The Custom-House

KORUSFTA

This post has not been updated since June 18.  All Korea-U.S. FTA material is now being posted to a new topic-specific blog: Korea-U.S. FTA.

I'm going to pull together a set of annotated links to web based materials on the U.S. - So. Korea FTA negotiations over the next few months. 

This post is subject to ongoing correction, revision, reorganization, and elaboration.  Last updated June 15.

This post pulls together a large number of different types of web material.  Several surveys or reports have been particularly useful.  These include:

What's in the Korea-U.S. FTA?

This post has not been updated since June 18.  All Korea-U.S. FTA material is now being posted to a new topic-specific blog: Korea-U.S. FTA.

I'm going to pull together a set of annotated links to web based materials describing the contents of the U.S. - So. Korea FTA, and evaluating its impacts on the U.S. and Korea.

This post is mean to complement a second post describing the history of the negotiations and ratification processes: KORUSFTA . 

Like the related post, this post is going to be subject to ongoing correction, revision, reorganization, and elaboration. 

Last updated June 14.

This post has not been updated since June 18.  All Korea-U.S. FTA material is now being posted to a new topic-specific blog: Korea-U.S. FTA.

I'm going to pull together a set of annotated links to web based materials describing the contents of the U.S. - So. Korea FTA, and evaluating its impacts on the U.S. and Korea.

This post is mean to complement a second post describing the history of the negotiations and ratification processes: KORUSFTA . 

Like the related post, this post is going to be subject to ongoing correction, revision, reorganization, and elaboration. 

Last updated June 14.

New "International Economic Law and Policy Community" Blog

The International Economic Law and Policy Blog is developing a spin-off news reporting blog.  The idea is to have students posting on breaking trade law and trade policy news stories.  It's in "beta" mode for the summer, with one contributor (Jordan Taylor, currently Deputy Counsel for International Trade Policy at the Humane Society International): International Economic Law and Policy Community .  By the fall they hope to have a stable of student contributors from around the world.

Economists on Parade

Late May and early June have seen a parade of economist profiles in the media.

Paras Dhayani's profiles two young Harvard students Andrei Shleifer and J. Bradford DeLong (Harvard Crimson, June 4).

This past Sunday, David Leonhardt profiled former Treasury Secretary and Harvard President Larry Summers in the New York Times Magazine: Larry Summer's Evolution.  While Summers remains committed to a market economy, and to liberal international trading rules, Leonhardt describes his increasing concern about the impact of the economy on the middle class (this is his "evolution").  The concern is manifested concretely by an interest in a more progressive income tax, health care reform, and increased government support for medical research.

In the same issue of the NYT Magazine, a much better article. Jason DeParle profiles development economist Lant Pritchett: Should We Globalize Labor Too?.  DeParle focuses on Pritchett's support for a dramatically expanded guest worker programs in developed countries:

The basics are simple: The rich world has lots of well-paying jobs and an aging population that cannot fill them. The poor world has desperate workers. But while goods and capital can easily cross borders, modern labor cannot. This strikes Pritchett as bad economics and worse social justice....

The key to breaking the political deadlock, Pritchett says, is to ensure that the migrants go home, which is why he emphasizes temporary workers (though personally he would let them stay). About 7 percent of the rich world’s jobs are held by people from developing countries. For starters, he would like to see the poor get another 3 percent, or 16 million guest-worker jobs — 3 million in the U.S. They would stay three to five years, with no path to citizenship, and work in fields with certified labor shortages. He assumes that most receiving countries would not allow them to bring families. Taxpayers would be spared from educating the migrants’ kids. Domestic workers would gain some protection through the certification process. And a revolving labor pool would reach more of the world’s poor....

Part of Pritchett’s argument is mathematical. Drawing on World Bank models, he estimates his plan would produce annual gains of about $300 billion — three times the benefit of removing the remaining barriers to trade....

The program outlined is more ambitious than most people in developed countries would accept.  This is an extremely good article, profiling Pritchett, describing his proposal, and offering critical perspectives from other experts. 

Jeffrey Sachs also wants to save the world: Jeffrey Sachs's $200 Billion Dream (Nina Munk, Vanity Fair, July 2007).  He wants more foreign aid. 

The Sunday Washington Post carried a profile of former MIT prof, senior World Bank and IMF economist, and current head of the Israeli central bank, Stanley Fischer: Fischer Popular As Israel's Bank Chief (AP via Washington Post, June 10).

Andy Guess, writing for Inside Higher ed, interviewed Robert Frank (June 1) on teaching economics.

