US Abuse of Anti-Dumping Duties

Last week, the Financial Times opined:

Anti-dumping duties are designed to prevent predatory companies pricing goods lower abroad than at home. But rules defining dumping vary between countries and are hopelessly opaque.

In the EU – as with most members of the World Trade Organisation except the US – anti-dumping actions are a politicised process, and investigators are allowed considerable leeway in deciding how comparisons between export and domestic prices should be made. Thus authorities are susceptible to lobbying, and inefficient businesses in shrinking sectors such as shoe-making spend too much time begging governments to protect them from cheap imports rather than figuring out how to make themselves competitive.

If I were to write the FT a letter, it would say:

Sir,

Anti-dumping policy is a dangerous and frequently abused trade instrument. You were right to criticize the politicized processes that produce anti-dumping actions in most countries but erred in exempting the United States from your criticism (“Down in the dumps,” June 14). Anti-dumping policy in the US, as in other nations, is dominated by special interests and based on suspect calculations.

For a number of years, US law — the Byrd amendment — actively encouraged lobbyists to bring anti-dumping claims by awarding the tariff revenues to the companies that filed a complaint. It was the European Union, along with ten other nations, that brought a successful case against this measure at the WTO dispute settlement panel in 2002.

Despite that ruling, the Byrd amendment was not repealed by the US Congress until February 2006 and will remain in effect until September 2007. Anti-dumping actions are protectionist interventions, whether implemented by Asians, Europeans, or Americans. The United States should not be let off the hook.

Bhagwati & Ikenson on unilateral liberalization

I attended a Cato Center for Trade Policy Studies event on unilateral trade liberalization featuring Jagdish Bhagwati and Dan Ikenson yesterday. It was quite enjoyable, as both speakers were entertaining and offered scholarly insights.

The case for unilateral liberalization is the traditional case for free trade. Imports are not merely “the price we pay for exports,” but an economic gain that boost consumption, increase competition, and lower input costs. If our trading partners decide to drop rocks in their harbors, that is not a reason for us to follow suit. Ikenson’s new CTPS policy analysis (pdf) outlines the potential gains from liberalization in the context of the current US tariff schedule and the global trading environment.

Although, as Ikenson noted, unilateral action constituted two-thirds (pdf) of the liberalization by developing countries in the past twenty years, “going alone” does not have a very strong history in the United States. Should we expect policy makers to adopt that approach now?

I doubt it. Both speakers pressed the case for unilateral liberalization, but neither claimed that such an approach was likely or politically feasible this summer. Bhagwati conceded that the US won’t “go alone,” but argued that we ought to “convey the lessons of unilateral liberalization” so as to educate people about the benefits of free trade and increase the likelihood of success at Doha. Ikenson was less optimistic about the WTO round’s chances, but one will note that his brief defends the economic feasibility of going alone, not its political palatability. He does not make any arguments that unilateral trade liberalization might win support amongst Congress members who don’t already support significant US liberalization via the multilateral approach. Bhagwati did say that the US ought to relax its demands and provide trade leadership, but that’s been true all along.

Though not able to prescribe a magical elixir for the Doha round’s woes, Bhagwati did offer a few political economy insights. First, he argued that the change in USTR from Rob Portman to Susan Schwab likely hurt the round, as Portman was known as an accommodating representative that would accept a more minimal outcome in terms of US demands. Schwab, according to Bhagwati, has shown a tendency towards the maximalist approach in the past. While not subscribing to the bicycle theory of trade, he clearly prefers that the US salvage Doha and accept a minimalist outcome.

Second, Bhagwati noted in the Q&A session that the business communities and export lobbies needed to push a WTO deal through Congress won’t take the position that a minimalist deal is worse than none and will be on-board for an outcome that keeps the multilateral system alive. Apparently Bhagwati believes that a successful Doha round is necessary to renew the president’s trade promotion authority, which is the basis for both PTA and WTO negotiations. So if the business community wants any kind of trade deals, they’ll back any Doha outcome that gives Bush a win. I may have misunderstood his remarks on this topic, but that was my interpretation of the comment.

Bhagwati remains optimistic about the WTO, while Ikenson is less confident. The next few weeks will be very interesting. Check out Ben Muse’s summary of what’s happening.

