Ben Muse

Economics and Alaska

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China and India

Last week the Financial Times ran a series of articles on the relationship between China and India. Some high points:

Both China and India are growing, but can they keep it up? ("Asia's giants take different routes Martin Wolf looks at why Beijing has enjoyed the greater success in stimulating growth - and what New Delhi will have to do to catch up" - registration required):
    "... The principal internal constraints on China's growth are institutional: the lack of a rule of law, the consequent uncertainty of property rights, the inefficiency of state enterprises and the profound weakness of the financial system. Important symptoms of these weaknesses have been the reliance on foreign entrepreneurship and an offshore financial and legal centre, namely, Hong Kong.

    Behind these weaknesses lies something more profound: a political system that is unlikely to prove suitable for an increasingly sophisticated economy and society... An important symptom of China's institutional weaknesses is the inefficiency with which capital is used...

    ... 60 per cent of all loans between 1993 and 2000 went to state enterprises. It is astonishing that, in the world's fastest growing economy, as much as 40 per cent of existing loans is considered bad...

    China does not only confront domestic challenges. It may well also confront external constraints. China's extraordinary success in export markets has been a powerful engine of growth. Yet it is hard to believe that this can continue, now that China is such a huge player in world trade and its own economy is already so open...

    If China's growth does remain rapid, can India match it? The optimistic view has been well expressed by Vijay Kelkar, a former senior civil servant.*** Mr Kelkar argues that India's political stability, well-entrenched democracy, relatively effective financial system, deepening international economic integration and improving environment for provision of infrastructure augur well for future growth.

    More fundamentally, India enjoys a greater demographic dividend, with the population of working age expected to rise as a share of the total until 2050, unlike in China, while the quality of the labour force is also improving. The private savings rate should continue to rise as living standards improve and the child dependency ratio falls. Finally, the growth of productivity has been reasonably good in India since 1980...

    Yet India, too, suffers from many constraints. Public sector dis-saving imposes a significant limit on capital formation. The political and legal systems, though well developed, are also cumbersome and inefficient. Politics lacks a focus on development..."
Last week there many reports on new U.N. population projections, forecasting that India's population would be bigger than China's by 2030. The Times' story is here: "Population of India forecast to overtake China's by 2030 " - registration required. Other news sources indicated that India's current fertility rate is three children per woman, while China's is 1.7.

Edward Luce and Richard McGregor looked at bilateral economic relations between India and China: "India's prowess in services and China's manufacturing strength are complementary but both countries can also grow in sectors where they compete directly. Other nations should consider how to respond, write Edward Luce andRichard McGregor" - registration required.
    "To some extent China and India's strengths are complementary rather than clashing. Whereas China has become the world's workshop for manufactured goods, India is developing a highly competitive services sector...

    Yet bilateral trade and investment ties are not simply about India selling software to China and China selling hardware to India. The division of labour is not so clear cut.

    A few years ago there was deep fear in New Delhi about the prospect of cheap Chinese imports flooding into India. Yet India actually has a modest trade surplus with China, driven largely by the export of Indian raw materials such as cement and iron ore, but also by exports of manufactured goods including plastics and steel."
Will an economically strong India provide a counterweight to China for the ASEAN nations and the U.S.?
    "India's economic emergence is openly encouraged by the 10-member Association of South East Asian Nations, which has become increasingly concerned about the growing preponderance of China. In much the same way as the US hopes India will become a geopolitical counterweight to China over the next decades, Asean hopes India will become an economic counterweight.

    That may be premature. India, with its sensitivity about sovereignty, bristles at being asked to play roles on behalf of other countries. But economic ties between India and China will continue to grow and a convergence of the two giants' broader interests at the World Trade Organisation and elsewhere will help bring them closer together."
Both China and India are working hard to secure external energy sources. ("Fuel for rivalry " by Victor Mallet - registration required) Recall that the sea lanes between China and the Middle East go through the Indian Ocean, past India.

    "With world energy supplies already tight, the question is not whether the rising demand from India and China will bring them into commercial competition with each other and with other big importers such as the US and Japan: that is already happening. The question is whether it will lead to diplomatic tension and ultimately increase the risk of military conflict in the Asia-Pacific region.

    For the moment, the competition for resources is fierce but not hostile. The main evidence of concern is that Beijing, nervous about the possible use of US and Indian naval power to control oil supplies from the Middle East in the event of conflict, is rapidly strengthening its own navy. "The Chinese are building up a capability to defend those sea lanes," says Gary Samore, director of studies at the London-based International Institute for Strategic Studies. "There is a naval rivalry building up in south-east Asia and the Indian Ocean..."

From the WTO to UNCTAD

What happens when a WTO DG's term ends?

The Kazakh Information Agency reports that the current DG, Supachai Panitchpakdi, will become head of the United Nations Conference on Trade and Development (UNCTAD): "Thai WTO chief appointed to head UNCTAD".

The Financial Times covers the story ("Supachai named to head Unctad"), and notes that Supachai is replacing Brazilian Rubens Ricupero. Ricupero ran unsuccessfully for WTO DG in 1994.

Still Waters Run Deep

"ONCE they were a byword for mindless docility. But cows have a secret mental life in which they bear grudges, nurture friendships and become excited over intellectual challenges, scientists have found..."

Jonathan Leake, Science Editor for Britain's Sunday Times reports: "The secret life of moody cows"

via Arts & Letters Daily.

We Need A New USTR

We've know since the first week of January (and the Bush Administration has known longer) that Robert Zoellick was stepping down as United States Trade Representative (USTR - the chief US trade negotiator), to be Rice's Deputy in the State Department.

Now, almost eight weeks later, the USTR position has not been filled. Peter Allgeier, a career civil servant in the USTR office, and a Deputy USTR under Zoellick, has been appointed "Acting" USTR.

The Financial Times editorialized today on the need to formally fill the USTR position: "Situation vacant" The Times emphasized the need to fill the position with someone with political stature:
    "The trade representative needs to be more than a technocrat. What is needed is someone with a broad international outlook, an understanding of the importance of the task and, above all, substantial political weight. The representative must be able to talk easily and persuasively to foreign counterparts, the domestic public, Congress and the White House. These become all the more essential when, as now, deals are to be closed. Mr Bush should not be content with an acting representative, however technically competent he may be. Trade is far too important to be downgraded in this way."
There's a lot of work to be done this spring:
  • Doha negotiations (the next 20 weeks - through the end of July - are widely believed to be a "crunch time" - see below - for the negotiations)
  • Congressional passage of the Central American Free Trade Agreements (CAFTA) (which the Times suggests will be an important indicator of the potential of a Doha Round agreement)
  • Selection of a new Director General for the WTO
  • "Renewal of the Trade Act of 2002"
  • a potential congressional vote on US withdrawal from the WTO ("Should the US leave the WTO?")
Failure to fill the position undercuts the status and strength of the USTR position within the U.S. government. It reduces U.S. ability to influence trade negotiations, or provide leadership.

As a case in point - this week there's an informal meeting of WTO member country trade ministers in Kenya. The goal is to move the Doha Round negotiations forward. Richard Waddington reports, Here: "Trade ministers to meet in Kenya as "crunch time" nears". Waddington notes,
    "...Preparations for Hong Kong will be addressed at the meeting, to be attended by ministers from Australia, Brazil, China, the European Union, India, Indonesia, Japan, Malaysia, Rwanda and Thailand amongst others.

    But the United States will be represented by deputy Trade Representative Peter Allgeier because no replacement has yet been named for Robert Zoellick, who has switched posts to become number two at the State Department.

    The absence of the top U.S. trade official could weigh against any clear decisions being taken in Kenya, diplomats say..."
We don't need this.

Revised 3-1-05: crunch time thru the end of July, not June

The Brazilians Are Not Happy With Pascal Lamy

According to MercoPress, a few days ago WTO Director General candidate Pascal Lamy proposed, at a UN conference, declaring "the Amazon region and other rain forests as 'global public assets' subject to world management.

Brazil, with its own DG candidate, sees the potential for interference in its affairs. The MercoPress report is here: "Brazil reacts angrily to Amazon proposal"

    "Brazil reacted angrily to former European Union Trade Commissioner Pascal Lamy's proposal to declare the Amazon region and other rain forests as "global public assets” subject to world management

    The proposal, which revived Brazil’s fears that rich countries pretend control over the Amazon region was harshly condemned in a release from the country’s Foreign Affairs Ministry.

    Mr. Lamy’s statements "are evidence of a prejudiced view underestimating the ability of developing nations to manage their natural resources in a sovereign and sustainable manner", said the release. "Such statements are incompatible with the post of director-general of the World Trade Organization (WTO) to which Mr. Lamy aspires".

