Tuesday, July 31, 2007

The Farm Bill

. Tuesday, July 31, 2007
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NPR's Morning Edition had a couple good pieces on the Farm Bill today. One focuses on how farmers support the bill in spite of current high prices. The other story focuses on what the Senate might do--principled opposition or a "massive money grab." My bet is on the second option. Both links are to audio files.

Sunday, July 29, 2007

Exchange Rates and Anti-dumping Duties

. Sunday, July 29, 2007
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More protectionist rumblings targeted at China from Congress. "Passed by a vote of 20-1, the Senate Finance Committee's measure would allow U.S. companies to seek anti-dumping duties on goods from any country that maintains a "fundamentally misaligned" exchange rate after being formally cited by the United States." (hat tip Greg Mankiw).

The curious thing is that this particular measure lags real world developments; firms already seek anti-dumping duties in response to exchange rate misalignments, even without a formal cite by the U.S. government.* The legislation is relevant, however, as adding exchange rates expressly to the law will make it easier to reach a positive finding in the investigation.

*Knetter, Michael and Thomas Prusa. 2003. "Macroeconomic Factors and Antidumping Filings: Evidence from Four Countries," Journal of International Economics 61 (1): 1-17.

Saturday, July 28, 2007

Juxtapositions

. Saturday, July 28, 2007
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The WTO dispute settlement panel sides with Brazil (again) over the U.S. cotton subsidies. The U.S. plans to appeal in order to protect domestic cotton producers.

The House passes the new farm bill, thereby saying "screw you" to the rest of the world ("Last week, a coalition of business groups, including the U.S. Chamber of Commerce and Business Roundtable, urged Congress to reject a farm bill that did not make major cuts in agricultural subsidies, so as to expedite a global trade deal benefiting manufacturers.")

Meanwhile, the U.S. and G-20 can't agree on the NAMA cuts in WTO negotiations either: "Brazil, India and others said in a joint statement that the [current] proposal does not have the potential to lead to a consensus. [It requires] them to make "severe cuts" in their industrial tariffs "to satisfy the commercial interests of the developed countries." For its part, the U.S. thought the proposal did not go far enough: it "does not provide the (necessary) magnitude of real new market access."

The bargaining theories I teach emphasize the importance of issue linkage in facilitating trade agreements. The U.S. and EU trade agricultural market access for NAMA. These bargaining models typically neglect what these events make clear: domestic politics make it really hard for governments to make these trades.

Wednesday, July 25, 2007

Sarkozy and the ECB

. Wednesday, July 25, 2007
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The new French president appears intent on gaining some influence over the European Central Bank. "Outlining for the first time the vision of the new French administration of how the euro area should operate, Jean-Pierre Jouyet, the country's minister for European Affairs, said that France would lobby for more regular - and more substantive - meetings between the euro group of finance ministers and the ECB president...

"We don't want to reform the treaty or touch the independence of the ECB," Jouyet said. "But when you're evaluating a country's economic situation you have to consider the whole picture: exchange rates, interest rates, public finances and growth. We want to talk about those factors. "It's the spirit of the treaty and the purpose of the euro group."

Unsurprisingly, the ECB is not enthusiastic. "A statement released by the ECB press department said that the ECB president "repeats with gravity" that any attempt to influence ECB decisions would violate European Union treaties."

While the French have subsequently backed away from the public effort to formally reduce ECB independence, they are maintaining their pressure for greater influence. One French official "cited an article of the EU treaty that established the bank "that nevertheless gives a very tiny bit of responsibility to the (EU) finance ministers on these subjects."

And while Sarkozy recognizes he holds a minority position among Euroland governments, he seems to believe that he has public opinion on his side.

Tuesday, July 24, 2007

Crocodile Tears?

. Tuesday, July 24, 2007
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As congressional Democrats put the brakes on ratifying the Bush administration's free trade agreements with Peru and Panama, House Ways and Means Chairman Charles Rangel "accuses the administration of trying to...make it look as if Democrats don't want a deal. "They can bark at the moon, but I want a treaty," says Mr. Rangel. "I would cry if I wasn't able to do this."