Foreign Affairs special on India

“In the July/August issue of Foreign Affairs, a special lead package has brought together four top experts to analyze the sources and implications of India’s rise — and the policies necessary for it to continue.”

One snippet that might generate discussion:

Rather than adopting the classic Asian strategy — exporting labor-intensive, low-priced manufactured goods to the West — India has relied on its domestic market more than exports, consumption more than investment, services more than industry, and high-tech more than low-skilled manufacturing. This approach has meant that the Indian economy has been mostly insulated from global downturns, showing a degree of stability that is as impressive as the rate of its expansion. The consumption-driven model is also more people-friendly than other development strategies. [FA]

Arbitrary Development Numbers: 0.7%

Haven’t read this paper by Michael Clemens and Todd Moss yet, but this abstract looks interesting:

When we use essentially the same method used to
arrive at 0.7% in the early 1960s and apply today’s conditions, it yields an aid goal of just
0.01% of rich-country GDP for the poorest countries and negative aid flows to the
developing world as a whole. We do not claim in any way that this is the ‘right’ amount
of aid, but only that this exercise lays bare the folly of the initial method and the
subsequent unreflective commitment to the 0.7% aid goal. Second, we document the fact
that, despite frequent misinterpretation of UN documents, no government ever agreed in a
UN forum to actually reach 0.7%—though many pledged to move toward it. Third, we
argue that aid as a fraction of rich country income does not constitute a meaningful
metric for the adequacy of aid flows.

UNDP: “Aid = Investment = Growth”

Michael Clemens had a post last month that is damning to a recent UNDP paper by Nanak Kakwani and Hyun H. Son titled “How costly is it to achieve the MDG of halving poverty between 1990 and 2015?”:

In the thicket of equations, you’ll find two assumptions for which there is zero evidence: All aid becomes investment, and all investment becomes income. No serious economist believes that—not even close—which makes this exercise totally irrelevant to aid policy.

In a five minute skim of the paper, I found passages that support that interpretation:

“Given this assumption, it is obvious that the growth rate of per capita GDP will be equal to the growth rate of capital per person. ”

“The investment gap can be filled by numerous alternative sources such as Official Development Assistance (ODA), private capital inflows, and borrowing.”

“Table 6 presents the average per capita investment-saving gap in 2002 US dollars. The estimates in Table 6 can be, in fact, interpreted as the amount of per person foreign aid required to meet the MDG.”

I’m surprised that we’ve returned to discussing the “investment gap,” which received such brutal treatment from William Easterly in The Elusive Quest for Growth that I took it to be dead. I haven’t followed UNDP/MDG estimates and projections in the past. Is this quality of work typical for them or an exception?

Pascal Lamy on PTAs slowing WTO negotiations

I submitted a query for the IHT‘s Q&A with Pascal Lamy, WTO Director-General. It appeared on Thursday:

Q. To what degree have bilateral and regional trade agreements hampered progress in the Doha Round negotiations?

Jonathan Dingel
United States

A. Hello, Jonathan. So far they have not proven a distraction. I can say that all of our members are well and truly focused on the Doha negotiations. But in the back of everyone’s mind is the question of how these agreements will proliferate absent a Doha deal by the end of the year. Bilateral agreements are not in and of themselves a bad thing. But they don’t cover important areas. Trade distorting farm subsidies, for example, will never be covered in a bilateral agreement. Such agreements, furthermore, can create disparate rules which can be confusing to entrepreneurs. Often the poorest countries are left on the sidelines with respect to bilateral negotiations. The bilateral route is open to the US, the European Union, India or China but not for the vast majority of poor countries. Furthermore, developing countries have a limited clout in bilateral negotiations with developed countries. In the WTO by contrast, developing countries have worked together to establish much more powerful platforms from which to negotiate with developed countries. The WTO is a kind of UN for trade but without a security council!

I am not surprised by Mr. Lamy’s reply, as any complaining on his part about distraction due to PTAs would do little to help the WTO negotiations. I agree with his assessment of PTAs’ inability to address a number of vital issues.

Read the full post for answers to questions from other readers.

NBER Grab Bag

Merely skimming the latest NBER abstracts can be very stimulating:

FDI is responsible for much of China’s growth, higher domestic saving rates encourage more FDI, and political risk alters the FDI structure. And while we ought to ditch the body mass index, unfavorable health conditions may not be the root cause of underdevelopment. Plus, measuring trade in services is really tough.