Ben Muse

Down to the wire in Seoul

Negotiations on the FTA between the U.S. and So. Korea have to be wrapped up this week if the current U.S. trade promotion authority is to be used.  Kelly Olsen reports on the intense ongoing negotiations in Seoul: U.S.-S.Korea Trade Talks Down to Wire (AP via Houston Chronicle, March 29).   Kim Deok-hyun reports on the closing hours of the negotiations:  S. Korea-U.S. FTA talks head for conclusion amid optimistic notes (Yonhap News, March 30)

There was a hitch on Friday: U.S., S.Korea trade talks stumble at last minute (Jack Kim, Reuters, March 30) - no word in the story on what the problem was.  The U.S. evidently decided that it could delay completion of the negotiations as late as noon on Sunday, April 1, and still meet the conditions necessary for consideration of an agreement under current trade promotion authority.  Heejin Koo reports: U.S., South Korea Extend Their Free-Trade Talks (Bloomberg, March 30).

Evan Ramstad reports on what's at stake for Korea in the negotiations: South Korea Ready to Open Up (Wall Street Journal, March 28 - illustration accompanies the Journal article):

...South Korea's economy now faces a problem. While it grew by 8% to 9% a year for much of the 1990s, its growth has recently slowed to 5%. A key reason: Chinese competitors are taking away South Korea's lead in low-cost manufacturing and threatening South Korea's higher-value industries.

To boost the economy, President Roh Moo Hyun says South Korea needs to do away with the old growth model and open up. He initiated the trade talks two years ago, hoping to attract more foreign investment and stimulate service industries, which account for 48% of the South Korean economy, compared with about 70% in the U.S.

Mr. Roh has also started free-trade negotiations with Canada, Australia and New Zealand, and is exploring talks with the European Union and the six Arab states that form the Gulf Cooperation Council.

The free-trade talks come as South Korea strives to make other efforts to speed up its economic growth. Regulators are pushing to make the country's businesses more transparent in hopes of boosting global competitiveness, addressing criticism that South Korea had weak accounting and disclosure standards. The country has opened its banking sector to foreign owners and competitors, resulting in the fast growth of global players such as HSBC Holdings PLC and a variety of new financial services.

In another article, Ramstad reports that agriculture is a key to the negotiations: U.S.-South Korean Trade Talks May Turn on Beef, Rice Imports (Wall Street Journal, March 30).  Ramstad's got an interesting story to tell:

How much are we spending on homeland security?

Bart Hobijn and Erick Sager take a look: What Has Homeland Security Cost? An Assessment: 2001-2005 (FRB New York, Current Issues in Economics and Finance, February 2007).

The question is important:

House Democratic Trade Terms

Congress and the President have been trying to agree on what to include in U.S. trade agreements.  Time is running out, as the deadline for formally notifying Congress of pending agreements, so that they're eligible for the expedited procedures of current trade promotion authority, expires Saturday night.

Yesterday, House Ways and Means Chair Charles Rangel, and Trade Subcommittee Chair Sander Levin, laid out what they need to see to approve pending trade agreements, and renewal of trade promotion authority: Rangel and Levin Unveil New Trade Policy for America (House Ways and Means Committee website, March 27).

Victoria McGrane reports: Trade Law Set to Expire; Agenda at Crossroads (Congressional Quarterly, March27).   And here's a report from Eoin Callan: House Democrats offer Bush a deal on trade (Financial Times, March 28).  Daniel Drezner is optimistic: An odd, optimistic moment on trade policy (March 28)

Why does the Saturday deadline matter?  McGrane:

Modern piracy

This week's Progressive Policy Institute (PPI) "Trade Fact" reports that Piracy Rates Have Dropped (March 28). 

In some parts of the world, pirates are on the defensive; annual pirate-attack totals peaked in 2003 at 445 and have fallen in each of the three years since. The sharpest drop is in Southeast Asia. Improving technology, revived naval budgets in Indonesia after recovery from the Asian financial crisis, and international agreements on protection of shipping in the Strait of Malacca have combined to cut attacks in the Strait and Indonesian territorial waters by nearly two-thirds -- from high points of 119 in 2002 and 149 in 2003 to last year's 61. Experts Jane Chan and Joshua Ho at Singapore's Rajaratnam School of International Studies find the downward trend continuing late in 2006.

Southeast Asia's success, though, is not universal...

