAs with different rules and implementation horizons makes policy coordination in developing countries increasingly difficult…

[In South-South PTAs,] initial foreign competition within the region may be less difficult to handle, the technological gap vis-à-vis competitors from more advanced countries outside the region may be easier to close, and the probability of finding a level playing field is greater.  In other words, the regional market often sets less exclusive benchmarks than competition with mature suppliers, so that even production at the infant industry stage can be successfully broadened.

I’m not convinced that preserving SD&T or opening trade between similar countries are critical to economic development, but UNCTAD has a 240 page report that makes the case. I just have to find time to read it!

[HT: Emmanuel]

The renminbi’s depreciation

Brad Setser reports that Chinese exports to India grew by 67.5% in the first three quarters of 2007:

The impact of the RMB’s depreciation (yes, depreciation – the RMB hasn’t appreciated enough v the dollar to offset the dollar’s depreciation against many other currencies) on a host of other emerging economies has been an under-reported story.

The renminbi's depreciation

Brad Setser reports that Chinese exports to India grew by 67.5% in the first three quarters of 2007:

The impact of the RMB’s depreciation (yes, depreciation – the RMB hasn’t appreciated enough v the dollar to offset the dollar’s depreciation against many other currencies) on a host of other emerging economies has been an under-reported story.

The renminbi's depreciation

Brad Setser reports that Chinese exports to India grew by 67.5% in the first three quarters of 2007:

The impact of the RMB’s depreciation (yes, depreciation – the RMB hasn’t appreciated enough v the dollar to offset the dollar’s depreciation against many other currencies) on a host of other emerging economies has been an under-reported story.

The distribution of ag subsidy income

Thomas Hertel, Roman Keeney &  L. Alan Winters explain why agricultural liberalization is so tough to achieve:

The “average” farm household in the United States is little affected by the trade reforms currently being contemplated in Geneva, but these reforms imply significant losses primarily for the very richest households involved in production of highly protected commodities. Meanwhile, in the developing world, many of the benefits of rich country agricultural liberalisation are translated into reduced poverty….

[I]n the United States, farm income accounts for less than 10% of total income of farm households… [O]ur estimates of the impact of Doha on the average farm household’s income suggest that it is statistically indistinguishable from zero! If this is the case, then what is the source of such strong opposition to reform?… In the United States, most farm households earn relatively little from farming, but those large farms producing sensitive products tend to be specialised, with the richest deriving up to 90% of their income from agriculture…

In contrast to the negligible impacts on the average US farm household, full agricultural trade liberalisation would cut the total income of the wealthiest rice farmers by about 19% and that of cotton farmers by 10%… It is these wealthy, highly specialised households in a few heavily protected sectors that stand in the way of serious agricultural reform in the US. Indeed, around one half of producer revenue in the US rice and sugar sectors over the period 2001-2005 were attributable to farm programs., while more than a third of cotton revenues are directly attributable to government programs. This sharp concentration of potential losses among a relatively small number of influential households has made reform in the US difficult indeed.

Read the full column for other important insights into agriculture at the Doha Round.

IMF WEO: No anti-trade arguments here

Clive Crook reports on the IMF’s World Economic Outlook:

The IMF splits globalisation into two components of economic openness: trade and foreign investment. Trade openness actually tends to reduce inequality and financial openness tends to increase it, the report finds. For the developing countries, the two roughly cancel out: their net effect is slightly pro-equality. For the rich countries, the balance is anti-equality: the disequalising influence of cross-border investment outweighs the equalising influence of trade. So although these numbers do provide a rationale of sorts for curbing cross-border flows of investment – harmful as that would be for growth – they offer no support for trade barriers. There is nothing here for the anti-trade lobby. Trade barriers inhibit growth and worsen inequality, in rich countries and in poor countries, says this report.

Read the full column, titled “End global inequality: become a Luddite,” to learn of Crook’s frustration with coverage of reactions to the report.

The strong dollar surprise?

The dollar is falling. Everyone knows it needs to fall even further. But there are worries that it could suffer a sudden plunge when currency traders realize it’s not falling fast enough. In a comment in the FT, Jeffrey Garten says betting on a weaker dollar is “nearly a risk-free proposition.” And that makes him unhappy:

At an opportune moment, they [central bankers] could make a sharp and powerful co-ordinated intervention in the currency markets to buy dollars. This surprise move would not change long-term trends, but it would show speculators that shorting the dollar is not always without consequence. The intervention could therefore bolster prospects for an orderly dollar decline and demonstrate that the US and the European Union are capable of jointly using powerful policy levers.

What? How would that help?

Do free traders neglect immigration?

At the end of a post about Social Security, Dean Baker implies free traders are lax in supporting freer immigration to the United States. At the risk of taking his closing quip too seriously, here’s why I am not fully persuaded.

Most economists who support freer trade also support freer immigration. Heck, Jagdish Bhagwati even has a version of his biography tailored to focus on immigration. And 500 economists signed a petition supporting more open immigration. So, although they could always do better, I think free traders are fulfilling their responsibility of advocating freer immigration. (One reason their contribution may be underappreciated is that economics is less central to the debate about immigration policy than trade policy.)

Then there are non-economist free traders. Here, Baker’s case holds up better. For example, the Heritage Foundation has used the argument that trade and migration are substitutes as a reason to support trade deals. On the other hand, Cato’s free traders are staunchly pro-immigration.

Two questions:

(1) Can anyone name an economist who is a notable free trader but opposes more liberal immigration policy?
(2) Are economists devoting too much of their policy influence to trade and not enough to migration?