Trade and Development Blog

Free-Trade Pact With South Korea Still Not Finished - NYTimes.com The trade accord, an update of the one the Bush administration negotiated and signed in 2007 under so-called fast-track authority that has since expired, has languished in the Democratic Congress. Mr. Obama, though, has thrown his weight behind it — while calling for some technical modifications that would be more favorable to American automakers and industrial unions — and with Republicans soon to take control of the House of Representatives, he has a better chance of getting it through. ... The biggest sticking point involves auto imports. In Washington, the Democratic leadership has been pushing forcefully for lower nontariff barriers to American exports of cars to South Korea, and for eased restrictions on American exports of beef, which has been a source of controversy since an outbreak of mad cow disease in 2003. While the agreement would lower or eliminate tariffs on cars in both countries, the Obama administrat...

  We are a very oil dependent country, as Matt Yglesias points out .  Note also on the graph how much the US trade deficit improved with the recession:  when consumption falls, so does import consumption.

NPR's Planet Money  has posted a great new audible podcast and blog entry on The Cotton Wars  about US subsidies to Cotton farmers.   It's a journalistic investigation and a great introduction to the political economy of the issues and how trade agreements and WTO enforcement (or lack thereof) occurs in practice. The narrative follows the history behind a number of recent successful complaints that Brazil (a major cotton producer in their own right) has filed against and appeals to the World Trade Organization claiming that the United States is violating it's own previous trade treaty commitments because of the ways it implements these subsidies. Colorful characters on both sides of the debate are interviewed.  We will spend a considerable amount of time looking at the topic of Agricultural Export Subsidies, which is one of the main topics in Chapter 10 of the textbook. International organizations such as Oxfam claim  that US cotton subsidies do mo...

... but an event that those of you with an interest in politics might enjoy attending: Jennifer J. Raab, President, Hunter College and Patricia Duff, Founder and President, The Common Good cordially invite you to attend ELECTION INSURRECTION: THE MID-TERM ELECTIONS 2010 Wednesday, October 13 Doors open at 6:00 p.m. The Kaye Playhouse at Hunter College East 68 th Street (between Park & Lexington Avenues) On Wednesday, October 13,  The Common Good  and the  Roosevelt House Public Policy Institute at Hunter College  join forces to present "Election Insurrection: The Mid-Term Elections 2010."   This timely forum brings together America's top political journalists with an authoritative range of strategists from across the political spectrum to discuss the importance -- and likely impact -- of the November Congressional and gubernatorial elections. Please join us for this vital and enlightening evening of discussion and debate. Moderator: ...

Liberal blogger Matthew Yglesias  comments on  a recent NBC/WSJ poll  that reveals that 53% of Americans believe that free trade arrangements with other countries have hurt US jobs, up from 46% three years ago.   Interestingly the poll reveals that [w]hile 65 percent of union members say free trade has hurt the U.S., so do 61 percent of Tea Party sympathizers.   Why such widespread sentiment against free trade arrangements?  The Stolper-Samuelson theorem predicts that (in a static world at least) there will be clear losers from free trade arrangements in the USA and that losses are likely to fall most heavily on lower-skilled workers and those tied to (specific factors in) declining (i.e. labor-intensive) industries.  It is perfectly rational for these individuals to oppose trade liberalization to defend their incomes.  But the same theory suggests others should gain, particularly better skilled workers. Yet puzzlingly (for this theory) the same ...

  To help at the annual Buttonwood conference which will be held at the CUNY Graduate Center, Oct. 25-26, 2010.   This is a high-level policy/academic conference sponsored by The Economist to "draw together leading policymakers, banking executives and regulators to discuss restoring trust in the financial system and evaluate our place on the road to recovery."  Confirmed speakers for this year include influential thinkers and policymakers including: Joseph Stiglitz, Peter Orszag, Mervyn King, Robert Rubin, Laura Tyson, Mohamed El-Erian, and others.  More information at the conference site. Should you be interested in getting involved send Arielle Koreyasu an email ( buttonwood.volunteers[at]gmail.com) with the information below along with the shifts you're available to work: First and Last Name: University/College Age Expected Graduation year SHIFTS: October 24 (Setup day): 10am-2pm, 12-4pm October 25 (day one): 10:30am-2:30pm, 2:15-6:15...