The International Maritime Bureau's experts, based at Kuala Lumpur's Piracy Reporting Center, counted 239 pirate attacks [worldwide - Ben] last year...

As always, the weekly trade fact post has several interesting links for further reading.

Blinder on maximizing the benefits from trade with other countries

David Wessel and Bob Davis report on Alan Blinder's ("Princeton University economist, former Federal Reserve Board vice chairman and perennial adviser to Democratic presidential candidates") thinking on free trade on the front page of today's Wall Street Journal: "Job Prospects. Pain from Free Trade Spurs Second Thoughts. Mr. Blinder's shift Spotlights Warnings of Deeper Downside. (March 28 - subscription required, although Jason Silver reports, "You can access those Wall Street Journal articles for free with a netpass from: http://news.congoo.com")

It turns out that Blinder is for free trade:

Staggering to the KORUS FTA finish

The U.S. and South Korea are working towards a Friday deadline to conclude negotiations on thier free trade agreement (FTA).  After that, they will not be able to take advantage of the existing U.S. trade promotion authority. 

The Hankyoreh carries this Yonhap News report: S. Korea, U.S. struggle to bridge differences in final FTA talks (March 26):

The Student Evaluations for Professor Socrates

From the Chronicle of Higher Education : Hemlock Available in the Faculty Lounge (discovered and translated by Thomas Cushman, March 16).

via Daniel Drezner .

Farm Bill Blog

Jonathan Dingel, over at Trade Diversion, has found this blog following the 2007 U.S. farm bill: 2007 Farm Bill Blog.  The blog is run by Phil Fraas, "a Washington agricultural attorney and veteran of six previous Farm Bills."

"Open Skies" Background

The Financial Times recommends the Cato Trade Policy Analysis Opening U.S. Skies to Global Airline Competition (Kenneth J. Button, November 1998) as background for understanding the issues in the current US/EU open skies agreement.

The Democrats Argue Among Themselves About Wage Insurance

Federal wage insurance may be one way to compensate those workers who lose from liberal trading rules.  Mark Thoma links to and excerpts two New York Times pieces, and a short blog post, describing the arguments in the internal debate among Democrats about this approach: Wage Insurance (Economist's View, March 18).

Legal bloggers advise, "Don't do it."

This weekend I posted on how firms cope when they have to fight for business in an environment where bribery is common.  I drew on James McGregor's comments about China in his 2005 book One Billion Customers: Doing business when corruption is common (March 17)

Legal bloggers Dan Harris at the China Law Blog (Chinese Nationalism: Want Jail Time With That?, Jan 21, 2007), and Craig Maginness at Going Global (Say No to Corruption and Make It Your Market Advantage, September 26, 2006) both advise against foreign firms paying bribes in China.

Harris refers to "how Western companies take an almost perverse pride in "going Chinese" by engaging in bribery and kickbacks."

Maginness points out:

• U.S. firms won't want to run violate the Foreign Corrupt Practices Act
• Chinese law is likely to be applied more strictly to a foreign firm than a Chinese firm, so you can make yourself a "hostage" to the parties that you bribe.
• Many Chinese firms would like to avoid bribery as well.  Positioning your firm and product as "clean" can create a competitive advantage.

Panamax, post-Panamax, Capesize, Malaccamax, post-Malaccamax

The Economist reports that the growth in international trade is likely to be given a boost by a large increase in container capacity in the near future:  Container ships. Maxing Out. (March 1):

Doing business when corruption is common

How do you compete in a business environment where bribes are common and, while you may prefer not to use them, you have competitors who are willing to?  An environment like China?

James McGregor takes this up in his 2005 book on doing business in China -   One Billion Customers.  Lessons From the Front Lines of Doing Business in China.  McGregor, a former Wall Street Journal China bureau chief, former chief executive of Dow Jones in China, former chairman of the American Chamber of Commerce in China, investor and consultant on China, knows how business is done in China.

"As a foreign company in China... you depend on approvals and favors from officals in order to conduct business, and you sell and distribute your product into a system that is lubricated by graft..."  So the question is, "...how do you deal with it without going broke or going to jail?" 

Here's his take:

On the way to a snowfall record

This became Juneau's second snowiest winter on Friday (I think the systematic records go back 64 years). 

Over 15 feet of the stuff has fallen into my driveway this winter.  By dawn this morning there had been 190 inches at the airport.  The record of 194.3 inches was set in the winter of 1964-65.