...The narrative theory of learning now tells us that information gets into the brain a lot more easily in some forms than others. You can get information into the student’s brain in the form of equations and graphs, yes, but it’s a lot of work to do that. If you can wrap the same ideas around stories, around narratives, they seem to slide into the brain without any effort at all. After all, we evolved as storytellers; that’s what we’re good at. That’s how we always exchanged ideas and information. And if a narrative has an actor, a plot, if it makes sense, then the brain stores it quite easily; you can pull it up for further processing without any effort; you can repeat the story to others. Those seem to be the steps that really make for active learning in the brain.

The assignment that seems to have summoned those steps and put them to work in the best possible way is what I call the “economic naturalist” writing assignment. It’s a very simple assignment: You’re supposed to pose an interesting question — and I stress interesting; nobody wants to read your answer if the question’s not interesting, I tell them — and then use basic economic principles, one of these five or six principles that we hammer away at in the course, to try to construct a coherent answer in economic terms to your question.

So, for example, Bill Tjoa, one of my students in 1997, asked, Why do the keypads in the drive-up ATM machines have Braille dots on them? It’s a good question. Drivers obviously can see; why do they need Braille dots on the drive-up cash machines? Mr. Tjoa made use of the cost-benefit principle. That’s probably the simplest and most important of all of the ideas we try to stress in the course. It says that if the benefit exceeds the cost, then it’s a good idea. What he argued was that you’re going to make the machines with Braille dots on the keypads anyway for the walk-up machines, so you’ve got to incur the expense of designing and manufacturing the keypads with the Braille dots. Once you’ve done that, it’s just cheaper to make all of the machines the same way, rather than keep two separate inventories and make sure that the right machines go out to the right destinations. So: Cost lower, benefit the same, it doesn’t inconvenience drivers any to use the machines with the Braille dots, so it would be foolish to do it any other way. So the real question isn’t why should there be Braille dots on the keypads — why shouldn’t there be? There’s no reason not to put them there.

On economists as a group: Chris Hayes described the annual American Economic Society meeting, focusing on the marginalization of thinkers outside of the mainstream:   Hip Heterodoxy (Chris Hayes, The Nation, May 24).  This led to a debate among economics bloggers and at TPM Cafe.  Several bloggers posted a link to this great piece by Axel Leijonhufvud: Life Among the Econ .

If you want to join the parade, Tyler Cowen has advice on How to study economics in your spare time (the text of the post has been lost, but the comments are worth while).

Trade, migration, inequality

Dani Rodrik wonders, Is international labor mobility necessarily good? (maybe not) and What's trade got to do with it?  (he points to  a paper suggesting that globalization may not be tightly associated with recent rising U.S. income inequality).

The Interim U.S. Environmental Review

Chapter 20 deals with  the Environment.  Supplementary "confirmation letters" address Section 20.6, on Public participation, and Section 20.2 with respect to Equivalence in Environmental Laws.

U.S. Presidential Executive Order 13141 governs the conduct of environmental analyses of trade agreements.  The USTR has established guidelines for implementing the provisions of the executive order: Guidelines for Implementation of Executive Order 13141: Environmental Review of Trade Agreements.  These documents, and more background (including analyses conducted for the other FTAs) can be found here: USTR Focus on Environment (look under the heading "Environmental Background").   

The Federal Register notice announcing the preparation of the environmental review for the Korean-U.S. FTA is here: Notice and request for comments (March 3, 2006). The USTR has prepared an interim environmental report on this FTA: Interim Environmental Review. United States - Korea Free Trade Agreement (December 2006).  This early report was produced months before the final agreement was reached on April 1.

This interim review brings up a number of issues:

• Environmental impacts in the U.S. and Korea caused by changes in goods and services production: for example, if auto production is reduced and agricultural production is increased in the U.S. the level and nature of environmental impacts will change.  In general, the Review sees these impacts as relatively small, and relatively smaller in the U.S. than in Korea.  There is not quantitative, or detailed analysis.  Impacts are assumed to be related to the impacts on the two economies, and these will be relatively small in the U.S., relatively larger in Korea.
• Liberalization of trade in environmental goods and services, reducing their cost and increasing options, will be a good thing.  The U.S. exported $1.2 billion in environmental goods and services to Korea in 2005.  Many of these are subject to high tariffs.  Reductions in these tariffs would encourage trade in these goods.
• Goods must be moved over transportation networks.  The Review points to the potential for some air and water pollution problems, but thinks these will be small compared to overall impacts in the affected ports.
• Bugs and other nasties hitchhike on ships (in ballast water) and in the packaging and goods themselves.  Think zebra mussels in the Great Lakes.  The agreement points to increased risks of the transport of invasive species between the two countries as goods trade levels rise.  The range of climates in the two countries overlaps, increasing the risk level.  Again, the increased risk is seen to be relatively small - because the increase in goods trade between the two countries will be relatively small to the trade already occuring.  Moreover, the agreement does not affect U.S. regulatory measures to address invasive species.
• Illegal trade in wildlife and wildlife products: This appears to be a relatively minor problem in trade between the U.S. and Korea.  Korea has legislation to deal with illegal trade in wildlife, but the Report says that Korean authorities facing difficulties in controlling the trade.  This is more an issue of Korean imports from third parties.  Illegal trade in these products between the U.S. and Korea appears to be relatively small.  Moreover, tariffs on wild animal and plant imports from Korea are already low, so the agreement is unlikely to make any problem worse.  The Report points to an "environmental cooperation mechanism" to be created between the two countries as a tool for improving the situation (see the bulleted point below).
• The Report notes that the agreement may provide an opportunity for better cooperation and information exchange on fisheries by-catch and for better control of illegal, unreported and unregulated fishing.  The Report doesn't indicate that these will necessarily be in the final agreement, howoever.
• The Report notes that FTA agreements on sanitary and phyto-sanitary (SPS) measures, technical barriers to trade (TBT) measures, and government procurement and investment regulations can have important environmental impacts.  Little useful is said beyond that, but the authors did not yet have access to the agreement.
• The Report notes that potential conflicts between investor rights and the ability of a country to regulate for health, the environment, and safety, are an important issue.  The authors don't expect problems, for the U.S., but they don't actually know the details of the agreement either.
• The Report expects that the agreement will produce an "environmental cooperation mechanism" for the two countries.  This is a good thing. 

The Interim Review notes that South Korea will perform its own environmental review. 

A Trade Policy  Advisory Committee has focused reviewed the environmental issues in the actual agreement: Report of the Trade and Environment Policy Advisory Committee (April 25).

Chapter 20 deals with  the Environment.  Supplementary "confirmation letters" address Section 20.6, on Public participation, and Section 20.2 with respect to Equivalence in Environmental Laws.

The Treatment of Goods from North Korea in the U.S. - S. Korea FTA

This is one of several sets of pages of annotated links to web based materials describing the contents of the U.S. - So. Korea FTA, and evaluating its impacts on the U.S. and Korea.

The post What's in the Korea-U.S. FTA? provides links to these pages.  Another post, KORUSFTA , contains annotated links on the history of the negotiations and ratification processes. 

All of these posts are going to be subject to ongoing correction, revision, reorganization, and elaboration.  Last updated June 11.

The export-processing zone at Kaeseong or Gaeseong in North Korea has been an important part of So. Korea's outreach to the north.   On the other hand, the U.S. is extremely sensitive to the political implications of these goods, and is concerned that the workers producing them are being exploited.

Goods from Kaesong, or other zones that may be developed are treated in Annex 22-C of the agreement (this is a part of Chapter 22. Institutional Provisions and Dispute Settlement).   Annex 22-C does not liberalize treatment of these goods.  It does provide a mechanism for reviewing this issue in light of the evolving situation.

The Annex creates a joint U.S.-So. Korea committee to follow up on the issue.  The committee is to meet at least once a year.  It is to prepare "criteria before goods from any outward processing zone may be considered originating goods for the purposes of this Agreement..."  The criteria are to include, but not be limited to

• "progress toward the denuclearization of the Korean Peninsula;"
• "the impact of the outward processing zones on intra-Korean relations;"
• "and the environmental standards, labor standards and practices, wage practices and business and management practices prevailing in the outward processing zone, with due reference to the situation prevailing elsewhere in the local economy and the relevant international norms."

The committee has two other responsibilities:

• "The Committee shall determine whether any such outward processing zone has met the criteria established by the Committee."
• "The Committee shall also establish a maximum threshold for the value of the total input of the originating final good that may be added within the geographic area of the outward processing zone."

Decisions reached by "unified" consent of the committee (does this mean unanimous consent?) may be recommended to the parties, which may take legislative action to revise the Agreement as desired.

The committee is to meet every year: S. Korea, U.S. to hold negotiations on Gaeseong issue every year (Korea.net, May 25).  One story, from the Chosunilbo, (N.Korean Goods May Benefit from S.Korea-U.S. FTA , April 6) points to the uncertainties associated with the mechanisms in the treaty, but is ultimately optimistic:

'Regardless of the economic impact, officials in Seoul highlight the significance of the FTA for the Kaeseong complex. They say it has paved the way for North Korea's entry into international trade, and will eventually improve Pyongyang's relations with Washington.

Lee Hae-yeong, professor of International Relations at Hanshin University, is not happy with the agreement (After revealing the FTA text: how much did Korea give up?, Hankyoreh, May 28).  For example, he doesn't like Annex 22-C:

The problem with the part about "Outward Processing Zones on the Korean Peninsula," which relates to the Gaeseong Industrial Park in North Korea, is similar (Annex 22-C). The problem here is a matter of how conditions are to be met, namely the denuclearization of the peninsula, inter-Korean relations, and "related international norms," essentially labor standards based on those of the International Labour Organisation. The U.S. can add additional conditions however it so desires. This means that Gaeseong, at its essence an internal issue for the Korean people, has been excessively politicized and in the process Seoul’s North Korea policy has been made subordinate to the U.S., as this stipulation requires the approval of the U.S. Congress.