    The statement refers to the current competition for the WTO chair between five candidates, including Mr. Lamy and Brazilian Ambassador Luiz Felipe de Seixas Correa.

    The Brazilian press speculates that Brazil will use Mr. Lamy’s Amazon proposal to influence the votes of other countries with tropical rainforests, such as the seven other South American countries that share the Amazon region. "
Right now there are only four WTO DG candidates.

Pascal Lamy Turns Up In India

Pascal Lamy took his campaign for Director General of the WTO to India this past week.

Monica Gupta reports in the Business Standard: "Lamy seeks consensus pitch for top WTO job"
    "According to Lamy, the new director-general's work is pretty much chalked out for the year, with the Doha round and the Hong Kong Ministerial in December being top priority.

    "Many developing countries don't have a permanent contact with the system (WTO). The WTO secretariat, which tends to become bureaucratic, should be more developing country-friendly," he said.

    "The director-general will also have to work towards building a better working relationship with other institutions like the Unctad, the World Bank and the IMF. As D-G of the WTO, he has the mandate to do that," he said adding that a candidate from a developed country like himself could exercise the necessary clout to achieve this objective."
Should developing countries support a European Director General?
    "Asked if he considered his EU background to be a disadvantage for garnering support from the poorer countries, Lamy said, “On the contrary, there were several occasions where I, as trade commissioner, had taken a stand contrary to the view of domestic constituency.”

    I was extremely unpopular in France due to my stand on agriculture. Similarly, concessions on drugs given to developing countries under TRIPS (Trade related intellectual property rights) was extremely unpopular with the pharma industry in EU."

HIV/AIDS and Life Expectancy in Africa

Here is some food for thought from the Economic Report of the President, 2005:

The Report notes that
    "As a result of its lethality and the relative youth of its victims, HIV/AIDs has reduced life expectancy by more than 20 years in many African countries. Life expectancy in some countries is projected to fall to roughly 30 years within the next decade, whereas in the absence of HIV/AIDS some were expected to approach or exceed 70 years.

Underground in Brazil

Mahalanobis reports on a McKinsey study on Brazil's underground economy: "Brazil's Informal Economy" . "...the informal economy generates nearly 40 percent of the national income..."

A large underground economy slows down economic growth:

    "Few policy makers are concerned, but they should be. By avoiding taxes and regulatory obligations, informal companies gain a substantial cost advantage that allows them to stay in business despite their small scale and low productivity and prevents more productive, formal companies from gaining market share. The result is slower economic growth and job creation..."(From another Mahalanobis post)
High taxes, regulation, and weak enforcement are implicated.

The Economic Report of the President, 2005

The annual Economic Report of the President (ERP) is now available: Economic Report of the President: Main Page

This year a chapter was deleted for political reasons. A blog posts Andrew Samwick gives a view into the White House economic analysis and policy machinery (Samwick worked at the Council of Economic Advisors (CEA), the agency responsible for the ERP, for a year).

Paper Bags Were Once a Luxury Item

We take too much for granted.

Don Boudreaux at Cafe Hayek explains why paper bags are no longer a luxury item, only affordable by the rich: "Bag the Politicians"

The Industrial Revolution made the world available to ordinary people. It was the poor who were it's greatest beneficiaries - a point that comes through in John Masefield's poem, "Cargoes.":
    Quinquireme of Nineveh from distant Ophir
    Rowing home to have in sunny Palestine,
    With a cargo of ivory,
    And apes and peacocks,
    Sandalwood, cedarwood, and sweet white wine.

    Stately Spanish galleon coming from the Isthmus,
    Dipping through the Tropics by he palm-green shores,
    With a cargo of diamonds
    Emeralds, amethests,
    Topazes, and cinnamon, and gold moidores.

    Dirty British coaster with a salt-caked smoke-stack
    Butting through the Channel in the mad March days,
    With a cargo of Tyne coal,
    Road-rail, pig-lead,
    Firewood, iron-ware, and cheap tin trays."
The dirty British coaster may lack the romance of the stately Spanish galleon, but the "cheap tin trays" it carries signal the good life for ordinary people. The first two ships aren't working for them.

By the way, George Soule has a nice short essay on the poem here, "John Masefield's 'Cargoes'" , with a somewhat different take on Masefield's intent.

Revised 2-24-05

How Renato Ruggiero Became the First Director General of the WTO

This year's race for Director General (DG) of the World Trade Organization (WTO) is the third in the WTO's history. Both of the other competitions were contentious.

The General Agreement on Tariffs and Trade (GATT), the predecessor to the WTO, lasted from 1948 to 1994, and had four Directors General (DsG). From the retirement of the first GATT DG in 1968, DsG were chosen by consensus.

From 1968 to 1993, the position was filled by civil servants. Following an "informal understanding," these were "chosen from a smaller industrialized country" and the deputy director general positions were divided "between the United States and the developing countries..."(page 55; page references refer to the Kahler paper on which this post is based - see below)

Things began to change in 1993, when Peter Sutherland, of Ireland, was chosen as the last GATT DG. Sutherland had been a commissioner to the European Community, and thus had a somewhat higher political profile than previous DsG. In another change from the past, candidates from developing countries emerged to contest the selection. (pages 55-56)

The agreements establishing the WTO were signed in April 1994, and came into force in January 1995. The selection process for the first WTO DG began shortly after the agreements were signed, with nominations made during June 1994. The four nominees were Renato Ruggiero, an Italian diplomat and former Foreign Trade Minister, Rubens Ricupero, the Brazilian Finance Minister, and a former ambassador to the GATT, Carlos Salinas de Gortari, President of Mexico, and Kim Chul-su, South Korea's Trade Minister. (page 56)

During the first part of the WTO race, a parallel contest was going on for the leadership of the Organization for Economic Cooperation and Development (OECD). This race was resolved in the fall, when one candidate was given an 18-month term, to be followed by another candidate who was given a full five year term. The parallel OECD-WTO races led to proposals for tradeoffs between them. The failure of the OECD to reach a decision, and the resort to a term-sharing compromise, were repeated by the WTO in the spring of 1995. (pages 57-59)

Ricupero's candidacy ended first; he had to leave the race in September, "after admitting that he had massaged official economic statistics in Brazil to enhance his party's electoral fortunes." (56)

Regional blocs formed around the remaining three WTO candidates. The EU endorsed Ruggiero in September, while the US endorsed Salinas de Gortari and Japan backed Kim, in October. (page 56-57) As of October, the race among the remaining candidates was close. A first round of consultations that month found the member countries fairly evenly divided among the three candidates. (page 60)

The Salinas de Gortari candidacy was badly damaged when the Mexican financial crisis broke in 1994. Where the three candidates been neck and neck in the fall, by February Ruggiero had pulled far ahead of both of the others (page 60). Salinas' candidacy died when he withdrew on March 1, 1995, the day after his brother was arrested for murder. (pages 60-61)

Salinas’ withdrawal left Ruggiero and Kim. The campaign dragged out for another two weeks, as U.S. internal indecision apparently prevented it from choosing between the two. The US Trade Representative, Mickey Kantor, was strongly opposed to Ruggiero, although other officials were not (pages 60-61).

In mid to late March, a series of compromises ended the contest. The U.S. accepted Ruggiero, but he was given a four-year, rather than a six-year, term; Sutherland, who had already agreed to one extension of his term, agreed to stay on until the end of April; a new DDG position was created for Kim (page 61). This set of compromises was controversial:
    "This open trade of a senior WTO position for crucial political support outraged some member states. The side agreement violated WTO rules, which stipulated that the creation of a new position first required consultation with the membership. African governments were particularly offended, since they had offered crucial support to Ruggiero, and they believed themselves underrepresented in Geneva. They immediately began to press for the creation of a fifth DDG position."(page 61)
This post is an abstract of a short history of the race by Miles Kahler, from pages 55-62 of his book Leadership Selection in the Major Multilaterals.

As Kahler tells the story, this selection process was marked by a continuation of the shift towards political and away from civil service candidates, begun with Sutherland. It was also marked by heightened competition, increased competition from developing country candidates, an inability to meet the deadline for concluding the process, regional coalitions between candidates, frustrated developing countries, violation of WTO rules, and the promise of a DDG position to obtain support. Regional loyalties appear to have been more important than candidate policy positions.

How Much Can College Economics Professors Make?