This morning was warm and sunny, but in the last hour the sky has darkened, the temperature has dropped, and it's begun to snow some more....

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Snow on the 17th left us 1.9 inches short.  The 18th was sunny and warm.

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Over the top sometime in the early morning of the 21st: 194.6 inches - but it's warmer,windy, and turning to rain today - lots of concern about the snow/rain load on roofs, a flood "advisory," and avalanche danger is "extremely high."  We have roads and neighborhoods that sit right in avalanche chutes.

A hedonic pricing model of housing

The Environmental Valuation & Cost Benefit News blog has found an unusual application of a hedonic pricing model:   The effect of the Theo van Gogh murder on house prices in Amsterdam (March 15, 2007).

What has globalization done for Mexico?

Good things, say some.

Dominick Salvatore looks at the "Economic Effects of NAFTA on Mexico," (Global Economy Journal, January 2007):

Reach out and touch someone

In 1820, the Chinese economy was - relatively - big.  Martin Wolf illustrated a column on Europe Tuesday with this figure, based on the work of Angus Maddison:

(Look who else is up there in 1700 and 1820).  But what happened inside it didn't have much of an impact outside.

Not so anymore.  When did it really come home to FT journalist James Kynge that China Shakes the World :

The information content of prices

James Kynge notes (as an aside in his new book about China) that:

...The first inkling the British had...of the Mongol invasion of Europe - a cataclysm for the civilization of the continent - was when the price of fish at Harwich, a harbor on the North Sea, suddenly rose.  The reason for this, people later learned, was that fishing fleets along the Baltic coast, abruptly deprived of sailors required to face the horse-borne enemy approaching from the east, had remained at their moorings.  That had reduced the supply of cod and herring to Harwich, and prices had gone up accordingly.

from China Shakes the World.

Is globalization good for the world's workers?

Stanford labor economist Robert J. Flanagan apparently thinks so. 

Richard Cooper reviews his new book (Globalization and Labor Conditions: Working Conditions and Worker Rights in a Global Economy, Oxford University Press, 2006) in the March/April Foreign Affairs:

In this impressively argued, empirically supported analysis of the evolution of working conditions in today's world, the Stanford economist Flanagan addresses the contention, advanced aggressively in political discussions, that globalization worsens the conditions of labor, spurring a "race to the bottom."

Based on analyses of 30 years of data from many countries, Flanagan concludes that, to the contrary, the three economic dimensions of globalization -- greater foreign trade, foreign direct investment, and international migration -- are associated with improved working conditions (higher wages, fewer hours of work, fewer accidents at work) and improved workers' rights (less child labor, greater freedom of association, less forced labor); open economies have significantly better working conditions than more closed economies.

Although he does not oppose increased regulation on behalf of labor at the national or international level, Flanagan is skeptical, on the basis of the evidence, that such regulation will by itself improve the conditions of the average worker. Too often, it improves the circumstances of some workers while worsening the circumstances of others.

His book offers the general advice that any proposed policy action should be evaluated on the basis of whether it enhances or narrows the opportunities available to workers. Expanded opportunities, such as those created by greater economic growth, are more likely to succeed in improving working conditions.

The Oxford University Press web site for the book has a link to the table of contents, and a more detailed description:

Has globalization helped the poor?

This spring, the National Bureau of Economic Research (NBER) will release a book on a September 2004 "Globalization and poverty" conference.  Ann Harrison, of the University of California at Berkeley, is the editor.  Copies of the conference papers are here: Globalization and Poverty web page

The March "NBER Digest" has a short article by Matt Nesvisky on the conclusions: Globalization And Poverty .

Bottom line:

First, impediments to exports from developing countries worsen poverty in those countries. Second, careful targeting is necessary to address the poor in different countries who are likely to be hurt by globalization. Finally, the evidence suggests that relying on trade or foreign investment alone is not enough to alleviate poverty. The poor need education, improved infrastructure, access to credit and the ability to relocate out of contracting sectors into expanding ones to take advantage of trade reforms.

Here's the Digest article itself:

Doha Round Status Report

The Doha negotiations were reinitiated last month, after being suspended last July.  The Government Accountability Office (GAO) has released a status report:  Congress Faces Key Decisions as Efforts to Reach Doha Agreement Intensify (GAO, March 2007, GAO-07-379).

