Posts Tagged ‘trade’

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The WTO clubs baby seals?

March 28, 2011

That’s a headline you might expect to see at FreeTradeKillsAnimals.org in the very near future. The WTO has just established three panels addressing complaints from Canada and Norway regarding the European Union’s recent decision (plus older regulations in Belgium and the Netherlands) to ban imports of seal pelts due to “the concerns expressed by EU citizens about seal products from hunts which involve shooting seals and clubbing them to death.” In non-trade-wonk language, Canada and Norway are asking the WTO to strike down the EU ban on seal products.

Canada’s request for the establishment of a panel claims that the EU regulations violate its obligations under the GATT and TBT agreements, and describes the issue thusly:

The European Union trade ban prohibits the importation and the placing on the market for sale in the European Union customs territory of any seal product except: (a) those derived from hunts traditionally conducted by Inuit and other indigenous communities, which contribute to their subsistence; and (b) those that are by-products of a hunt regulated by national law and with the sole purpose of sustainable management of marine resources. In addition, seal products for personal use may be imported but may not be placed on the market. The effect of the trade ban, in combination with the implementing measure, is to restrict virtually all trade in seal products within the European Union, and in particular with respect to seal products of Canadian origin.

If the WTO rules against the EU, it will be yet another case of a democratically established regulation intended to protect the environment being overturned in favor of an ideal of free-flowing unregulated commerce. Canada’s case will likely be that its seal-product export industry is a crucial part of the livelihoods of some of its vulnerable populations, and that the hunting of seals is done in a sustainable manner. The Canadian chapter of the Humane Society International (an organization which, is should be noted, is hardly a reliable opponent of current “free-trade” policies) anticipates these arguments:

National polling consistently shows the overwhelming majority of Canadians want the commercial seal hunt to end, oppose the Canadian government using tax dollars to promote the sealing industry and support the rights of foreign nations to prohibit trade in seal products… Canada’s seal slaughter is conducted by commercial fishermen who earn, on average, less than 5 percent of their annual income from killing seals.

It is worth noting that the U.S. banned the importation of seal products from Canada in 1972’s Marine Mammal Protection Act – yes, the same MMPA that was weakened by the famous GATT tuna-dolphin case. Furthermore, in 2005, a bipartisan resolution was introduced in the Senate calling on Canada to end the commercial hunting of seals.

In sum, Canada’s reaction to international pressure from the EU and the United States regarding its seal-hunting industry is not to eliminate or downside said industry, but instead to defend it using a minimally accountable transnational commercial institution that has historically sided with commercial interests over environmental protection or other sound regulatory measures. This is a rather telling indicator of the power of global commerce over international norms about environmental and consumer protection.

That said, environmental and animal rights organizations tend to have massive clout with American and European publics when they can show that cute furry cuddly things are in danger. And few things are cuter, furrier or cuddlier than baby seals (evidence above courtesy of Google Images). So this is also a golden opportunity for such organizations to raise a stink about the structure of the global economy; whether they are able to take advantage, and how they frame the broader issues at hand, will be very interesting to see.

Flying Whale

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Neoliberalism’s newest foe: Orrin Hatch?

March 10, 2011

The Hill is reporting that Sen. Orrin Hatch (R-Utah) is threatening to package together the South Korea, Colombia and Panama FTAs into a single giant toxic loogie of awful. As the ranking member of the Senate Finance committee, which has jurisdiction over trade issues, Hatch is not in a powerless position, so this might actually matter.

While Hatch is doing this ostensibly to force the passage of all three FTAs, this action might also give opponents of the deals their best possible chance to stop their passage:

While the AFL-CIO and other big unions oppose all three deals, the South Korean deal has won support from the United Autoworkers. And while other unions oppose the Korea and Panama pacts, they would see movement on Colombia by the administration as almost an act of war. For years, unions have drawn a line in the sand over Colombia, which they say has not done enough to stop violence against union organizers.

The article concludes, “Trade was supposed to be a winning issue this year for Obama and the GOP. Wednesday’s move shows it will be a victory that is hard to achieve.” So, “Obama and the GOP” don’t win; who else loses? Let’s see… multinational corporations looking to hide behind generous Panamanian tax-haven laws; banks looking to hide behind Panamanian bank secrecy regulations; Colombian resource extraction companies looking for new markets for their products, created at the expense of millions of displaced indigenous and Afro-descendant peoples; any companies in the U.S., Korea, Colombia or Panama hoping to be able to sue against public health, environmental or labor protection laws that infringe on their expected profits…

Those are the regular folks “Obama and the GOP” are fighting for with these trade deals. Don’t you feel sorry for all of them already? Luckily, Orrin Hatch has our back.

It’s a strange world.

Flying Whale

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Greg Mankiw’s fascinating, bizarre, twisted logic

February 4, 2011

I have the privilege of taking a macroeconomics class that uses a textbook by Greg Mankiw, former economic adviser to George W. Bush. Which has been kind of weirdly enjoyable, because Mankiw presents such a caricature of economics that it’s really easy to pinpoint weaknesses of the field. His text, for instance, offers absolutely no critique of GDP – he mentions that GDP doesn’t cover the informal sector, but makes no mention of why GDP might be a problematic measure of national well-being.