Phil Miller, at the blog Market Power, posts some generous extracts from a Wall Street Journal article on academic economists: "The Market for Academic Economists"

I became an economist because I thought people who spent all their time thinking about money would inevitably get a lot of it. Apparently I don't spend as much time thinking about it as these guys:
    "The scramble for talent has driven up salaries. According to the Bureau of Labor Statistics, salaries for economics teachers, a category that includes professors, averaged nearly $140,000 a year -- based on a 52-week year -- in 2003, making it one of the highest-paid professions that the government tracks. But at the elite colleges, economics professors can earn substantially more, with some senior faculty commanding $150,000 to $250,000 for nine months' work. Other forms of compensation such as housing subsidies and signing bonuses can be used to bolster pay packages. Superstars, such as Nobel Prize winners, can earn in excess of $300,000."

Tulsa, May 31, 1921

Brad DeLong provides extracts from a Financial Times column on the Tulsa Race Riot of 1921: "The 1921 Tulsa Riot". Here are some more:

    "Historians call the firestorm that convulsed Tulsa from the evening of May 31 into the afternoon of June 1 the single worst event in the history of American race relations...

    ...In 1921, a leafy neighbourhood sprawled here
    [North Tulsa - Ben]. Back then it was called Greenwood, and it was a black neighbourhood as affluent as any in America. Its small but thriving business district was dubbed "black Wall Street". Greenwood, as Clark and other survivors remember it, was a city within a city. "We had it all," he says, "Shops, schools, movie theatres, doctors, lawyers, newspapers -you name it."

    Sixteen years earlier a vast petroleum field had been discovered nearby, and by 1921 Tulsa had become known as "the oil capital of the world". The town was awash in oil dollars, and the ascendant class of oilmen and their families needed more than domestics - they needed a service sector. Greenwood bloomed... as many as 10,000 blacks enjoyed the quiet and prosperity on the western edge of the Ozark Mountains. But Greenwood posed a challenge. "The old order would not stand much longer," wrote legal scholar Alfred Brophy in Reconstructing the Dreamland, the most recent of more than half a dozen books on the riot. "It was a culture that would not easily abide unequal treatment."

    The riot began, as the battles in America's race wars often seem to, with an allegation of sexual assault. On the warm afternoon of Memorial Day, May 30, 1921, in the Drexel Building that still stands downtown, a 19-year-old black shoeshine boy named Dick Rowland had gone to the "coloured" men's toilets on the top floor. Sarah Page, a 17-year-old white girl - an orphan, Tulsans were soon told, working her way through college - ran the elevator. What transpired between the two remains a mystery, but whether Rowland tripped, or grabbed Page's hand, or never even touched her, the girl screamed. It was enough. By the following afternoon, a front- page headline in the Tulsa Tribune, trusted daily of the town's white citizens, exhorted: "Nab Negro for Attacking Girl in Elevator". Rowland, the Tribune cried, had attacked Page. The spectre of rape raised, the lynching calls ensued.

    At the courthouse downtown where Rowland was being held, a white mob squared off against armed black men. Veterans of the first world war, they had come from Greenwood to stave off a lynching. Shots broke out and mayhem ensued. Officers of the Tulsa police and county sheriff's department sided with the whites, hastily deputising hundreds and handing out weapons. National Guard troops were called in from neighbouring towns, arriving in trucks mounted with machine-guns. The guardsmen not only abetted the violence, but disarmed and rounded up hundreds of black defenders of Greenwood. As the whites fired at will, local biplanes circled above, scouting for blacks and - according to some reports - dropping incendiary explosives.

    When martial law finally brought quiet, 35 blocks of Tulsa's north side - with 1,256 houses and 23 churches - had burned to the ground. Hundreds of homes and shops had been looted. Black men had been shot, burned and dragged through the streets...

    ...The true death toll will never be known. The confirmed count stopped at 39, but a Red Cross tally at the time ran as high as 300 dead - most of them black.

    In the riot's aftermath, an all-white grand jury affirmed that "there was no mob spirit among the whites, no talk of lynching and no arms". No participant in the riot was ever tried for a felony crime."
The longer article in the Financial Times is concerned with the reparations movement in the US. DeLong was tipped off by a post at Crooked Timber.

You Win the WTO DG Race. What Do You Do First?

Once you’ve been chosen Director General (DG) of the World Trade Organization (WTO), what do you do?

Mike Moore, a former new Zealand Trade Minister and Prime Minister, was selected as Director General of the WTO in late-July 1999. His term began on September 1. An important meeting of member nation trade ministers was scheduled for Seattle, November 30 to December 3.

Moore looked back in his 2003 book, A World Without Walls . He didn’t look systematically at the steps involved in taking up the DG responsibilities, that wasn't the purpose of the book. But, he did describe some of them.

It's not dramatic, but you have to wrap up your personal business, and move to Geneva. In Moore’s case, as a New Zealand legislator and a Labour party loyalist, there were special considerations:
    “My duty was clear: ensure my local party had a good choice of candidates because the seat was not safe for a newcomer ... I gave my last speech in Parliament and to the party caucus…

    I left Parliament and New Zealand, ensuring my resignation was timed so I didn’t double-dip salaries and that there wouldn’t be a by-election just before a general election, which could have made my replacement vulnerable. As usual, I left Yvonne with all the problems of shifting base and trying to sell our home…

    I arrived in Geneva a week before my contract started, stayed in a local hotel, and began to try and put things together for the WTO’s now notorious Ministerial at Seattle in November 1999..."
    (pages 95-96)
Moving may have been complicated for Moore, although he doesn’t say so, to the extent that his family’s savings had been depleted in the selection contest: “My wife Yvonne and I had spent our modest savings.” (page 95)

Moore was selected for Director General in an acrimonious selection process. In fact, the WTO failed to reach a clear-cut decision, and the six year term was divided equally between Moore and the former Deputy Prime Minister and Commerce Minister of Thailand, Supachai Panitchpakdi. Moore got the first three years.

Miles Kahler describes the 1999 selection process on pages 62 to 72 of his book, ”Leadership Selection in the Major Multilaterals” (this is available for reading on the Web; go to the chapter titled "Diagnosis: Selection At the World Trade Organization).

The divisive selection process created a need to engage the other side; the three year terms created an ambiguity about Moore’s status that needed to be resolved:
    ”My first step was to try and reach out to those who were my opponents. On the first day I rang the Thai Ambassador, suggesting an early meeting. He refused to meet me until the following week when I was formally the Director-General (DG). I told him: ‘Fine, I will be able to fit you in, in a month’s time.’ He compromised, but said he wouldn’t meet me in the DG’s office. I agreed, but had to refuse his suggestion that I have a photograph taken with Supachai on my first day. There can be, I explained, only one DG at a time and I would be professional and ensure the transition, three years later, was clean, clear and proper; a duty I believed I carried out correctly and professionally.”(96)
The next rung down from the Director-General are four Deputies. Selection involves identifying the people with appropriate skill sets, looking for geographical balance, and accounting for commitments made during the bargaining process for the DG.

Kahler suggests that these commitments loomed large in the 1998-99 selection process for Deputy Directors General ("It seemed hardly accidental that the four deputy directors general appointed by Moore in November 1999 represented key parts of his coalition...The large emerging-markets that had formed the core of the Supachai coalition were notably missing..." (page 72)).
    "Selecting my Deputy Directors-General (DDGs) was a revelation. Dozens of ambassadors wanted to press their candidates on me, which is fair enough, but exceedingly time consuming. How can you say ‘No’ to thirty ambassadors, many of whom say they have been instructed by their Presidents and Ministers to make a submission and push their favorite.

    I was determined to have a balance and ensure that Africa had its first DDG. I think I selected a good team, with complementary skills and experiences. Andy Stoler from the USA was a tough, professional public servant, who got the most difficult work. He was to be the Minister of Finance. Every organisation needs a dedicated bastard, I told Andy, and that was his job. He also has a strong social conscience, which he diplomatically keeps well hidden. Paul-Henri Ravier is a classic French bureaucrat, in the best sense of the word, whose memos are masterpieces. I asked him to write me one-page notes, as though I was fourteen – he responded with missives that would have got through to a ten-year old. He intimately understood the myriad details that escaped me. Miguel Rodriguez Mendoza, a former Minister of State and President of the Institute of Foreign Trade for Venezuela, was a technocrat who knew the subjects and had mastered the minutiae. And Ablassé Ouedraogo, a former Foreign Minister of Burkino Faso, had excellent contacts throughout Africa and access to the development agencies.

    This proved invaluable in building coalitions and budgets, especially as I began to refocus the WTO to emphasise the Development Agenda.

