In making his standard argument against “free trade fundamentalism” Robert Wade presents a novel analytic suggestion:

In thinking about these issues, we should also give up talk of “the developing world” in contrast to “the developed world,” and talk instead of a “1:3:2 world” (one billion people live in the rich countries, three billion live in countries where growth rates are faster than those of the rich countries, and two billion live in countries where they are substantially slower).

[Hat tip: Pienso]

Bryan Mercurio is miffed that governments promise big benefits from FTAs and then fail to actually do the liberalization predicted to produce those gains (e.g. Japan & agriculture, Korea & agriculture, etc). I thought that that was basically standard practice.

I saw Don Boudreaux speak about statistics yesterday. He used the trade deficit as an example of a frequently misunderstood statistic. Unfortunately, I feel his discussion may have done more to muddle the issue than clarify it. Correctly understanding the details of the trade deficit should be of interest to both those who did and did not attend the particular lecture in question.

Boudreaux made three statements that I felt were either incorrect or incomplete:

1. The trade balance measures the value of merchandise goods exported minus the value of merchandise goods imported. The current account balance includes net exports of services.
2. The inclusion of services meaningfully alters the size of the trade deficit. [Update: I was likely mistaken in interpreting this as an implication of Prof. Boudreaux’s remarks. See his comment below.]
3. Media sources frequently report the trade balance without properly recognizing its components and relative significance.

My thoughts on each of these claims follow. Please email me (link on right sidebar) if I have made an error.

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From now on, please refer to the Doha round as “this trade thingy.”

Ben Muse points to an Economist article on the use of computable general equilibrium models in trade liberalization debates. For an application to PTAs, see Panagariya and Duttagupta (pdf).

I don’t know if Greg Mankiw agrees with Ed Lazear, but this post features the latter saying something interesting about the trade deficit:

I would like to point out the historic record suggests that countries can be in a current-account deficit or a surplus situation for very long periods of time. New Zealand and Australia have had deficits for decades. Australia in particular has been running a current account deficit that has created a level of foreign indebtedness equal to about 72 percent of their GDP, whereas our foreign indebtedness was only about 21 percent of GDP in 2004 (most recent available published data). Yet, the Australian economy has been very strong and growing at robust rates over the past decades. Australia’s real GDP has grown at an average rate of 3.5 percent over the last decade.

Don’t put Lazear in the Don Boudreaux camp, however:

There is no clear correlation between a country’s surplus or deficit and economic growth. Given the lack of obvious correlation, should we still be concerned about a large current account deficit? We should still be concerned. We must constantly monitor our international situation for the reason that abrupt changes could create problems for the U.S. economy.

On the other hand…

In particular, a rapid decline in the U.S. current account deficit would correspondingly imply a rapid decline in the U.S. capital account surplus. Were this to happen, there could be significant adverse consequences to the U. S. economy and to the rest of the world. We do not anticipate abrupt changes like this occurring.

UPDATE: Brad DeLong notes the difference between the current account deficit and the trade deficit, and the implications for sustainability. Read his post. I’d feel bad for making that error, but so did Greg Mankiw.

“Cheap foreign labor is a subsidy.” — Mark Krikorian at a panel on immigration.

Wow.

If you think China receives an amazing amount of foreign direct investment, it’s because you’ve been seeing Chinese statistics. In a pair of posts, Madhukar Shukla points to evidence that China counts capital goods imports as FDI, reports “round-tripping” of money through Hong Kong as foreign investment, and generally doesn’t conform to OECD and IMF standards in this regard.

Need the latest data for your regressions? World Development Indicators 2006 is available now.

[Hat tip: PGP]

A note worth passing along: Jim catches an odd statistical choice by Marian Tupy in his latest Policy Analysis, “Trade Liberalization and Poverty Reduction in Sub-Saharan Africa.” Check it out.

Using three countries to represent the average tariff of the 48 nations in sub-Saharan Africa is an embarrasingly bad approach, but apparently Tupy also avoided using an earlier base year that offered more data!

Another irony: Figure 7 makes it appear that Sub-Saharan Africa’s trade regime was the most liberal in the world in 1983!