Chapter 3 of the Feenstra/Taylor textbook begins with an extended discussion of the rise of President Evo Morales of Bolivia -- the first Aymara President in the country's near 200 year history in a predominantly indigenous population country.  The discussion centers on his partial nationalization of the gas industry, or more precisely, his renegotiation of the terms of revenue sharing rules from Bolivia's vast newly developed natural gas fields (for more background on this issue in Bolivia, read up on the so called  gas conflict ). The textbook discussion is meant to illustrate the distributional conflicts that sometimes arise when a country opens to trade, an issue that is analyzed in that chapter with the Specific Factors Model.   The event will take place Monday September 20th at Kaye Playhouse auditorium (North building) and starts at 1:15pm but might want to arrive a bit earlier to get past the extra security screening.  Here is a copy of the offi...

The following informational event might be of interest to any of you who might entertain the thought of further graduate study in public policy.  Sent to the Economics Department announcing an event at Roosevelt House: I'm writing to let you know about a great opportunity for our undergraduates who are interested in graduate programs in public policy. Next Wednesday, September 22, admissions officers from Princeton, Harvard, Chicago, and Syracuse will be at Roosevelt House at 12 PM to give a presentation and meet with students about their graduate programs.  Lunch will be served. We really want to get a good turnout for this event, so could you (and/or your departmental administrator) please pass on the attached documents to your juniors and seniors?  One document is a PDF announcement that can be posted around the department (as well as sent out), and the other is a Word document that describes the programs and gives bios of each of the four admissions officers. I...

Help the World’s Poor: Buy Some New Clothes : "Back to school shopping leads many people to buy apparel that was made in sweatshops. Rather than feel guilty for “exploiting” poor workers, shoppers should rejoice. Their spending is some of the best aid we can give to people in poorer countries." So says Benjamin Powell on the always provocative AidWatch blog. Liberal New York Times columnist and Economics Nobel Prize international economist Paul Krugman wrote an earlier and now often cited statement along similar lines titled " In Praise of Cheap Labor: Bad jobs at bad wages are better than no jobs at all ." Do you agree with these arguments?

I will post trade and development related news and other items of interest here from time to time. You are invited to contribute by sending me ideas. If you are new to 'blogs' you might read up a little on how to easily keep track of new blog entries on your computer or phone using an 'RSS reader' such as Google reader. I also keep a 'stash' of other trade related stories here which I might later 'blog' about. You can also subscribe to that list via an RSS reader. Past entries on this blog are from earlier Trade or Development courses I have taught.

The BBC reports : Daewoo leased the vast tract of land - which is half the size of Belgium - for 99 years and hopes to produce 5m tonnes of corn a year by 2023. ...It will manage the plantations directly and use South African labour. My first reaction is "wow!" this could potentially demonstrate how trade and foreign direct investment can bring new technologies and agricultural practices to Madagascar that could help to raise local incomes. My second reaction however is, who did Daewoo lease half of the arable land in Madagascar from!? My understanding, from reading a few papers on the topic (such as this one ) is that while Madagascar is most certainly a land abundant country with very low productivity agriculture, it is also true that local communities have property rights claims to the land that they have used as farmers or pastoralists. Madagascar has in fact been supposedly recognizing and titling these claimants. The question then is from who did Daewoo lease this ...

The following film will be shown at Hunter this Saturday Nov 22nd at 3pm in Hunter West room 714. I haven't seen the film myself so I cannot comment on it in much detail, but it features interviews with economists Amartya Sen, Joseph Stiglitz and a few others. The film would seem to offer a left-of-center perspective on the causes of world poverty, and a call to action to do something about it. It is narrated by actor Martin Sheen. More information about the film, including a trailer can be found here: http://www.theendofpoverty.net/

The New York Times ran a piece Saturday entitled "Congo's Riches Plundered by Renegade troops."   Violence in the Congo may seem senseless to outsiders, but it is far from random.  More often than not violence is for control over valuable resources.  The picture above is of tin mine workers in rebel controlled territory in an area of forest where  Col. Samy Matumo, commander of a renegade brigade of army troops that controls this mineral-rich territory, is the master of every hilltop as far as the eye can see ....On paper, the exploration rights to this mine belong to a consortium of British and South African investors who say they will turn this perilous and exploitative operation into a safe, modern beacon of prosperity for Congo. But in practice, the consortium’s workers cannot even set foot on the mountain. Like a mafia, Colonel Matumo and his men extort, tax and appropriate at will, draining this vast operation, worth as much as $80 million a year ....the ore these ...