The GAO sought to answer three questions in this 65 page report:

(1) the overall status of the Doha Round negotiations now and the progress that had been made prior to and since the breakdown of the talks, (2) the substantive divisions among key WTO members that led to an environment of deadlock and the eventual suspension of the negotiations, and (3) the possible economic and other ramifications if the round is not concluded satisfactorily.

At this point:

King Island goes to war

King Island takes up about two to four square miles of the Bering Sea, just south of the Bering Strait.  It's about 30-40 miles from the U.S. coast.  In the winter it’s surrounded by the Bering Sea ice pack.  Until the late 1950s - 1960s it was home to about 150-200 Inupiat Eskimos in the village of Ugiuvak (or Ukivok, also the Inupiat name for the island).  Ugiuvak clung to the side of a cliff, on the south side of the island.   I’ve posted on King Island before, here, and here. 

The picture below shows Ugiuvak in the late 1930's.  The large white building at the lower end is a Bureau of Indian Affairs (BIA) school, the large white building towards the upper end of town is a Roman Catholic church.  Most of the village lies on the ridge under the church and just to the right of the school.  If you click on the photo you can get a more detailed view:

The next picture was taken many years before, but it gives a good idea of the way the houses were built.  They weren't built on dirt foundations dug into the slope, but were built on platforms perched on long poles. 

Paul Tiulana was born in Ugiuvak in 1921.  In the late 1970s he told Vivian Senungetuk about life on King Island in the 30s and 40s.  Senungetuk transcribed his account, edited it somewhat, and published it as A Place for Winter. Paul Tiulana's Story.  Tiulana is leaning heavily on his spear on the right in the cover photo below (taken in the late 1930s):

Hunting was important for King Islanders in the 20s and 30s - it was a source of food, clothing material, everyday items, building materials, and trade goods.  Tiulana says that others in the village began to teach him hunting skills when he was about 10, although he must have picked up a lot before that. 

What causes exports?

The journal World Economy celebrates its 30th birthday with free access to its symposium issue on EXPORTS: CAUSES AND CONSEQUENCES .

In one of the articles, Joachim Wagner reivews 54 microeconomic studies on the role of exports in promoting growht and productivity, and reports: Exports and Productivity: A Survey of the Evidence from Firm-level Data:

While the role of exports in promoting growth in general, and productivity in particular, has been investigated empirically using aggregate data for countries and industries for a long time, only recently have comprehensive longitudinal data at the firm level been used to look at the extent and causes of productivity differentials between exporters and their counterparts which sell on the domestic market only.

This paper surveys the empirical strategies applied, and the results produced, in 54 microeconometric studies with data from 34 countries that were published between 1995 and 2006.

Details aside, exporters are found to be more productive than non-exporters, and the more productive firms self-select into export markets, while exporting does not necessarily improve productivity.

Canada's corn complaint

Canadian corn farmers think the U.S. unfairly subsidizes its corn farmers.  In early January, Canada requested consultations with the United States on this issue under the WTO's dispute settlement process.  The request has implications for the Doha Round, and the upcoming U.S. farm bill.

Jeanne Grimmett goes over the details of the WTO dispute settlement process: Dispute Settlement in the World Trade Organization: An Overview (CRS, January 29, 2007).

Randy Schnepf lays out the background to and issues in the Canadian corn case in the Congressional Reserach Service (CRS) report: U.S.-Canada WTO Corn Trade Dispute  (January 31, 2007).

Negotiations to renew Trade Promotion Authority

Gregg Hitt reports that the administration and leaders of the House Ways and Means Committee are trying to find middle ground that would permit renewal of trade promotion authority (TPA): Bush and Democrats Talk Trade  (Wall Street Journal - subscription required, Mar 1).

The sticking point is how to handle Congressional negotiating guidance on labor rights.  Mary Jane Bolle looked at the labor issues in this Congressional Research Service report: Trade Promotion Authority (TPA)/Fast-Track Renewal: Labor Issues (February 2, 2007).

If negotiators are successful, TPA renewal may make it possible to move forward on the Doha Round, and on several free trade agreements.

Hitt reports:

House passes CFIUS reform legislation

Gregg Hitt reports that the House has passed CFIUS reform legislation: House Bill Boosts Scrutiny of Foreign Deals (Wall Street Journal - subscription required, March 1):