    Unfortunately, I didn’t have time to bring the DDGs on board ahead of the Seattle conference. They had never met as a group until we assembled in the USA, and I was unable to lean on their strengths beforehand...”
And then you have to learn the organizational culture, and what opportunities you have adapt the organization to your working habits and needs:
    ”Reforming multilateral agencies is much easier said than done, as I quickly discovered when I took up office. Here are some examples. When I arrived in Geneva, I wanted to have my four DDGs close by, on the same floor. I wanted to be able to drop in to their offices to seek advice. I’m used to a cabinet system and enjoy and benefit from a collective input. My DDGs had the skills, experience, knowledge and mastery of complicated details that I did not have at the time. A simple proposition, I thought. What I learnt was instructive of the manner in which the WTO and international institutions operate.

    The problem, I was solemnly advised, was that Andy Stoler, the US DDG, had a four-window office. If the others were to join us on our floor, they would have to suffer smaller, three-window offices. Given my New Zealand experience, where protocol doesn’t exist, I couldn’t take this advice seriously. Easy, I replied, let’s paint over one of Andy’s windows.

    Staff scolded me, saying this was a very important issue; I wasn’t taking this ‘problem’ seriously. It was pointed out that at another major institution in Geneva, a similar problem emerged with one DDG having a toilet and shower, a profound privilege that other DDGs in that organization didn’t share. ‘Don’t tell me,” I replied. ‘They bricked out the toilet and shower to make than all equal!’ ‘Yes,' came the reply.

    Then divisional staff responsible to DDGs lobbied, suggesting that they needed to be close to their respective DDGs, whom I, in vain, wanted to rename Executive Deputies, with Divisional Directors becoming Divisional Managers. Another clash of cultures. I lost. Round One to the bureaucrats and the system...
    (pages 116-117)
In Moore’s case, the opportunity to make changes was severely constrained by the need to prepare for a meeting of member-state trade ministers in Seattle – scheduled to begin on November 30 – about 12 weeks after his term began. Perhaps this is also a reference to the work necessary for the Doha meeting in Qatar as well.
    ”In the end, I simply didn’t have the time or resources to overcome bureaucratic resistance, while also trying to get the new Round launched…”(page 118)
The Seattle meetings were meant to lay the groundwork for, and initiate, a new round of trade negotiations. As it happened, pre-meeting planning and groundwork were not done very well, and the negotiations failed.

The planning failed, in part, because of the length and controversy of the 1998-1999 DG selection process. That process was originally expected to produce a selection in November 1998, to fill a position that would become open on May 1, 1999. As noted above, the process only ended in late July 1999. The previous DG, Renato Ruggiero had left when his term ended on April 30, 1999. So, from May 1 to September 1 the DG position was not filled. Then Moore only had 12 weeks to pull things together.

Sources: Moore, Mike. A World Without Walls. Cambridge University Press. 2003; Kahler, Miles. Leadership Selection in the Major Multilaterals. Institute for International Economics. 2001.

The NGOs' New Influence

On January 26, the candidates for WTO Director General made presentations to the General Council of the WTO. Afterwards, three of them participated in a question and answer "public hearing" with a variety of NGOs. (here are the meeting minutes)

Evelyn Iritani, writing in the L.A. Times about the new influence of NGOs, treats this public hearing as exhibit one in her case: From the Streets to the Inner Sanctum (registration required).
    "Unhappy over the World Trade Organization's refusal to discuss contentious labor issues at its 1999 meeting in Seattle, activist Mike Waghorne joined tens of thousands of protesters on the streets. The demonstrations, which turned violent, sparked anti-globalization protests around the world.

    Nearly six years later, Waghorne is still unhappy with the Geneva-based trade group. But now he can voice his displeasure from a much more comfortable perch.

    Waghorne was among 70 outsiders given the chance to grill three candidates last month for the position of WTO director general. It marked the first time in the organization's 10-year history that activists were allowed to have input in the selection process, an event that Waghorne, an officer with labor coalition Public Services International, described as "civil" and a far cry from the fireworks he had expected.

    Once relegated to the streets and hallways, social and environmental activists like Waghorne are finding these days that businesses and trade officials are receptive to their concerns. Activists are prompting changes in corporate practices or trade policy, in some cases partnering with their former targets. Representatives of Amnesty International and other groups were even invited into the proceedings of the World Economic Forum last month in Davos, Switzerland..."

Amazed by 19th Century Progress

I'm often startled to think how far technology has come in the lifetimes of people I've known. People felt the same way in the industrial revolution of the 19th Century.

According to John Steele Gordon, young George Templeton Strong was impressed with technological change to 1839 :
    "...the railroads simply thrilled the people of the day, who sensed immediately that they were in a new era, one beyond the comprehension of earlier times. "It's a great sight to see a large train get underway," nineteen-year-old George Templeton Strong wrote in his diary in 1839. "I know of nothing that would more strongly impress our great-great grandfathers with an idea of their descendent's progress in science...Just imagine such a concern rushing unexpectedly by a stranger to the invention on a dark night, whizzing and rattling and panting, with its fiery furnace gleaming in front, its chimney vomiting fiery smoke above, and its long train of cars rushing along behind like the body and tail of a gigantic dragon - or like the devil himself - and all darting forward at the rate of twenty miles an hour, Whew!"
Strong wants to show Ben Franklin a railroad train; I'd like to have him with me as my plane descends into Seattle on a clear day. He can have the window seat.

Philip Hone had more reservations about technological change:
    "But it also induced a sense of misgiving and unease, especially in the older generation. By 1844 Philip Hone, forty years older than Strong, wrote, "This world is going too fast. Improvements, politics, reform, religion - all fly. Railroads, steamers, packets, race against time and beat it hollow...Oh, for the good old days of heavy post coaches and speed at the rate of six miles an hour!" "
(John Steele Gordon, An Empire of Wealth, 2004. Page 151)

Lower Manhattan, Dusk, September 4, 1882

Can you imagine watching the lights come on?

    "Edison's other unsung invention was the electric power system by which his lightbulb could be lit. Once the lightbulb was a working invention, he set about to build a generating plant and lay electric lines in a one-square-mile of the Manhattan business district. In 1880 he secured from the city the right to "lay tubes, wires, conductors and insulation, and to erect lamp-posts within the lines of the streets and avenues, parks and public places of the City of New York, for conveying and using electricity or electrical currents for purposes of illumination."

    Edison build the world's first power plant on Pearl Street and installed six of the largest dynamos yet built, weighing thirty tons each. Working at night so as not to make New York City's traffic any worse than it already was, he dug trenches for his electric mains, which totaled fifteen miles in length, and sent out crews to wire up houses and stores whose owners were willing to sign up for the new service.

    As with any new techology, Edison had to devise solutions on the fly to endless problems that had not been thought of until they arose. One problem was that if there was a leakage of current under the pavement, horses would conduct it through their shoes and panic. many of Edison's on-the-fly solutions were patentable, and he applied for no fewer than 102 patents in 1882, the most in any one year, as he was building his system.

    Finally, at 3 PM on September 4, 1882, Edison, standing in J.P. Morgan's office, closed the circuit, and 106 lamps came on in the offices of Drexel, Morgan and Company. More came on at the New York Times, which had also signed up as an Edison customer, and in shops along Fulton Street. They didn't make much impression in daylight, But by that evening it was obvious that something important had happened. The next day the New York Herald reported that "in stores and business places throughout the lower quarters of the city there was a strange glow last night. The dim flicker of gas, often subdued and debilitated by grim and uncleanly globes, was supplanted by a steady glare, bright and mellow, which illuminated interiors and shone through windows fixed and unwavering."
(From Gordon's An Empire of Wealth, 2004, pages 302-303).

Earth-shaking events should be noisy and dramatic. Here, the sun just set quietly, and the lighting just gradually became more noticable.

19th Century IT

Remember computer punch cards? John Steele Gordon describes their origins:
    "As governments and businesses grew in size and came to rely on ever more statistics, the need to speed up the processing of data became acute. The 1880 United States census, tabulated by hand, required seven years of mind-numbing work to complete. To help with the next census, a young mining engineer and statistician named Herman Hollerith devised a solution based in part on the eighteenth-century Jacquard loom, which had allowed the machine weaving of complicated cloth patterns. Hollerith's device used punch cards with holes. When a needle pass through a hole, it completed an electrical circuit by dipping into a tiny cup of mercury, and a counter clicked upward.

    Hollerith's device was able to tabulate the data on puch cards at the rate of a thousand cards an hour, and the sixty-two million cards generated by the 1890 census were processed in only six months. (Ironically, a fire in 1921 destroyed the database of the 1890 census, and while the totals are known, almost all the individual data are lost.) Hollerith formed a company that merged with two other companies and in 1924 changed its name to the International Business Machine Corporation, IBM for short."
(Gordon, An Empire of Wealth, his new popular economic history of the U.S., pages 406-407). For more details on the history of this technology try Douglas Jones' web page, "Punched Cards" , or Mark Howell's page, "High Tech in the '90s - The 1890 Census ".