    There is no doubt that conflict can lower economic activity by raising insecurity and draining labor and talent out of productive activities and into military/criminal/redistributive activities. Economists have long recognized this possibility and pointed out that the likelihood of conflicts depends, amongst other things, on the relative returns.     Ray Fishman over at Slate summarizes a nice recent research paper by economists Oeindrila Dube and Juan Vargas which looks at the relationship between commodity prices and conflict in Colombia.  Fishman's  post is entitled "Will there be blood? Will falling commodity prices cause civil war?"  There are two opposing forces.  A few excerpts:  ...Poor farmers impoverished by lower crop prices may be eager recruits for rebel groups who can promise a better livelihood from stolen loot than what the soil can provide (not to mention protection from pillaging, since unaligned farmers may be easy prey for either rebels or governm...

Princeton University economist Paul Krugman was awarded this year's Nobel Prize in Economics “for his analysis of trade patterns and location of economic activity.” This topic and Krugman's work turns out to be incredibly central to the study of economic development, as we will be discussing in class precisely this week (in Eco 330) and next (in Eco 730). Here is Freakonomics blogger Justin Wolfers with more detail on some of his contributions, and his more recent public profile as a New York Times columnist : Krugman’s accumulated scientific writings amount to an astonishing contribution. As an international economist, he has been working the same intellectual fields as giants like Ricardo, Samuelson, and Ohlin. Before Krugman, it was hard to believe that there was a lot more to be learned about trade theory, and the profession had moved on to what many believed were more fertile fields. Krugman’s insights helped bring trade theory into closer connection with data on how t...

The New York Times has a story today on important property rights reforms that are being considered in China. Right now all rural lands are state owned, but under the control of village governments. Individual peasant cultivators could enter into long term leases with their local governments, but they had relatively little in the way of protection for their investments (e.g. the local government could revoke the lease) and little or no ability to lease out or sell the rights to their rental. This appears to be about to change. Lease lengths may be lengthened and it seems households will be able to sub-lease or perhaps even sell their 'rights' to the lease. This is a long (but still cautious) step toward establishing a land market. As the article explains: Many farmers work on tiny, state-allocated plots of land for a small fraction of the year, investing little in agriculture. While they are entitled to 30-year land-use contracts, the state retains ownership of rural ...

So much attention has been focused on what is happening to large private financial institutions. But as the crisis spreads, how soon before entire countries (perhaps because they are under the strain of bailing out their local financial system) find themselves in a situation where they are forced to, or choose to, default on their official country debt. Felix Salmon reports that moment may be arriving soon for Pakistan: Pakistan's economic crisis deepened on Monday after the rupee sank to an all-time low and Standard & Poor's, the global rating agency, downgraded the rating on the country's sovereign debt to CCC-plus - a few notches above default level. and Iceland .

Paul Krugman sums up the position that many economists feel they have been left in: Here’s the thing: it’s very hard for Congress to originate complex financial rescues, so it’s normally up to the executive to put things together. Unfortunately, Paulson came up with an awful plan. Ideally, the Dems would have ripped the thing up and started over, but that was never realistic. So instead they made it significantly better, but still building on the original, misconceived structure; it became better than nothing, but not good. And then it failed in the House, so the Senate has larded it up, with stuff like SEC. 503. EXEMPTION FROM EXCISE TAX FOR CERTAIN WOODEN ARROWS DESIGNED FOR USE BY CHILDREN. I think that Congressional leaders know that it’s a bad bill, but feel compelled to defend it, because they’re (rightly) scared of the financial consequences of a second rejection. And to some extent economists like myself are in the same position; I think I called it the “hold your nose caucus....

During Eco330 discussion of Engerman and Sokoloff's hypotheses  on the role of institutions versus other factors in explaining different development outcomes, Jed brought up the very interesting origin of "The Dismal Science" as a term to refer to the field of Political Economy. It dates back to debates between anti-abolition writers such as Thomas Carlyle and, the target of his criticisms, John Stuart Mill and Adam Smith.   Like many other Europeans of the time Carlyle believed that the origin of differences between countries and regions had to do with race and 'cultural characteristics' between peoples whereas political economists such as John Stuart Mill argued that, to quote Adam Smith "The difference of natural talents in different men is, in reality, much less than we are aware of.." and instead that it was institutions and incentives that led to such divergent performance outcomes. Based on his views on the primacy of institutions John Stuart Mil...

On Wed Sept 24th at 2:30pm the Hunter Economics Department will host an informal panel discussion on the current turmoil in financial markets. Room to be announced here soon.