U.S. trade officials will announce a major trade enforcement action against China on Tuesday, according to an advisory from the U.S. Trade Representative’s office. The advisory, which was obtained from a business group, said U.S. Trade Representative Ron Kirk “will hold a press conference to announce a major trade enforcement action against China.” It gave no other details.
via Scott Lincocome.
The WTO laid the cornerstone of its new headquarters building in Geneva today.
Alan Beattie isn’t so impressed: “WTO needs a bigger headquarters to host larger stalemates in”.
Rob Johnson and Guillermo Noguera describing not-yet-posted research:
[W]e combine time series data on sectoral production and bilateral trade with benchmark input-output tables for the OECD and major emerging markets, covering 80-90% of world trade and GDP. We find rapid and accelerating declines in the domestic content of exports of most countries. Preliminary results suggest that the value added content of trade declined by nearly twice as much in the decade from 1995-2005 than in the prior two decades. These declines are concentrated within manufacturing sectors, and not due to the changing composition of world trade. At the bilateral level, there are large differences in the rate and timing of changes across trading partners. Further, we detect cyclical patterns in the value added content of trade, which tends to rise in recessions due to the compression of demand in sectors that are most vertically specialized.
The Panama Canal is being expanded; the $5b construction of larger locks is due to be completed in 2014. As the Financial Times describes, that’s expected to shake up the east coast shipping scene.
Scenes like the one at Baltimore are being played out all along the east and gulf coasts ahead of what promises to be the biggest shake-up in US distribution since the advent of shipping containers 50 years ago.
Ports, terminal operators, rail companies and state governments are jostling to win the new traffic they expect to be generated by the bigger ships. Billions of dollars are being spent to build new quays, deepen channels and expand rail tunnels. Consumers, manufacturers and retailers in the US mid-west and inland eastern cities could all benefit.
Containers heading to these areas will have the option of going via east-coast ports then heading west on trains. Their traditional route has been eastward from California, where larger ships free of Panama Canal restrictions already dock.
Here’s James Feyrer on the closing of the Suez Canal. Feyrer is also working on a paper titled “The Opening of the Panama Canal as a Natural Experiment in Trade”.
[HT for FT to Seb]
The preliminary program for January’s AEA meetings is online. I’ll post some trade highlights when the conference comes around.
It’s Michael Clemens on labor mobility, so I can recommend it without having read it yet:
Clemens, Michael A.. 2011. “Economics and Emigration: Trillion-Dollar Bills on the Sidewalk?” Journal of Economic Perspectives, 25(3): 83–106.
Abstract: What is the greatest single class of distortions in the global economy? One contender for this title is the tightly binding constraints on emigration from poor countries. Vast numbers of people in low-income countries want to emigrate from those countries but cannot. How large are the economic losses caused by barriers to emigration? Research on this question has been distinguished by its rarity and obscurity, but the few estimates we have should make economists’ jaws hit their desks. The gains to eliminating migration barriers amount to large fractions of world GDP—one or two orders of magnitude larger than the gains from dropping all remaining restrictions on international flows of goods and capital. When it comes to policies that restrict emigration, there appear to be trillion-dollar bills on the sidewalk.
Fred Bergsten says:
“China has intervened massively in the foreign exchange markets for at least five years, buying at least $1 billion every day to keep the dollar strong and its own renminbi weak… This is by far the largest protectionist measure adopted by any country since the Second World War — and probably in all of history.”
All of history? What about periods of autarky?
What fraction of your good was made in China when the label says “Made in China”? From the FRB-SF:
Goods and services from China accounted for only 2.7% of U.S. personal consumption expenditures in 2010, of which less than half reflected the actual costs of Chinese imports. The rest went to U.S. businesses and workers transporting, selling, and marketing goods carrying the “Made in China” label. Although the fraction is higher when the imported content of goods made in the United States is considered, Chinese imports still make up only a small share of total U.S. consumer spending…
Table 1 shows that, of the 11.5% of U.S. consumer spending that goes for goods and services produced abroad, 7.3% reflects the cost of imports. The remaining 4.2% goes for U.S. transportation, wholesale, and retail activities. Thus, 36% of the price U.S. consumers pay for imported goods actually goes to U.S. companies and workers.
This U.S. fraction is much higher for imports from China. Whereas goods labeled “Made in China” make up 2.7% of U.S. consumer spending, only 1.2% actually reflects the cost of the imported goods. Thus, on average, of every dollar spent on an item labeled “Made in China,” 55 cents go for services produced in the United States. In other words, the U.S. content of “Made in China” is about 55%. The fact that the U.S. content of Chinese goods is much higher than for imports as a whole is mainly due to higher retail and wholesale margins on consumer electronics and clothing than on most other goods and services…
If we take into account imported intermediate goods, about 13.9% of U.S. consumer spending is attributable to imports, including 1.9% imported from China. Since the share of PCE attributable to imports from China is less than 2% and some of this can be traced to production in other countries, it is unlikely that recent increases in labor costs and inflation in China will generate broad-based inflationary pressures in the United States.
Previous installments:
Tariffs on intermediate inputs vs final goods:
Today I received some tax saving wisdom from a taxi driver in Ukraine. He told me that people who import cars to Ukraine sometimes cut the car in two separate pieces and carry it through the customs this way. By doing this, they save a fortune on import tax. A car carried in two pieces is seen as spare parts and therefore is taxed at a much lower rate than a normal car.
When in Ukraine, the car is welded back into one piece. After that, it’s usually sold locally at a good price. I looked through forums and apparently this is a common practise in developing countries, particularly in post-Soviet states such as Ukraine.
Via MR.
Jeff Schott counsels Jagdish Bhagwati against pushing a “Doha lite” deal with what’s currently on the WTO negotiating table.
Trade Diversion 