Add this to other parts of the 19th Century IT revolution, on which I posted, here: "The IT Revolution (the 19th Century IT Revolution)"

Amateur Astronomers Lose an Old Friend

Kodak's slide projector falls victim to technological change. In among the obituaries, in the March issue of Sky & Telescope, Edwin Aguirre writes:
    "There has been another death in the Eastman Kodak family. Only months after announcing that the company...would cease production of its popular black-and-white astrophotography film...Kodak rolled the last of its 35-millimeter slide projectors off the assembly line on October 22nd. The end had been expected since September 2003, when the company announced that it would stop making and selling projectors due to declining sales.

    During its heyday from the 1960s to the 1980s, it was the principal means for amateurs to share their astrophotos and give lectures at club meetings, conventions, public star parties, and planetarium shows. This was before digital imaging, personal Web sites, and Microsoft's PowerPoint software gained widespread popularity. The venerable projector just couldn't keep up with the rapidly evolving, computer-driven multimedia technology. However, Kodak says that it will "continue to provide service and support for slide projectors through June 2011. It has no plans to "discontinue any color slide films at this time.

    Kodak debuted its slide projectors in the mid-1930s, and its innovative carousel-tray loading system introduced in the early 1960s made possible complex, multiprojector audiovisual presentations. The company estimates that is has sold around 15 million units worldwide during the projector's nearly seven-decade-long production run..."

Should Airlines be Required to Compensate Customers for Delays?

"If people are happy to carry the risk of cancellation in return for cheaper fares, why shouldn't they have that option?" (Dr. Eamonn Butler at the Adam Smith Institute Blog - "Compensation for air delays").

Bhagwati Separates WTO Critique Wheat and Chaff

Jagdish Bhagwati tries to separate the wheat from the chaff in the critiques of the WTO, in a Far Eastern Economic Review essay.

Dingel, at Exploit the Worker, links to, abstracts from, and critiques the article: "New Bhagwati Article: WTO Is Off Track".

The Company Store Wasn't So Bad

Joshua Hall reports on research by Price Fishback, over at Division of Labour: "Did Miners 'Owe Their Souls To The Company Store?' "

Blustein's Book Reviewed

Allen Beattie reviews Paul Blustein's new book on the Argentine financial crisis (And the Money Kept Rolling In (and Out): Wall Street, the IMF, and the Bankrupting of Argentina ) in today's Financial Times: "The debt crisis that has taught lenders nothing" (subscription required)

The book gets a good review - it provides the "forensic examination" the Argentine crisis deserves; as "readable" as his book on the Asian crisis; "he reconstructs the riveting narrative"; provides more discussion of policy implications than the Asian book.

Among other take-aways - it wasn't a failure of the Washington consensus:
    "...the familiar criticism of the IMF's actions - that it capriciously imposed fundamentalist free-market policies on Argentina and abandoned it to chaos when they failed - is 180 degrees in the wrong direction. The IMF, wisely as it turned out, was initially suspicious of the dollar peg currency regime that Argentina adopted in 1991 and which proved the country's undoing. But the fund became impressed by the peg's early success in reducing inflation, entranced by Argentina's dynamic but ultimately dangerous finance minister Domingo Cavallo, and breathlessly enthusiastic about the (somewhat botched) privatisation and liberalisation programme of the 1990s.

    Accordingly, it suppressed its misgivings about Argentina's inability to balance its budget and its consequent need to borrow dollars from the global capital markets at ever-higher rates to back the dollar peg. Far from imposing the "Washington Consensus" (the first component of which, let us recall, is fiscal discipline) on Argentina, the IMF was fatally complicit in its violation. As the crisis deepened in 2000 and 2001, the fund was so keen to avoid blame for pulling the plug that it continued to lend until all hope was extinguished."
Bottom line:
    "The crisis was not primarily made in Washington. Blustein finds the real culprits in Buenos Aires and New York: the Argentines who peddled a falsely glowing vision of their country's economic renewal and the herd-like investors who believed the story or simply tracked the index of emerging debt."

The Making of the WTO Director-General, 2005, #2

This post updates a January 24 collection of links on the WTO Director-General (DG) selection process: "The Making of the WTO Director-General, 2005 ".

What does it matter

I didn't have this topic heading in January. I'll accumulate "so what" posts here. Why does free trade matter? Why does the WTO matter to free trade? Why does the DG matter to the WTO? What about the General Council Chair?

Here's a first installment - Pascal Lamy's articulate explanation of what the DG does: "What does the Director-General of the WTO do?".

How are Directors-General chosen?

This post links to the WTO DG selection rules, and to a newspaper article providing a summary description of the process: "The Rules for Choosing a Director-General of the WTO".

Miles Kahler critiques the methods used to choose leaders at the World Bank, IMF, and the WTO in the Institute for International Economics book, Leadership Selection in the Major Multilaterals. The chapters can be read (but cannot be downloaded) online. I learned about this from Daniel Drezner.

A Claude Barfield Financial Times column, arguing that a WTO DG should have considerable political stature, at the former head-of-state level, was the subject of this post: "What Should We Look For In a WTO DG?".

Early Maneuvering

Nominations had to be made by December 31. But the race began before then. Who might have been in? Why did some drop out while other stayed in?

Early on, Jagdish Bhagwati suggested, in the Jan/Feb 2004 Foreign Affairs, that the South African Trade Minister Alex Erwin was considered a leading contender. Bhagwati's article was titled : "Don't Cry for Cancún". "...Alec Erwin, South Africa's trade minister and a favorite to become the next director-general of the WTO..." This was quickly denied.

A lot of people thought about running for DG: "People who might have run for WTO Director-General, but did not". In October, Brazilian and Uruguayan representatives met in Montevideo, without reaching joint agreement on a Latin American candidate: "Why are there two Latin Americans in the WTO race?". In December, Kenyan Trade Minister Mukhisa Kituyi almost entered the race: "There was another candidate".

And then there were four

When the sun came up on January 1, there were four candidates. Felipe Seixas Corrêa of Brazil, Carlos Pérez del Castillo of Uruguay, Pascal Lamy of France, and Jaya Krishna Cuttaree of Mauritius. Who are these men? What strengths and weaknesses do they bring to this office?

This Jan 2 survey post linked to pages with biographical information on each candidate: "Race for WTO Director-General". The Economist also surveyed the four candidates on January 7: "The Race for WTO Director-General".

Here is a report of an interview with Mauritius Foreign Minister Jayakrishna Cuttaree: "Jayakrishna Cuttaree". Here is a post on a Financial Times column that discussed Pascal Lamy: "The pros and cons of Pascal Lamy".

Alan Oxley, former Australian Ambassador to the GATT explains: "What's Wrong With Pascal Lamy". Peter Gallagher, an Australian trade consultant, discussed Pérez del Castillo and Lamy: "Advice on who to pick as the next WTO Director-General". Both Oxley's column and Gallagher's post offer much more.

Michael C. Boyer, James G. Forsyth, Jai Singh survey the four candidates, and their chances, in the February 2005 issue of Foreign Policy, "Who Gets to Run the WTO?". Very good. I learned about this from Daniel Drezner.

The race itself

How do you campaign to be Director-General of the WTO? Mike Moore, a former Prime Minister of New Zealand, was DG from 1999 to 2002. He described his race for DG in his 2003 book on the WTO, A World Without Walls. This post has an extract from the book, describing the race: "What's it like to run for WTO Director-General".

Mauritius sought support among the Indian diaspora for its candidate: "Cuttaree plays the ethnic card".

Uruguayan Pérez del Castillo traveled to Australia to meet with the trade minister there: "What will Australia do?”.

Brazilian Felipe Seixas Corrêa traveled to South Africa – another G-20 member: "The Brazilian visits South Africa". South African news reports suggested that South Africa was torn between its G-22 ties with Brazil and its connections with other African countries. This faced it with a choice, described in the post "Seixas Corrêa, or Cuttaree?".

The selection rules call for the presentation of the candidates to the General Council soon after the nominations end. In 2005, this presentation takes place on Wednesday, January 26: "This Wednesday’s WTO General Council meeting" and "The next step in the WTO race". A group of NGOs is taking advantage of the General Council meeting to schedule its own "public hearing" with the candidates on the evening of January 26: "Public Hearing for WTO Candidates". And another post: "Meet the WTO Candidates".

Once the presentations were completed, the texts were posted to the WTO website, and there was a spate of stories: "WTO DG Candidates Address the General Council". In a first, three of the candidates answered questions at an NGO sponsored "public hearing" on January 26. Here is a transcript: "Minutes of Civil Society Hearing for WTO Director-General Candidates".

