A symbolic Doha?

Joseph Francois, who was previously skeptical of others’ emphasis on completing the Doha to address the crisis, say it’s “still true that the substance of the Doha Round will not impact the current crisis.” But now he supports completing the round, because doing so would be “a potent symbol of commitment.”

I’m skeptical of that line of reasoning. First, if world leaders are smart, they’ll invest their limited energies in supporting measures that have both substantive and symbolic impact. Second, I don’t know what the value of a symbolic commitment would be (I know that past efforts have proven hollow). Finally, I just don’t expect countries to restrain themselves – as Francois himself notes, the EU is introducing new export subsidies and the US Congress is gunning for China. Francois’ plea that “We are in this together. Just say no…” is likely as futile as Nancy Reagan’s.

Along related lines, Will Wilkinson complains about economists recommending policies that target psychological confidence rather than substance, when they don’t seem to have done much reliable work on that subject.

Vox's Global Crisis Debate

Vox has launched a Global Crisis Debate forum in coordination with the UK government to let economists across the globe debate what should be done. The debate on international trade and open markets is moderated by Richard Baldwin, and the debate on development and the crisis is moderated by Dani Rodrik. Some snippets:

Simon Evenett is skeptical that a new surveillance mechanism or a declared standstill on protectionist measures would have any bite.

Marc Auboin surveys how quickly trade financing is drying up and what governments might do to intervene effectively – fows of trade finance to developing countries seem to have fallen by some 6% or more year-on-year.

Dani Rodrik says that the crisis is also an opportunity for developing countries, as they have a chance to gain “a much bigger say in the institutions that govern economic globalisation.” He’s pushing for counter-cyclical capital-account management, cracking down on tax evasion, a Tobin tax, and WTO guarantees for “policy space.”

As usual, Rodrik has drawn a number of replies. Nancy Birdsall says developing countries haven’t put themselves in the position to make such reforms. Yung Chul Park and José Antonio Ocampo largely agree with Rodrik. I am sure that those who disagree will make their appearance soon, however.

Finally, AEI’s Philip Levy outlines political reasons to be unhappy about “Buy American” provisions in the stimulus package – he thinks that it’ll provoke a backlash that starts a procurement war, which will only hurt the US.

Where the IMF dare not tread

Apparently the Chinese will not be offended by the IMF’s managing director telling the world’s most prestigious newspaper that the renminbi “needs to move,” but they would be rather upset by a formal labelling of their currency as “fundamentally misaligned.” So much so that the IMF’s executive board has not discussed the Chinese economy since 2006, contrary to its obligation to review member economies.

Strong dollar, yada yada yada

The Economist notes that Timothy Geithner says that “a strong dollar is in America’s national interest” and that “China is manipulating its currency… China cannot continue to get a free pass for undermining fair trade principles.”

So either America is very upset with China for doing something that’s in America’s national interest, or American officials are very much opposed to things which are in the national interest, or statements from Treasury officials generally consist of large loads of hooey. Naturally, it’s the latter.

Mattoo and Subramanian: Beyond Doha

Aaditya Mattoo and Arvind Subramanian’s push for vastly expanded global trade negotiations, seen two weeks ago in the FT, appears in a much longer form in this month’s Foreign Affairs.

Claude Barfield objects:

[T]he two economists recommend a vastly expanded negotiating remit (in some instances in conjunction with other international institutions), including food security, energy and climate change, competition policy, new currency and financial regulations, and supervision of sovereign wealth funds.

There are two huge problems with proceeding in this manner. First, WTO members are fiercely protective of their rights, and many would rebel against a wholesale revision of the 2001 Doha ministerial decisions regarding the substantive agenda. Second, the issues championed by Mattoo and Subramanian are exceedingly complex could take years to sort out. Further, a move to short-circuit the negotiating process would be taken as a direct, coercive attack on the policy space of the developing world – this is particularly true of the larger countries such as China, India, Brazil, and South Africa. Attempting to move directly to a “more ambitious agenda” thus would likely backfire and deepen the already deep divisions in Geneva.

Mattoo and Subramanian laid out their ideas in full in a 30-page PIIE working paper last October, though I haven’t had a chance to read it yet.

The UK's trade economists

British economists will be happy to hear that the ESRC’s benchmarking review of UK economics, chaired by Elhanan Helpman, concluded that international trade “is doing well and improving” in Britain. “The output of the leading scholars is of high quality,” though “expertise in the field is highly concentrated in just a handful of economics departments.” “Recent hires at the junior and senior level have significantly strengthened the field in the UK.” (ESRC pdf)

Related: Earlier news that Europeans have a growing share of JIE articles.

On the dramatic drop in the trade deficit

Barbara Kotschwar and Gary Hufbauer warn that a falling trade deficit gives little reason to cheer:

[T]he US trade deficit declined from $56.7 billion in October 2008 to $40.4 billion in November 2008, a fall of nearly 30 percent… About 80 percent of the decline reflects the falling price and volume of oil imports. However, nonoil merchandise exports in 2008 fell about as much as nonoil imports, about 7 percent for both.

Should the Commerce Department throw a party to celebrate declining imports? No! … the almost simultaneous announcement of 7.2 percent unemployment and the lowest monthly trade deficit since 2003 reflect a plain fact: Bad economic times drive down both employment and imports.