At issue is whether Peru and Panama must enact labor side agreements before Congress ratifies the treaties. Rangel asserts that "rank-and-file Democrats simply don't trust the White House to enforce the labor commitments once Congress approves the deals."

While one might agree or disagree with Democrats' goals and/or methods, it is hard to discount their fear that neither the White House nor governments in Peru and Panama would worry too much about the labor side agreements once Congress approves the treaty. Seems like a variant of the time consistency problem: once Congress commits, the others have little incentive to live up to their side of a bargain.

Tuesday, July 10, 2007

Signalling

. Tuesday, July 10, 2007
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If you wondered whether the Chinese government is concerned about the international impact of recent revelations about unsafe Chinese exports, the latest news out of China sends a clear signal. "China executed its former top food and drug regulator today for taking bribes to approve untested medicine as Beijing scrambled to show that it is serious about improving the safety of Chinese products."

Seems a little extreme, but the execution signals two audiences: other would be bribe-takers and lax regulators who imperil China's exports and the world as a whole.

Friday, July 6, 2007

Immigration and the Race to the Top

. Friday, July 6, 2007
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The IHT has an interesting piece on labor mobility in Europe. Seems that the central and east European economies are losing skilled labor to western European countries. The solution? Policies that encourage skilled workers to move from points further east (e.g., Ukraine, Belarus, etc.).

While the article has a somewhat gloomy tone (highlighting the potential negative impact of labor scarcity on foreign investment), one might also point out that when supply is less than demand, price for the factor in short supply will rise. Hence, emergent labor shortages should produce rising real wages for skilled workers. Shouldn't this be good news?

By the same logic, why does the contemporary U.S. debate on immigration neglect supply, demand, and real wages? Is it reasonable to think that all Mexicans (Latinos more broadly) would move to the U.S. if they could? Wouldn't a mass migration increase the real wage in Mexico, thereby encouraging a reversal of labor flows?

If anybody can point me to a relevant academic literature on this question, please leave a comment.

Wednesday, July 4, 2007

Trade May Be Hazardous to Your Health?

. Wednesday, July 4, 2007
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The NYT polls its readers whether they believe that recent revelations of lax enforcement by the Chinese government of basic food safety regulations means that we need a "food safety agreement with China."

The question, and the readers' responses fail to recognize two basic facts:
1. The U.S. already has a "food safety agrement" with China. It is called the Agreement on Sanitary and Phytosanitary Measures. This agreement gives the United States the full legal right to prohibit imports of food products that are harmful to human health. It does, however, provide some basic guidelines about how the U.S. can do so.
2. The issue is not about rules--the issue is the cost of enforcing the rules. This could be done at the border through statistically-based samples or it could be done at the place of production by having inspectors on site. The former does not require any bilateral agreement of any kind--it merely requires us to pay the cost of hiring more inspectors.

In the mean time, private industry is taking some initiative here--and no surprise as they stand to be the big losers from dangerous products.

Monday, July 2, 2007

Axis of Idiocy

. Monday, July 2, 2007
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Shall...we...dance, da, da, da...

Who forgot to invite Mugabe?

Meanwhile, Chavez's oil-financed populism is producing the classic Latin American boom (and bust). "But this effervescent economy – averaging about 12 per cent growth in the past three years – has unleashed one of the highest inflation rates in the world. And as growth slows, which some fear it is doing, inflation could continue to rise."

Sunday, July 1, 2007

A Moment of Silence...

. Sunday, July 1, 2007
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..in memory of fast track authority, and perhaps the Doha Round as well. "Congressional leaders yesterday said they would deny the president's request for an extension of his so-called fast-track authority -- the right to ink trade deals and submit them to Congress for a simple up-or-down vote without amendments. The administration warned that without this power, its pursuit of new trade pacts would be hamstrung, jeopardizing American jobs linked to exports."

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

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