I previously complained that CAFTA was driven by non-trade interests like regional security. Now Declan McCullagh notes that CAFTA will harmonize copyright standards by having our six CAFTA partners adopt the bulk of the Digital Millenium Copyright Act. I wish “trade liberalization” would return to liberalizing trade.
[Hat tip: H&R]
In a post on anti-subsidy activism by celebrities on behalf of Oxfam, Kerry Howley of Reason wonders: “What if Hollywood activists all started making sense?”
She then notes that Minnie Driver’s agricultural product of choice to have dumped on her head was cotton “because she needed to remain relatively clean after her photograph, since she was in the middle of a press tour for a London play.”
Here’s an alternative universe where Minnie Driver does make sense:
Ms. Driver chose cotton because she wanted to protest the agricultural subsidy most damaging to LDCs. Citing a recent conversation with Arvind Panagariya, Driver explained that the campaign against most agricultural subsidies was actually being driven by the middle-income Cairns Group of developing countries, as LDCs already enjoy preferential access to EU markets. Noting that the EU’s internal price for cotton wasn’t elevated above world prices, the actress explained how the abolition of cotton subsidies would not result in a terms-of-trade deterioration for LDCs, whereas the cessation of sugar subsidies would damage the terms of trade for poor exporting nations such as India and the African, Caribbean and Pacific (ACP) countries.
If that didn’t make sense, read this PDF.
Today I read The Shackled Continent
Sub-Saharan Africa’s poverty has become the central focus of development discussions in the popular press and amongst NGOs over the last year or so. As someone not very familiar with development literature specific to the continent, I found the book to be an excellent primer on Africa.
Given my greater familiarity with development literature generally, I found Guest to be at his best when delivering detailed historical accounts (such as Robert Mugabe’s wrecking of Zimbabwe, the failure of ANC economic policy in South Africa, and disastrous civil wars), telling entrancing personal narratives (such as his journey on a truck delivering Guinness in Cameroon or troubles warding off prostitutes), or offering amusing asides (such as his use of a North Korean computer operating system). These gems aren’t found in the other books I’ve read.
Unfortunately, much of the content in this non-technical text will be familiar to those that have read books like Johan Norberg’s In Defense of Global Capitalism
Nonetheless, for those with more than a passing interest in development, I’d recommend The Shackled Continent
My most serious complaint: The introduction, which at twenty-five pages (10% of the total) is far too long, provides an outline of the topics to be covered so exhaustive that one later reads many sections with a sense of deja vu.
This is entirely unsurprising to anyone that’s followed the sweatshop debate for a while, but here’s more evidence that sweatshops are good:
We examined the apparel industry in 10 Asian and Latin American countries often accused of having sweatshops and then we looked at 43 specific accusations of unfair wages in 11 countries in the same regions. Our findings may seem surprising. Not only were sweatshops superior to the dire alternatives economists usually mentioned, but they often provided a better-than-average standard of living for their workers. [CSM]
Christian Science Monitor article here; academic paper here (pdf). Hat tip to Arnold Kling.
I thought that the world of textiles had entered “2005 and beyond: the Quota-Free Era,” so I was confused when I read this article:
Fees applied to quotas on garment and textile exports to the United States have been abolished by the Vietnamese Ministry of Finance in a recent decision.
Deputy Finance Minister Truong Chi Trung said the decision, dated July 25, was good news for about 800 US-bound garment and textile exporters in Vietnam.
The decision was made in the context that Vietnamese garment and textile exporters are facing fierce competition from their Chinese rivals, with the threat of decreasing exports.
Trung went on to say that the abolishment of quota fees will not cause a big impact on the country’s tax revenues as fees collected from garment and textile exports are estimated at a mere VND50-55 billion a year….
To boost exports to the US, Vietnam plans to negotiate with the US to increase quotas for Vietnamese garment and textile exporters and simplify procedures on granting export permits, Trung said. [Yahoo]
I was aware of the calls for the imposition of “emergency” quotas upon Chinese textile exports, but how is the US getting away with plain old protectionism?
