Korean FTAs: Going nowhere fast?

Korea’s chances of negotiating its FTAs with China and Japan were probably hurt by this comment:

The U.S. is a much better free-trade partner for Korea than China or Japan, where issues of race and historical animosities would make an agreement difficult, Korea’s chief negotiator in free-trade talks with the U.S. said Thursday. Kim Jong-hoon invoked “many sensitive issues such as racism, history distortions and territorial disputes” with China or Japan in response to the suggestion that the country should seek a free trade agreement with one of them first since their economies are smaller than the U.S.’ He was speaking at a forum hosted by the Korea Employers Federation.

But don’t look for the US negotiations to go much better:

Lee Myung-soo, vice minister at the agriculture ministry… “We will stick to our principle of not giving up the rice market in the free trade talks with the U.S.”

Half of the potential gains from a Korea-US FTA are in agriculture! The ASEAN-Korea deal is also held up by the rice barrier.

Don’t look for much progress on these Korean FTAs. But I’ve been skeptical from the start.

Apologies for the Brief Hiatus

Between taking finals, graduating, packing, repacking, moving to a new city, and starting an internship, I’ve been too busy to post anything of consequence. I should be back in another week or so.

In the meantime, Tyler Cowen points to an interesting abstract on variables influencing a paper’s likelihood of being cited.

Foreign aid grudge matches

Pablo at PSD points to an William Easterly vs Jeff Sachs debate on foreign aid in the LA Times, while Jim at Our Word is Our Weapon notes that Easterly and Steve Radelet are still trading comments at Cato Unbound. Pablo bills the former as a Columbia vs NYU scuffle, and I’d like to note that the latter is an in-house match between Center for Global Development fellows.

Despite a number of folks billing these debates as showdowns, I see a consensus emerging:

Easterly: “The two key elements necessary to make aid work, and the absence of which has been fatal to aid’s effectiveness in the past, are FEEDBACK and ACCOUNTABILITY.”
Sachs: “The standards for successful aid are clear. They should be targeted, specific, measurable, accountable and scalable.”
Radelet: “We need clear, measurable goals, and aid programs should be constantly assessed against those goals by independent monitors.”

Apparently it’s difficult to get economists to agree about what “accountability” means in practice.

Barriers to entry in the oil market

In the 1960s, 85% of known reserves worldwide were fully open to the international oil companies. That number is now 16%. The rest of the world’s oil and gas is either restricted or entirely cordoned off. “You don’t have an infinite number of prospects to drill anymore,” says T. Boone Pickens, the raider and oil patch veteran. In 1979, U.S. and British companies accounted for 27.8% of world oil and gas production. By 2004 their share was just 14%, says Bernard J. Picchi, an analyst at Foresight Research Solutions LLC in New York. National champions such as Saudi Aramco, Kuwait Petroleum, and Mexico’s Pemex outweigh publicly traded oil companies in the production contest. “Everyone is pointing their fingers at the ExxonMobils, but they are relatively small players,” says Gal Luft, co-director of the Institute for the Analysis of Global Security.

While the international majors are not the altruistic utilities that U.S. politicians might wish them to be, their main interest is in efficiently extracting and selling oil and gas. Even when they struggle, as Royal Dutch Shell PLC has in Sakhalin in Siberia, the Western oil majors are usually best equipped to tackle the hardest projects. National oil companies, though, often have a different agenda. “More and more production and reserves are controlled by governments or institutions that have more of a political than a commercial motive,” says Gerald Kepes, a managing director at PFC Energy. “That has a huge impact on pricing.”

The track record of Petróleos de Venezuela (PDVSA), the Venezuelan national oil company, is a striking example. For President Hugo Chávez, PDVSA is a cash cow for social programs, and developing new production is apparently a low priority. Since 1998, just before Chávez took power, PDVSA’s output has fallen by 46%. [Business Week]

[Hat tip: Brandon Henak]

Investing in stamps?

Postal officials pitched the idea of creating a “forever stamp” that would be good for sending first-class mail no matter how much — or how often — the cost of a postage stamp goes up. The announcement came on the same day that the Postal Service said it would seek to raise the price of a first-class stamp for the second consecutive year.

The forever stamp, which would cost the same as a first-class stamp, would provide a hedge against future postal rate increases and end the search for 2- or 3-cent stamps that usually follows a price increase…

Consumers could squirrel away forever stamps for months or years; they essentially would gain value every time rates increase… The cost of a first-class stamp has gone up 13 times since 1974, when the price was raised from 8 cents to a dime. Kearney said rate increases soon could become an annual affair. [WaPo]

The AP version of the story that I read in my local paper said that hoarding was not expected to occur.

Hoarding stamps (say, buying one million stamps now, and selling them after the next hike for a price slightly below that offered by the USPS) is profitable if the revenue exceeds the cost of storage and the opportunity cost of rates of return of other financial instruments.

If hoarding is not expected to be a problem, the USPS is saying that it expects future price hikes to be small relative to these costs. What other factors are relevant and what other information does the USPS reveal by saying it doesn’t fear stamp speculators?

David Andrew Taylor predicts fairly sizable stamp price increases in the next two years and estimates that the return on investment would be 7.7%!

Zimbabwe Update


Pablo at PSD points to a NYT article reminding us what a hellhole Zimbabwe is:

“Zimbabwe has been tormented this entire decade by both deep recession and high inflation, but in recent months the economy seems to have abandoned whatever moorings it had left. The national budget for 2006 has already been largely spent. Government services have started to crumble… In February, the government admitted that it had printed at least $21 trillion in currency — and probably much more, critics say — to buy the American dollars with which the debt was paid. By March, inflation had touched 914 percent a year, at which rate prices would rise more than tenfold in 12 months. Experts agree that quadruple-digit inflation is now a certainty.”

Not everything is awful: neighborhoods and households financed by American dollars from foreign aid, charities, and remittances are suffering far less. And Robert Mugabe just completed a 25-bedroom mansion.

Nationalization in Bolivia

President Evo Morales of Bolivia plans to nationalize the oil, gas, mining, foresty, and other natural resource industries. Foreign companies are unlikely to be compensated for their confiscated assets.

“Morales sent soldiers and engineers with Bolivia’s state-owned oil company to installations and fields tapped by foreign companies… The companies have six months to agree to new contracts or leave Bolivia, he said.” [Forbes]

“Morales had long pledged to nationalize the sector but said repeatedly he would not expropriate companies’ assets.” [CNN]

News & Notes

The softwood lumber dispute has come to an end, and the settlement isn’t pretty to free traders.

Jane Galt says that the “Bush administration’s committment to free trade has been downright inspiring.”

Oxfam argues that no deal is better than a bad one at Doha if the US & EU positions don’t change.

Blogging will continue to be light as I am a bit swamped with only two weeks until graduation.