Here a couple choice things from the textbook we’re using and his Principles textbook, which I found online. First, from the latter:

International trade in goods and services can improve the economic well-being of a country’s citizens. Trade is, in some ways, a type of technology. When a country exports wheat and imports textiles, the country benefits as if it had invented a technology for turning wheat into textiles. A country that eliminates trade restrictions will, therefore, experience the same kind of economic growth that would occur after a major technological advance.

This has got to be the weirdest and least compelling defense of Ricardian comparative advantage I have ever read.

On why capital does not flow to poor countries:

Poor nations have not only lower levels of capital accumulation… but also inferior production capabilities… a second reason capital might not flow to poor nations is that property rights are often not enforced. […] Whichever of these two reasons is correct, the challenge for poor nations is to find ways to reverse the situation. If these nations offered the same production efficiency and legal proetctions as the U.S. economy, the direction of international capital flows would likely reverse. The U.S. trade deficit would become a trade surplus, and capital would flow to these emerging nations. Such a change would help the poor of the world escape poverty.

I like how Mankiw manages to, in one stroke of ingenious logic, blame poor countries for being poor and for perpetuating the U.S. trade deficit.

Less humorous and more indicative of the nature of this textbook are Mankiw’s “Four Most Important Unresolved Questions of Macroeconomics,” with which he closes the book:

  1. How should policymakers try to promote growth in the country’s natural level of output?
  2. Should policymakers try to stabilize the economy?
  3. How costly is inflation, and how costly is reducing inflation?
  4. How big a problem are government budget deficits?

These all seem like real issues, to be sure, but contrast Mankiw’s list with a list in Macroeconomics in Context, an introductory textbook that attempts to present a more holistic economics curriculum. This book ends with a chapter called “Macroeconomic Challenges for the Twenty-First Century” and addresses:

  • Macroeconomics and human development: the relationship between economic growth and human development; human development when there is already “enough”
  • Macroeconomics and ecological sustainability: the relationship between economic growth and global population problems, resource depletion, pollution, and climate change

Economics as a means, not an end: perhaps that’s part of what Mankiw is missing.

Flying Whale

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The caring neoliberal

February 4, 2011

A while back, Jonas brought to my attention a couple posts by Ryan Avent and Mike Konczal making the case that neoliberals are really more concerned about the poor than progressives are – it’s just that they care about the global poor and not just the domestic poor. This is a pretty potent argument, and certainly one that’s well-supported by almost any introductory macroeconomics textbook available (I say almost because there is at least one exception).

Before going any further I should acknowledge that Avent’s post in particular is actually mostly about what leftists should and shouldn’t think about organized labor. Obviously, I have thoughts on that too, but that’s not the aspect of this conversation I want to talk about here. What I want to talk about is this, from Avent:

…I think that current neoliberals think of themselves as more honestly egalitarian than traditional leftists, based on their international view of developments in human welfare. The past few decades have witnessed an unprecedented reduction in global poverty thanks to liberal reforms in China and India. Countries containing twice the population of the currently developed world are now hurtling toward middle-income status, thanks to trade, thanks to deregulation, and thanks to the introduction of market reforms.

And Konczal:

…there is an argument that neoliberals have a claim on really being concerned about labor, because they care about labor on a global scale, that the nation-state where you happen to be born isn’t a suitable location to determine boundaries for justice.

The key to the argument, really, is that last sentence of the quote from Avent. For neoliberals to claim to be “more concerned” about the poor than progressives requires a belief that neoliberal policies – for simplicity, let’s lump into that potent phrase the Washington Consensus of liberalization, privatization, and deregulation, tempered very slightly by the kind of softness for human development indicators espoused by the World Bank of recent history – actually make the world’s poor better off.

That’s the major sticking point. It’s not that progressives only care about the domestic poor and would take improved outcomes for the American working class at the expense of the working class in the global South. (That might describe a particular kind of parochial liberal or working-class perspective, but not a truly progressive one, in my opinion.) It’s that progressives don’t buy that the basic package of policies advocated by neoliberals are actually doing anything to benefit the world’s poor – or, at least, that they’re not doing enough. It’s an argument about policy, not an argument about who cares about the global working class more.

Avent’s argument takes as self-evident that it’s trade, deregulation, markets, etc etc that have caused the rise in living standards in, for example, China and India. But there’s certainly an argument to be made that this is hideously simplified and potentially misleading, if not outright wrong. China and India are growing, sure; trade in some form has a lot to do with it, sure. But are China and India growing in particularly equitable ways, ways that improve standards of living for a majority of their populations? Are the specific kinds of trade and market policies advocated by neoliberals the ones that have accounted for that growth? Are these countries growing and improving because of neoliberal policies, despite neoliberal policies, or something in between?