Here’s the trick: Vietnam isn’t a member of the WTO. Neither are Russia, the Ukraine, nor Belarus. The US maintains textile quotas against each of them.
Japan said it will impose higher tariffs on 15 U.S. products starting Sept. 1 in retaliation for a U.S. law that distributes the proceeds from anti-dumping levies to affected industries.
The increased tariffs are worth 5.7 billion yen ($51 million), the Ministry of Finance said in a statement today, without identifying the products involved.
Japan wants the U.S. to repeal the so-called Byrd Amendment, which became law in 2000, where proceeds from anti-dumping levies against Japanese steel products are distributed to the U.S. steel industry. [Bloomberg]
The perverse structure of the Byrd Amendment encourages rent-seeking, as Dan Ikenson noted in a September 2004 column:
The legislation was surreptitiously inserted into the agriculture appropriations bill in 2000 by Sen. Robert Byrd after it failed to win support from the congressional committees that have expertise and oversight on trade issues…
By compensating petitioners and supporters of petitions, the Byrd Amendment provides an additional financial incentive to file antidumping and countervailing duty cases. Furthermore, by excluding from compensation those companies that do not support the petitions, the law encourages them to change their positions simply to maintain eligibility for compensation.
Yet despite opposition to the law from President Clinton and advocacy for repeal from President Bush, Congress shows no sign of relenting. [Cato]
Maggie Xiaoyang Chen and Aaditya Mattoo are breaking new ground in the literature on preferential trade by exploring the topic of regionalism in standards:
Two factors explain the shift in regional negotiating emphasis away from conventional barriers and toward standards. First, multilateral negotiations have achieved remarkable reductions in tariffs and quotas but done relatively little to reduce the trade restrictive impact of technical barriers. Second, while multilateral trade rules governing regional agreement on tariffs seek at least in principle to balance the interests of integrating countries and the rights of excluded countries, the rules treat regional agreement on standards as always benign and worth of encouragement.
Are regional agreements on technical barriers indeed an unambiguous blessing for global trade? The voluminous research on regionalism with its almost exclusive focus on tariffs and quotas provide no adequate answer. This paper is a first step in the theoretical and empirical analysis of regional initiatives on technical barriers to trade.
I haven’t yet finished reading the paper, but it’s quite interesting thus far.
The WTO can’t host negotiations on these barriers to trade:
How much do cultural biases affect economic exchange? We try to answer this question by using the relative trust European citizens have for citizens of other countries. First, we document that this trust is affected not only by objective characteristics of the country being trusted, but also by cultural aspects such as religion, a history of conflicts, and genetic similarities. We then find that lower relative levels of trust toward citizens of a country lead to less trade with that country, less portfolio investment, and less direct investment in that country, even after controlling for the objective characteristics of that country. This effect is stronger for good that are more trust intensive and doubles or triples when trust is instrumented with its cultural determinants. We conclude that perceptions rooted in culture are important (and generally omitted) determinants of economic exchange.
That’s the abstract of a December 2004 working paper by Luigi Zingales, Paola Sapienza, and Luigi Guiso.
[Hat tip: H&R]
I’m not sure if this paragraph from the WaPo story on CAFTA refers to agricultural subsidies or another agricultural program:
The last-minute negotiations for Republican votes resembled the wheeling and dealing on a car lot. Republicans who were opposed or undecided were courted during hurried meetings in Capitol hallways, on the House floor and at the White House. GOP leaders told their rank and file that if they wanted anything, now was the time to ask, lawmakers said, and members took advantage of the opportunity by requesting such things as fundraising appearances by Cheney and the restoration of money the White House has tried to cut from agriculture programs.
“Fair trade” means many different things to different people, but collectively, fair trade activists have made themselves a powerful constituency. See the opening sentence of USTR Rob Portman’s press release on CAFTA:
Tonight is an historic night for American leadership on free and fair trade.
That’s a throw-away line, so one can argue that the phrase was merely included to mollify fair traders who had criticized CAFTA. Regardless, it’s both impressive and frustrating that fair traders have become so relevant to trade politics.
Trade Diversion 