Newsweek interviewed Pascal Lamy in late January: "Newsweek Interviews Pascal Lamy". Here is a February article on Lamy based on German sources: "Does Pascal Lamy have a good chance?".

In early February, the Australians came down in favor of Carlos Pérez del Castillo. Stories a few days before tied Australia's selection decision (which was said to be between Pérez del Castillo and EU candidate Lamy) to recent EU decisions on wheat subsidies "Which Candidate Will the Australian's Choose?"; "The Australians Opt for Pérez del Castillo".

This post links to a set of stories on Pérez del Castillo's claims about the division of Latin American support between himself and Seixas Corrêa: "Latins for Pérez del Castillo".

This post links to and quotes from an Indian column surveying the candidate-set from the Indian point-of-view: "An Indian View of the WTO-DG Candidates".

Cuttaree campaigns with a web site: "Jaya Krishna Cuttaree". I learned about this from Daniel Drezner.

The Choice

How was the selection ultimately made?

The Transition

What is involved in settling in to the office?

Last updated February 15, 2005; revised February 16

Dan Drezner WTO DG Post

Drezer takes time off from following the World Bank race, to post on the selection of the World Trade Organization Director-General: "Handicapping the race for the WTO leadership"

See especially the link to a Foreign Policy story on the strengths and weaknesses of the four candidates, and a link to Mauritian Foreign Minister Cuttaree's campaign web page.

For background on the political economy of this type of race, Drezner recommends Miles Kahler's Leadership Selection in the Major Multilaterals (Amazon link).

Revised February 16 to note that Kahler chapters cannot be downloaded)

This book is also available at the Institute for International Economics website, where the chapters can be read (but not downloaded) individually: Leadership Selection in the Major Multilaterals. Kahler has chapters on leadership selection at the World Bank and IMF, and at the WTO. Looks good.

Alexander Hamilton

Adapting Tom Lehrer's rueful joke comparing himself to Mozart: "By the time Alexander Hamilton was my age, he had been dead for four years." Among other things, during his 49 years, Hamilton:
  • was a key aide to General Washington from 1777 to 1781
  • led a crucial bayonet attack on a key British redoubt at Yorktown
  • built up a leading law practice in post-revolutionary New York
  • was a New York commissioner to the Annapolis conference (which laid the groundwork for the constitutional convention)
  • was a delegate to the Philadelphia Constitutional Convention in 1787
  • wrote most of the Federalist Papers
  • led an uphill fight for ratification of the Constitution by New York State
  • served as the first Treasury Secretary of the United States from 1789 to 1795
  • established the Customs Service
  • established the Revenue Cutter Service (later the U.S. Coast Guard)
  • maintained a system of U.S. lighthouses and navigational aids
  • wrote many important state papers, including Report on the Public Credit, Report on a National Bank, Report on the Subject of Manufactures, and the Opinion on the Consitutionality of a National Bank (and played a crucial role in drafting Washington's Farewell Address)
  • arranged for funding the national debt
  • arranged for the federal assumption of the state debts
  • established the first bank of the United States
  • drove James Madison and Thomas Jefferson, and their minions, nuts
  • provoked and suppressed the Wiskey Rebellion
  • was the subject of the first important U.S. sex scandal
  • had the good sense to fall in love with and marry Elizabeth Schuyler
  • helped raise their eight children
The public accomplishments I've described all came in the 19 years between 1777 and 1795. He left the Treasury in 1795,when he was only about 40.

It's all in Ron Chernow's excellent book, Alexander Hamilton. Chernow's book is reviewed by blogger Pejman Yousefzadeh, here: "Book Review--Alexander Hamilton .

You may also be interested in the Library of America volume on Hamilton: Hamilton. Writings.

What Should We Look For In a WTO DG?

Claude Barfield thinks that the four candidates for Director-General (DG) of the World Trade Organization (WTO) are all "distinguished and able diplomats and negotiators." He doesn't think they have the requisite stature to advance the world trade agenda. A different type of candidate is needed, he argues in today's Financial Times : "Cause of world trade demands a powerful patron" . (subscription required)

Diplomats were Ok in a simpler time, when the world's trade rules were negotiated among a small group of developed countries, the rules did not interact as closely with domestic "financial and telecommunications regulations, intellectual property rules, health and safety measures, taxation and the environment" concerns, and did not attract the attention of such a wide range of interest groups.

Barfield thinks the world needs a stronger DG position, filled with candidates with more political (rather than technical) credibility. Following the political scientists Robert Keohane and Joseph Nye, he'd like to see "...effective politicians linking organisations to constituencies" chosen for the DG position.

What sort of a person would fill the bill:
    "If the director-general is to be granted increased authority and stature, the bar must be set higher in terms of personal background and qualifications. The ideal candidate would be a current or former elected head of state, from at least a mid-sized developing democracy. There is such a candidate waiting in the wings - Ernesto Zedillo, the former president of Mexico. In addition to expertise in trade matters, Mr Zedillo's political credentials are impeccable: he guided Mexico through the difficult economic debacle that he inherited from his predecessor without reverting to traditional protectionism. More important, he presided over the first successful transfer of democratic authority to an opposition party.

    If one wanted truly to jolt the system, there is Bill Clinton. Whatever the judgment of his US presidency overall, he has proved to be a defender of free trade, even against the dominant trends in his own party, and he retains a towering respect and influence in international circles, particularly among developing countries..."

The Hurricane Economics Posts Are Starting

We're still about three and a half months from the (Atlantic) hurricane season. This runs from June 1 through November 30. But the hurricane economics posts have started already.

This one, from Steve Verdon at Outside the Beltway is on a topic I hadn't seen before: "Hurricanes and Distributed Generation" .

Should the U.S. leave the WTO?

Here's another potential bump in the road to the meeting of WTO trade ministers in Hong Kong this December, and the completion of the Doha Round of trade negotiations in 2006:

Jeffrey Schott, in his essay, "Confronting Current Challenges to U.S. Trade Policy" writes that this year, Congress
    "...will likely be required to take another trade vote on a resolution to withdraw from the WTO. Section 125 of the Uruguay Round Agreements Act of 1994 requires the president to report to Congress every five years on the costs and benefits of US participation in the WTO. After receipt of the president's report, both houses of Congress have 90 days to vote on a joint resolution calling for the withdrawal of US membership in the world trade body. If adopted, the withdrawal resolution is subject to presidential veto, in which case Congress has an additional 15 days to override the veto. The first WTO withdrawl vote took place in June 2000; the withdrawal resolution was rejected by a vote of 35 to 0 by the House Ways and Means Committee, and by 363 to 56 by the full House...
    The timing of the vote will depend on when the president issues his report on US participation in the WTO. Since the second five-year period ends on December 31, 2004, the report presumably should be presented in early 2005 after the new Congress convenes, with the prospective vote on the withdraw resolution in late spring..."
Schott speculates that a vote "could be more contested" this year. In part, he says, because of the publicity given to a series of trade cases the US has before the WTO. Actually, our record before the WTO hasn't been all that bad. Schott has a nice table (8.2) summarizing the US record in WTO dispute resolution cases. From 1995 to 2004 we appeared as a complaintant in 71 cases, of the 48 that have been won or lost, we won, or won on core issues (according to the USTR), in 44; we lost four. The US appeared as a respondent in 72 cases. Of the 49 that have been decided, we won, or won on core issues, in 24; we lost in 25.

It is hard to imagine that Congress would take us out of the WTO. It is easier to see opportunities for grandstanding and posturing, and Schott suggests the potential for the diversion of USTR office energy and time from Doha negotiations to servicing a Congressional debate. Schott also notes "defeating the resolution also could be costly if it requires acceptance of new negotiating constraints or other types of political side payments."

Schott's essay appears in a new book from the Institute for International Economics (edited by Fred Bergsten), The United States and the World Economy: Foreign Economic Policy for the Next Decade . It looks like all the essays can be read online, but they can't be printed out or copied. This post is also based on the Schott essay: "Renewal of the Trade Act of 2002".

The French Army in WWI

I learned about this archive of color photos of WWI French troops from Abiola Lapite: Colour World War I Photos

Renewal of the Trade Act of 2002

The US Trade Representative is currently negotiating the Doha Round trade agreements under the "fast track" provisions of the Trade Act (TPA) of 2002. Actually "fast track" is an earlier term; the term preferred since 2002 is "trade promotion authority" or TPA.

The fast track provisions are considered crucial to a successful negotiation. This Congressional Research Service issue brief from 2002 gives some background on "fast track": "Trade Promotion Authority (Fast-Track Authority for Trade Agreements): Background and Developments in the 107th Congress".