I confess to knowing less than I should about China and India. But I do know that neoliberal policies have not improved the situations of most developing countries from the end of World War II until today. It’s a tired but still relevant argument that those countries that have grown the most have done so partly because at some point in their history they rejected neoliberal doctrine and the fetish for a quick transition to free markets and an open economy. Is the progressive who criticizes neoliberals by citing these historical (and current!) examples just trying to make sure the U.S. working class gets its fair share of the pie? I don’t think so. Do neoliberals really care about the global working class? I don’t know. What I do know is that their policy prescriptions have historically been a pretty terrible way of expressing whatever care and concern they might feel.

Flying Whale

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Kevin Gallagher gets it right

January 7, 2011

It should be no surprise that I agree with Kevin Gallagher (Boston University/Tufts Global Development and Environment Institute), but it’s nice to see that he basically echoes what I’ve been saying over the past few posts about the China/WTO/green energy issue: “The US should not try to beat China down, but should pursue its own green jobs policy and reform the WTO, so the rules allow countries to combat climate change.”

Gallagher does seem to be a bit more optimistic about the WTO than I generally am, as he sees potential room for allowing green-energy subsidies to be exempt from WTO disciplines:

…there may be a window at the WTO for subsidies for alternative energy. Developed countries saw to it that the subsidies agreement at the WTO left room to support research and development, regional inequality and environmental protection. This window closed in 2000, but is under review in the (stalled) round of WTO talks, and could be expanded.

I didn’t know this particular tidbit about the subsidies agreement – very interesting. That said, I don’t really think the ideal course of action is to add more exceptions to misguided WTO rules, since, as they say, the exceptions prove the rule.

What I find most interesting in Gallagher’s piece, though, is this quote he pulls from Barack Obama’s The Audacity of Hope:

“Indeed, countries that have successfully developed under the current international system have at times ignored Washington’s rigid economic prescriptions by protecting nascent industries and engaging in aggressive industrial policies.”

Too bad this passage doesn’t much fit with what Obama’s apparent international economic policy has been thus far.

Flying Whale

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CGD’s nonsensical response to the China clean-energy subsidy case

January 5, 2011

It’s not entirely surprising that the folks at the Center for Global Development are about as appalled at this WTO case on Chinese clean-energy subsidies as I am. Unfortunately, the apparent logic behind David Wheeler’s indignation doesn’t make a whole lot of sense. He starts off nicely: “…it’s clear what we have to do now: Subsidize clean power, exploiting scale and learning economies to drive it to cost parity with fossil power as quickly as possible.” And then, after contrasting the Obama approach to this proposed solution, Wheeler gets nice and outraged towards the end:

Think about it: The Obama administration, having defined climate change as a global emergency, has responded to a massive Chinese drive toward cheap clean technology by demanding that they retreat! Mr. President, by the logic of your own rhetoric this is insane, because we’re out of time.

But then he reels off this killer concluding sentence:

Anything that makes renewable energy cheaper, anywhere in the world, should be welcomed without reservation. For trade in clean power technology that means no restrictions: no tariffs, no quotas, no sanctions, no limits of any kind, from now on.

It doesn’t take a genius to sort out that the WTO case against China is probably legitimate because the sort of policies that Wheeler is agitating for – the sort of policies that China is trying to implement – are likely WTO-illegal trade-distorting subsidies. (Important aside: the solution to this should not be to change these subsidies to conform to WTO rules; the solution should be to change the WTO rules!) These days, “no restrictions” on trade sure as hell means no industrial policy. So which does Wheeler really want: the smart industrial policy to promote clean energy that he seems to push for most of his article, or the ideological purity of “free trade” that CGD so frequently advocates, implicitly and explicitly? It’s got to be one or the other – it can’t be both.

Flying Whale

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USTR throws a bone to the Steelworkers

January 3, 2011

By petitioning the U.S. government to sue China at the WTO for its “unfair” clean energy subsidies, the Steelworkers gave the Obama administration the perfect opportunity to appear labor-friendly without actually having to be progressive at all, or challenge any entrenched domestic economic interests. I wrote about this impending disaster a few months ago, and late last month it came to fruition.

The United States on Wednesday accused China of illegally subsidizing the production of wind power equipment and asked for talks at the World Trade Organization, the first step in filing a trade case.

“Import substitution subsidies are particularly harmful and inherently trade distorting, which is why they are expressly prohibited under WTO rules,” Trade Representative Ron Kirk said in a statement. “These subsidies effectively operate as a barrier to U.S. exports to China.”

So not only is this an attack on efforts to move the world towards a greener economy, it’s also a broad attack on industrial policy in general (the sort of broad attack, of course, that is part of what the WTO is designed to do). Even more, it’s a political win for the centrists in the Obama administration, who can now point toward this as a supposedly pro-labor move while they simultaneously push heavy-handedly anti-labor policies like lobbying for the South Korea-U.S. Free Trade Agreement.

Great move, USW!

Flying Whale