Michigan Democrat Sander Levin, the Chair of the House Ways & Means Committee Subcommittee on Trade, sees problems with the language of the annex: U.S. congressman demands elimination of N. Korean products from Korea-U.S. FTA (Yonhap News via The Hankyoreh, June 12):

Levin, who has already vowed opposition to the FTA, citing unsatisfactory provisions in the auto sector, said Annex 22-C on OPZs applies labor standards different from those agreed on between the Congress and the U.S. administration.

The annex directs the joint committee to examine the standards with "due reference to the situation prevailing elsewhere in the local economy and the relevant international norms."

"This raises a number of troubling policy and legal issues," Levin wrote in the letter, "To apply any lesser or different standard for goods from North Korea to take account of the situation prevailing elsewhere in the local economy would be wholly inconsistent with the recently agreed upon provisions applying basic international labor standards."

He said the annex also allows the administration to recommend Kaesong products be included in the FTA without congressional approval.

"Since neither is satisfactory, the conclusion is that Annex 22-C must be removed from the FTA," he wrote.

Sander's issues came up again at a hearing of the House Foreign Affairs Committee's Subcommittee on Terrorism, Nonproliferation, and Trade.  The Subcommittee held a hearing on the foreign policy implications of the FTA on June 13: Kaesong, auto issues dominate House hearing on S. Korea-U.S. FTA (Yonhap News via The Hankyoreh, June 13).

I have a hard time seeing how this committee commits the U.S. to anything.  The committee itself would only have two parties, and presumably it'll reach its decisions by consensus.   It only appears to have authority to make recommendations, which are then explicitly subject to legislative approval in each country. 

This is one of several sets of pages of annotated links to web based materials describing the contents of the U.S. - So. Korea FTA, and evaluating its impacts on the U.S. and Korea.

The post What's in the Korea-U.S. FTA? provides links to these pages.  Another post, KORUSFTA , contains annotated links on the history of the negotiations and ratification processes. 

All of these posts are going to be subject to ongoing correction, revision, reorganization, and elaboration.  Last updated June 11.

The Singapore Harbor waterspout

An enormous waterspout passed through anchored shipping at Singapore during early to mid-afternoon on May 25. It may have lasted 15 minutes.  I haven't found any reports of loss of life or shipping, so that's good.

Here's a video from Lova744 in Singapore.  The spout passes within a few yards of one ship about 52 seconds into the video, causing it to pivot around its anchor:

">

Here's an inventory of often spectacular photos at flickr: Singapore waterspout.  The next video shows the whole thing in "fast forward" (from lategahndotcom):

">

Here's a link to a slower, real-time, video of the waterspout sweeping through the shipping: Singapore Waterspout .  I like this one because it gives a panoramic sense of the spout passing across the harbor.

How not to import defective products from China

...and how to protect yourself if something goes wrong.

Dan Harris at the China Law Blog explains the new rules of the blame game for U.S. and E.U. importers of defective products from China.  The plaintiffs are not going to go after the Chinese supplier, and they're not going into a Chinese court.

What can an importer or retailer do to protect itself?  Harris discusses researching the Chinese supplier, quality control, contracts, refusal to stay with under performing suppliers, insurance, and marketing.  Not everything he tells his clients, but interesting: How To Protect Your Company From Bad China Product (June 6).  Here's his point #2:

2.   Quality Control.  It is absolutely essential the Western purchaser of Chinese product take responsibility for quality control.  Most Chinese products arrive in the U.S. or Europe already packaged for retail sale, making inspection outside China cost ineffective.  In these situations, a statistically valid inspection system within China is critical for proving out the safety and quality of the product.  For food and drug items, the Chinese government has its own effective inspection system, but to reduce costs, many Chinese suppliers intentionally avoid the Chinese government procedures.  The Chinese government itself estimates as many as 50% of the food and drug items exported from China violate China’s own export rules.  It therefore becomes your job to make sure your Chinese supplier is licensed both to manufacture the product you are buying from it and licensed to export it.  It is also your responsibility to make sure the product you are buying went through proper Chinese government inspection before export.   

What Are the Implications of the Trade Treaty Between the Administration and Congress?

Sungjoon Cho of Chicago-Kent School School of Law has written a short note on the May 10 trade agreement between the Administration and Congress: The Bush Administration and Democrats Reach a Bipartisan Deal on Trade Policy (American Society of International Law e-newsletter "Insights", May 31).