Under the "fast track" or TPA provisions,
    "...Congress agrees to consider legislation to implement the trade agreements (usually nontariff trade agreements) under a procedure with mandatory deadlines, no amendment, and limited debate. The President is required to consult with congressional committees during negotiation and notify Congress at major stages."
The TPA was not easy to get. While Bush succeeded in 2002, President Clinton failed in 1998.

Under the Trade Act of 2002, Congress will have to renew the President's negotiating authority in the first half of this year.

Jeffrey Schott writes about TPA renewal in his essay "Confronting Current Challenges to US Trade Policy" . This can be found in the new Institute for International Economics book "The United States and the World Economy: Foreign Economic Policy for the Next Decade", edited by Fred Bergsten. Here is Schott's discussion of the extension issue:
    "Securing the extension of TPA is the highest priority. [of several pieces of upcoming trade-related legislation Schott discusses - Ben] The Trade Act of 2002, as amended, provided for a two-year extension of the negotiating authority beyond its expiry on June 30, 2005 - if the president requests it by April 1, 2005, and neither house of Congress disapproves before July 1, 2005...Any member can request a vote to deny the extension of TPA, which could lead to a floor vote if reported out by one of the designated committees.

    The last time Congress was confronted with a vote to extend "fast-track" authority was in 1991. That debate focused on the use of fast-track procedures for the prospective negotiation of the NAFTA. Before the vote, congressional leaders demanded and received assurances from the administration that labor and environmental interests would be safeguarded in the NAFTA negotiations. The disapproval resolution was then defeated by 231 to 192 in the House and by 59 to 36 in the Senate...A similar debate could evolve in 2005 with TPA critics demanding either changes in existing provisions of the Central American Free Trade Agreement (CAFTA) or supplementary obligations added to the body of the agreement of labor and the environment, as a condition for extending TPA.

    While it would be extremely disruptive for Congress to revoke the administration's negotiating mandate in the midst of ongoing trade talks, it is entirely possible that Congress could add - through separate legislation - new conditions on the use of fast-track implementing procedures. Calls for product-specific exceptions from trade reforms, earmarked spending programs, and stricker trade enforcement provisions will likely flood the congressional debate on TPA extension.

    Could US trade policy operate effectively if TPA is not extended? Without TPA, trade initiatives would be implemented through regular legislative procedures. Several sectoral trade pacts plus China's protocol of accession to the WTO passed Congress in the second Clinton administration despite the fact that fast-track authority (renamed TPA in 2002) lapsed in 1994. The rub is that none of those deals required significant change in existing US laws, regulations, or levels of trade protection. Without TPA, other countries probably would be unwilling to commit to reforming their own politically sensitive trade restrictions. Why risk inflaming one's own political constituencies if there is a good chance that Congress will balk at reciprocal liberalization of US barriers, or demand that the negotiations be reopened? At best, US officials would be offered second-best deals; at worst, trade talks would collapse (or never engage), subjecting US negotiators to involuntary retirement."

A Neat Digital Clock

Robert Lawson, over at Divison of Labour has found a neat digital clock: "Hey pal, do you have the time?"

Are Your Blogging Libel Insurance Premiums Paid Up?

Eugene Volokh posts on blogging libel liability insurance over at the Volokh Conspiracy.

A useful activity with a bad name: asset stripping

Brian Micklethwait defends asset stripping at "Asset stripping is good"

I learned about this from the Adam Smith Institute Blog.

Are we exporting our polluting industries?

Have polluting industries from the U.S. migrated overseas to "pollution havens" in developing countries as trade barriers have fallen?

No say Josh Ederington, Arik Levinson, and Jenny Minier in an NBER working paper: Does the U.S. Outsource Polluting Industries?. As reported by Matthew Davis in the most recent NBER Digest:
    "Polluting industries' share of U.S. manufacturing output has declined in recent decades. That is good news for environmental quality in the United States. However, the fact that the decline has coincided with falling trade barriers has given rise to suspicions that the United States has outsourced its polluting industrial processes to developing countries. In Trade Liberalization and Pollution Havens (NBER Working Paper No. 10585), authors Josh Ederington, Arik Levinson, and Jenny Minier ultimately refute the notion that domestic manufacturing is cleaner today because trade agreements have allowed the United States to use "pollution havens" in the developing world to do its dirty work.

    "We find no evidence that domestic production of pollution-intensive goods in the U.S. is being replaced by imports from overseas," they state. On one hand, Ederington, Levinson, and Minier understand how the "casual observer" could see a link between lower tariffs and a cleaner U.S. manufacturing sector. After all, while U.S. manufacturing was growing by 51 percent -- even as total emissions of many pollutants were growing at half that rate or actually dropping -- U.S. tariffs were falling dramatically. Between 1978 and 1994, tariffs on manufactured products were reduced 50 percent on average. But if trade liberalization were simply allowing dirty industries to relocate offshore, then the proportion of U.S. imports produced by pollution-intensive industries would rise as tariffs fell. Yet the opposite occurred.

    Imports overall grew by 318 percent during the period. But according to World Bank data that characterizes industries by their pollution intensity, imports of goods manufactured in highly polluting processes grew at a much slower rate. In other words, just as the U.S. manufacturing sector was growing while simultaneously shifting toward clean industries, the same thing was happening to our imports: they were rising, but the percentage of goods coming from polluting industries was going down. "The cleaner U.S. manufacturing composition is not offset by dirtier imports," the authors write. "Rather, the composition of imports has also become cleaner."

    Importantly, their conclusion holds firm even when they limit the analysis to trade with developing countries. Imports from developing countries grew by 344 percent, but imports of pollution-intensive goods from developing countries grew much more slowly.

    Ederington, Levinson, and Minier believe that, if anything, lower tariffs might be actually slowing the U.S. shift to cleaner industries, because imports of goods made from pollution-intensive processes have not kept pace with the overall rise in imports. Thus, surprisingly, one potential environmental consequence of tariff reductions is that U.S. industries are dirtier than they otherwise would be..."

Japan's Complaint About U.S. "Zeroing"

Kyodo News reports that Japan has filed a complaint about U.S. anti-dumping rules with the WTO: "Japan asks WTO to set up panel on U.S. antidumping method"

"Dumping" occurs when a firm sells goods in a foreign country at prices below those in its home country. Many countries have rules that allow them to impose anti-dumping penalties on firms believed to be dumping. The WTO trade agreements set standards for anti-dumping rules in signatory countries. (WTO Anti-dumping gateway)

The Japanese think that U.S. use of "zeroing" violates the WTO standards. "Zeroing" is a method the U.S. uses when determining whether dumping has occurred, and how serious it has been.

Suppose a good is imported from a foreign country into the U.S. in several different varieties - large, medium, and small. To see if the good was being dumped, the U.S. and foreign prices for each variety would be compared. The percentage differences between the prices for each variety would be calculated and the results would be summarized with a weighted average of the three percentages (weighted by the import values). This percentage would be the aggregate dumping margin.

Unless one of the varieties was sold in the U.S. for more than it was sold in the home country.

In that case, the percent for that good would be set to zero before the weighted average was calculated. In other words, if some of the varieties were not dumped, the percentages for those that were not dumped would be ignored. The effect would be to increase the size of the dumping margin, and the likelihood that the firm would be found to be dumping.

Zeroing has been under fire for a while. WTO dispute and appeals reviews have ruled against E.U. zeroing, and U.S. zeroing. Dan Ikenson of the CATO Institute discusses the status of the WTO decisions as of last April: "Zeroing In: Antidumping’s Flawed Methodology under Fire".

Jay Kraemer and Mark Fajfar bring things up to late November 2004 in this memorandum from the law firm, Fried, Frank: "WTO Appellate Body Rules Against U.S. “Zeroing” in Anti-Dumping Calculations".

Kraemer and Fajfar point out that the the WTO is finding that zeroing
    " contrary to Article 2.4.2 of the Anti-Dumping Agreement, which requires that the dumping margin calculation include "all comparable...transactions." In essence, the...[WTO - Ben] found that by excluding non-dumped transactions from the calculation of the weighted average dumping margin...the U.S. method leads to the finding of dumping margings where none exist, or to the finding of higher dumping margins than actually occurred." (pages 1-2)
The Kraemer and Fajfar article is very interesting, summarizing the U.S. arguments. They note that, if the U.S. dropped the zeroing methodology, firms petitioning the Department of Commerce for anti-dumping penalties, would have to think very carefully about how they defined the products they wanted penalized for dumping:
    "If the U.S. petitioner frames the scope of the investigation too broadly, it faces the risk of too many transactions with a "negative dumping margin" - i.e., where the export price in the U.S. is higher than the normal value [that is, the "price" in the home country - Ben]." (pages 8-9)

An Indian View of the WTO-DG Candidates

The contest for the Director-General (DG) of the World Trade Organization (WTO) pits a candidate from a developed country (Pascal Lamy of France) against three candidates from developing countries (Jaya Krishna Cuttaree of Mauritius, Luiz Felipe de Seixas Corrêa of Brazil, and Carlos Pérez del Castillo of Uruguay)., an Indian news service, surveys the field from an Indian point of view: - National News Detail The author thinks India has a choice between Pascal Lamy of France, and Luiz Felipe de Seixas Corrêa of Brazil:
    "So far as Mr Cutaree of Mauritious is concerned, while India would like to support him, his winnability could be a tough call, sources said.

