Preparations to have a free trade zone across Africa’s three economic blocs are in high gear, Juma Mwapachu, the East Africa Community (EAC) Secretary General has said.
The efforts are a result of a tripartite summit held in Kampala last year, where heads of state from the three regional blocs; EAC, Common Market for Eastern and Southern Africa (COMESA), and the Southern African Development Community, (SADC) agreed on the expeditious establishment of a free trade bloc.
“We are at the stage where we are about to complete the technical study which will determine what form of free trade area we should have,” Mwapachu told journalists at the just concluded EAC media summit in Kampala.
The study, being conducted by a consultancy firm from the three blocs, will define the institutional arrangements required and a roadmap towards the establishment of the free trade area.
The rhetoric of policy relevance in international economics
In a 1996 article, William Milberg surveyed all international trade articles appearing in the AER, JPE, RES, and JIE from 1988 to 1992. He described two notable shortcomings:
Of articles containing no policy conclusions, 55.9 per cent included empirical studies. Of articles with policy relevance, only 16.1 per cent had empirical content. This is precisely the opposite of the expectation that policy-relevant research will tend to be grounded on empirical support, and that when such relevance is not at stake, empirical support will be less important. According to the survey, empirical analysis is often used to explore positive issues, whereas policy-related issues are most often analyzed using purely theoretical arguments…
[I]n a field where writing structure and even methodology are otherwise extremely uniform, the rhetoric of policy relevance is diverse, flexible and unrigorous. Paradigmatic convention seems not to dictate this aspect of the discourse. Norms of systematic and logical analysis break down precisely where the most is at stake in economic analysis – the legitimacy of its policy conclusions.
It’d be fascinating to see such an analysis of the recent literature.
Hat tip: Matthew Eagleton-Pierce.
US still losing "zeroing" cases
FT: “A World Trade Organisation court on Tuesday reaffirmed a ruling against the US for the way it calculates emergency tariffs on imports it deems unfairly priced, the latest stage in a long-running case brought by Japan.”
The original “cash for clunkers”: International trade in used vehicles
Lucas Davis and Matthew Kahn on cash for clunkers:
International trade in used durables acts as a substitute for explicit “cash for clunkers” programmes. In developing nations, there is significant demand to drive such “clunkers”. Over the last two decades, an unprecedented increase in private vehicle ownership has taken place in the developing world. The total number of registered vehicles in non-OECD countries increased from 110 million to 210 million between 1990 and 2005 and, by some estimates, is forecast to increase to 1.2 billion by 2030 (Dargay, Gately, and Sommer 2008). Rising income explains a large share of this growth. Another important but rarely discussed factor is international trade in used vehicles. High-income countries export large quantities of used vehicles to low-income countries. The scope for continued expansion of trade is enormous. For example, in 2007 there were 768 total vehicles per 1000 people in the US compared to 30 per 1000 in China and only 12 per 1000 in India…
The US “cash for clunkers” programme is likely to displace international trade in used vehicles. While US households and new vehicle manufacturers benefit from this programme, households in the developing world who demand low-quality, cheap vehicles are made worse off.
The social environmental consequences of such incentive programmes hinge on several behavioural parameters. Our NAFTA research has documented that the US is exporting relatively high-polluting vehicles to Mexico but that these vehicles are cleaner than the average vehicle currently registered in Mexico. This suggests that trade lowers the average vehicle emissions in both countries. Since Mexico’s total base of registered vehicles is much smaller than the US, the composition shift is much more quantitatively important for Mexico than it is for the US.
Climate change depends on the total amount of global greenhouse gas emissions. Consequently, the aggregate impact of cash for clunkers will depend on how it changes behaviour both in the US and countries that import used vehicles from the US. Cash for clunkers will affect behaviour in importing countries by increasing the price of used vehicles. What will drivers in these countries do without the supply of cheap clunkers from the US? Will they continue to drive even older vehicles? If so, “cash for clunkers” may slow vehicle retirement rates abroad, aging the stock of vehicles in countries that import used vehicles from the US at the same time the vehicle stock in the US becomes younger.
The H1-B constraint no longer binds
Michael Clemens wanted to study the effects of the H1-B visa lottery. But there may be no lottery this year:
For the first time in several years the H1B visa programme, once the most sought after among Indian professionals, is unlikely to reach its cap of 65,000 before the start of the 2010 fiscal with nearly 20,000 slots lying vacant thanks to the tattered US economy.
The US Citizenship and Immigration Services said it has received approximately 49,000 H1B petitions till August seven counting toward the Congressionally-mandated 65,000 cap, more than four months after it started accepting applications for visas for the 2010 fiscal begining this October.
This is in contrast to the previous years when the USCIS had to resort to computerised draw of lots as it received petitions outnumbering several times more than the Congressional mandated cap of 65,000 within the first few days after it started receiving H-1B applications.
Not everything is made in America
The “Buy American” provision is causing some practical difficulties for those implementing stimulus-funded projects:
Contractors are searching the U.S. in vain for filters as well as bolts and manhole covers needed to build wastewater plants, sewers and water pipes financed by the economic stimulus. As officials wait for federal waivers to buy those goods outside the U.S., water projects from Maine to Kansas have been delayed.
The secret US-Russia trade agreement
Reasonable people may differ on how much secrecy is needed for ongoing trade negotiations. But I have never heard any argument to justify why a trade agreement signed by the United States should remain a secret from the American people.
Technical barriers to trade
The WTO launches a database of members’ declared technical barriers to trade. See Richard Baldwin’s classic article on the subject:
The main thesis of this paper has five steps: technical barriers to trade (TBTs) are important; liberalization of TBTs will continue; this liberalization will involve hegemonic harmonization or mutual recognition of rules and test; such liberalization will almost surely entail preferential arrangements among rich nations, creating in essence a two-tier system of market access with developing nations in the second tier. The final step is to conclude that the WTO should be modified to address the potentially discriminatory aspects of regional TBT liberalization initiatives. The WTO, in short, should be gearing up to “fight” the battle of frictional barrier liberalization.
Economist: "Unpredictable tides"
The Economist has a long article on global trade in its most recent issue: “World trade is no longer collapsing and fears of rampant protectionism have not been realised. Even so, the way to revival looks far from smooth.”
NBER Summer Institute next week
The NBER’s summer institute closes out next week with the international trade and investment workshop. Most of the papers to be presented are available online already.
Trade Diversion 