Wednesday, February 28, 2007

EU Trade Policy

. Wednesday, February 28, 2007
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The WTO released its semi-annual EU trade policy review. It confirms what we already know: "Agricultural products are the most tariff-protected," the report said, with an average duty of 18.6 percent in the EU, compared to an average of 4 percent for non-farm goods. This represented an increase in the agricultural duties from 16.5 percent in 2004, while tariff for industrials posted a slight decrease from 4.1 percent two years earlier, the report by the WTO secretariat noted."

You can read the full report on the WTO website. While late in the game, it contains lots of specific detail about EU agricultural support mechanisms.

Saturday, February 24, 2007

Chavez vs. the Washington Consensus

. Saturday, February 24, 2007
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According to the Washington Post, Hugo Chavez is using his oil windfall to counter market-based strategies of development. "For Chávez, the goal is nothing less than to kill the so-called Washington consensus, the economic prescriptions championed by the International Monetary Fund and the U.S. Treasury, which press governments to limit spending, raise interest rates and open their economies to foreign trade and investment...The Venezuelan model, which is predicated on a break with all multinational institutions with Washington ties, has plainly gathered steam in some Latin American countries...

"The question now is how long Venezuela can maintain the aid. Although the economy is growing thanks to high oil prices, it has little private investment and creates few new jobs. And, true to the predictions of economists who are skeptical of the Chávez model, inflation is skyrocketing -- so much so that Chávez recently threatened to nationalize grocery stores if they did not limit price increases."

Tuesday, February 13, 2007

More Trade Deficit Politics

. Tuesday, February 13, 2007
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According to the Washington Post, "Increasing the pressure on Beijing, a bipartisan group of senators introduced legislation yesterday that would revoke China's permanent normal trade relations with the United States. That would restore the system, in place until 2001, that forced China to pass congressional review of its trade practices each year to maintain unhindered access to the American market.

The Bush administration is scrambling to stay ahead of congressional demands for action on China. Earlier this month, the administration announced that it would pursue a case against China at the World Trade Organization for allegedly subsidizing exports, a process that could eventually allow the United States to impose retaliatory tariffs."

My favorite nonsense quote: "If President Bush deserves blank-check trade negotiating authority from Congress with this record, then Paris Hilton deserves to be Girl Scout of the Year," declared Alan Tonelson, a research fellow at the U.S. Business and Industry Council, an advocacy group that opposes the administration's trade policies."

Another Record Year

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Some records we might not want. "The United States ran a record trade deficit in 2006 for the fifth consecutive year, the Census Bureau reported Tuesday, in an announcement that quickly reignited the dispute between the White House and Democrats over the value of past and future deals as well as trade barriers."

While I am not among those who see the deficit as a large economic problem, it does have political consequences. "Democrats used the latest trade numbers to demand what the Speaker of the House of Representatives, Nancy Pelosi, called "a new direction" in trade policies, placing more emphasis on opening foreign markets to American goods, protecting American products from counterfeiting and helping American industry become more competitive.

"The consequences of these persistent and massive trade deficits include not only failed businesses, displaced workers, lower real wages, and rising inequality, but also permanent devastation of our communities," Pelosi wrote in a letter to Bush that was signed by other House Democrats as well.

A much tougher stance was taken by consumer, environmental and labor groups that called on Congress to let the president's negotiating authority expire and to reject the various pending trade deals and the philosophy of free trade that led to past accords like the North American Free Trade Agreement, or Nafta, with Mexico and Canada.

"The 2006 midterm elections showed that members of Congress bear the political liability for this failed trade policy," said Lori Wallach, director of Public Citizens Global Trade Watch. She called on Congress to respond by "permanently burying" the "fast track" approach.

Put together, these statements suggested that a division remains among liberals and within the Democratic Party in Congress foreshadowing what could be a similar disagreement among Democratic presidential candidates over the issue of trade."

I wish that the political debate reflected a basic understanding of the difference between macroeconomics and microeconomics. The current account deficit is a macroeconomic issue (too little savings relative to investment) and not a microeconomic issue (too willing to liberalize trade). Consequently, "burying fast track" will correct the U.S. current account deficit.

Thursday, February 8, 2007

Mugabe and De-development in Zimbabwe

. Thursday, February 8, 2007
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As we move toward our section on development, you might find it interesting to look at current developments in Zimbabwe. "For close to seven years, Zimbabwe’s economy and quality of life have been in slow, uninterrupted decline. They are still declining this year, people there say, with one notable difference: the pace is no longer so slow."

The article raises a central question about development--to what extent is poverty due to the international economic system and to what extent to domestic factors such as bad governance.

Friday, February 2, 2007

The 2007 Farm Bill

. Friday, February 2, 2007
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In case you missed it, the Bush Administration sent its proposed 2007 Farm Bill to Congress earlier this week (this legislation is revised every five years, FAQ on the details is here).

While the administration asserts that the proposal will cut total subsidies by $10 billion, the program is essentially an extension with modifications of the 2002 Farm Bill. Consequently, other WTO members have given the proposal a somewhat skeptical reception. The EU asserts that the proposed cuts are insufficient to promote agreement in the Doha Round. Australia claims the Farm Bill constitutes "reneging" on the promise to resume negotiations made last weekend.

Which is not to suggest that the proposal is immune from criticism by domestic farmers and their representatives in Congress.

International Political Economy at the University of North Carolina: February 2007
 

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