    As for Carlos Perez del Castillo of Uruguay is concerned, his track record as the Chairman of the General Council at the failed Fifth Ministerial Conference at Cancun did not impress the developing countries.

    Besides carrying the European clout, the French candidate could be considered useful to New Delhi since ''we are close to Europeans in our defensive interests in agriculture'', sources said.

    At the same time, Brazil and India have become major players among the G-20 countries' grouping which has left its own imprint in the multi-lateral negotiations in agriculture. Besides, Mr Seixas Correa's call that the next WTO chief should be from the developing countries could influence the Indian trade policy-makers...

    My Lamy's appeal soliciting support from the members is quite interesting. The former EU Trade Commissioner, could not hide his disappointment at the failure of the Cancun Meeting and had described the WTO-consensus building approach as ''medieval''.

    Agreeing that he had described the WTO as ''medieval'' organisation, Mr Lamy has now reminded himself of the need for following the consensrs approach. '' The WTO must be driven by the members of the organization, and the principle of consensus must continue to govern our deliberations'', he said.

    Besides, like other DG candidates, Mr Lamy stated that ''priority must be to re-balance the international trade system in favour of the developing countries''.

    The Brazilian makes an important point in his presentation for support. According to him, the WTO cannot be allowed to remain the closed-door club of the rich countries and the voice of the developing and developed countries has become too vocal to be ignored... According to him,consensus should result from inclusive and transparent procedures."

Latins for Pérez del Castillo

Carlos Pérez del Castillo, the Uruguayan candidate for Director-General of the WTO, claims the support of all the Latin American countries except Cuba, Venezuela, and Brazil. Brazil has its own candidate, Felipe de Seixas Corrêa.

These are the countries mentioned in this story, dated Feb 4: "Uruguay calls for single L.A.nominee to WTO head", and in this story, dated January 29: "Candidato uruguayo plantea "desafíos" para dirigir la OMC".

Does Pascal Lamy have a good chance?

Deutsche Welle carries a story by Rafael Heiling quoting various German WTO experts about Pascal Lamy's good chances for winning the WTO position. "Good Chances for France's Lamy at WTO" .

The article is very flattering about Lamy's qualifications. Aside from these, Georg Koopman of the Hamburg Institute of International Economics thinks he'll win because:
    "...he has backing from Europe, with 25 WTO members, and then he has a very good connection to the US, and to (US Trade Representative) Robert Zoellick," he said."

Monday's budget may propose farm subsidy cuts

Developed country agricultural subsidies are a big issue in the ongoing Doha Round of trade negotiations. These subsidies encourage developed country agricultural production, and increase the competition faced by agricultural sectors in developing countries.

The 2002 U.S. farm bill increased U.S. agricultural subsidies, and was seen as a step back from U.S. commitment to a freer trade regime.

This weekend the Financial Times is reporting that the new Administration budget, to be released Monday, may contain large reductions in funding for agricultural subsidies: "Bush's budget cut proposals anger farmers' lobby"

As the title notes, farm state legislators and lobbyists are unhappy. The article also discusses some of the implications for the Doha trade negotiations:
    "The proposed cuts are likely to please US trading partners that opposed the 2002 bill, and could signal that the US is eager, for budgetary reasons, to support deep cuts in farm subsidies as part of the Doha Round world trade negotiations.

    Paul Drazek, a consultant with DTB Associates in Washington, said farmers feared that “if we reduce subsidies now we would lose leverage in the Doha negotiations”.

    But he said it might have the opposite effect of encouraging other countries to reduce their subsidies by showing the US is willing to move on its own."

The Australians Opt for Pérez del Castillo reports that Australia will back Uruguayan Carlos Pérez del Castillo for World Trade Organization (WTO) Director-General: "WTO support for del Castillo"

The Australian National Farmers' Federation thinks the government made the right choice: "NFF backs del Castillo for WTO director-general".
    " "NFF president Peter Corish says the Uruguayan is a trade reformer, which would be a great benefit for farmers here.

    "We know Carlos Perez del Castillo very well.

    "We've had a lot to do with him over the past few years in trade negotiations; he went to university here in Australia, he knows Australian farming very well; he's actually married to an Australian, and he's one of the real leaders for trade reform on an international basis."

    But the main rival to Australia's choice as head of the WTO - current EU Trade Commissioner Pascal Lamy - is expected to receive strong support.

    Australia's former ambassador to the WTO Alan Oxley says Mr Lamy has done his best to stifle trade reform, and his election to the director-generalship would be a blow to farmers.

    "The director-general should be a free-trader: he's a French socialist.

    "You won't find anything written by him that indicates he's believer in free trade.

    "He's also been, on behalf of the European Community, the leading advocate of introducing into the WTO, what we call, non-trade concerns.

    "Finally: Lamy - he's a European, he would work for solutions that worked for Europe, and agriculture's so important: so it'd be a pretty bad result for Australia."" "

Why don't people walk up escalators?

Craig Newmark channels Steven Landsburg and Steve Margolis at Newmark's Door .

Call Centers: Good News for Africa

Abiola Lapite (Foreign Dispatches) has a good story from the New York Times on the outsourcing of call centers from developed to African countries: "Outsourcing Reaches Africa" . There's a lot of potential here, but Lapite sees the national telecommunications monopolies as a continuing barrier to increased activity.
    Part of the Times story: "...Kenya's regular phone lines are so abysmal that the founders of KenCall had to go through the cumbersome process of getting government approval to use a costly satellite hookup. Even more dollars were burned on an elaborate generator system aimed at keeping KenCall's computer screens running during Nairobi's frequent power failures..."

    Some of Lapite's commentary: "...Outsourcing has the potential to prove as great a boon to French and (particularly) English-speaking Africa as it has for India, if only the national carriers could be shoved out of the way. Unfortunately, the incentives in most sub-Saharan African countries are such that this is unlikely to happen in the near future without significant external pressure: why privatize a parastatal which is both a handy tool for ethnic patronage and a cash cow? If the likes of Gordon Brown and Jeffrey Sachs really wish to make a difference in Africa, I'd suggest they hold off on the calls for debt forgiveneness and start by cajoling the continent's rulers to open up their telecoms and electricity sectors to local and foreign competition."
I learned about this from "Want a Mortgage? Call Africa".

Summary of Paul Blustein's new book on the Argentine crisis

Here's the Publisher's Weekly summary of Paul Blustein's new book on the Argentine financial crisis, as copied from the Amazon web site (And the Money Kept Rolling In (and Out): Wall Street, the IMF, and the Bankrupting of Argentina ):
    "Argentina's economic boom in the 1990s made it a "poster-child" for the "Washington consensus" of market-oriented reform; when the currency, banking system, economy and a succession of governments all collapsed in 2001, the country became an object lesson in the pitfalls of that model. Journalist Blustein (The Chastening) offers a fine postmortem of the debacle, from a more centrist perspective than the subtitle might suggest. The problem, he contends, lay in Argentina's unsustainable government deficits and its policy of tying the currency to a rigid exchange rate of one peso to the dollar, a measure that ended hyperinflation, but, when the dollar soared, eventually priced Argentinean products out of the market. He criticizes the International Monetary Fund and Wall Street not for imposing austerity, but for indulgently lending Argentina vast sums, despite warning signs, that saddled it with debt and delayed a necessary devaluation and loan restructuring. Blustein's discussion of Argentina's free trade policies and their effects on industry and employment is skimpier than it should be. But working from a colorful inside account of the decision-making processes of the IMF and international investors, he does an admirable job of elucidating the complexities of international finance, currency reform and debt, taking note of their consequences for ordinary people. (Feb. 1) Copyright © Reed Business Information, a division of Reed Elsevier Inc. All rights reserved."

FY 2004 Byrd Amendment Payouts

Under the Byrd Amendment, revenues from anti-dumping tariffs are paid to the producers that filed the original anti-dumping petitions with the U.S. Department of Commerce.

Companies subject to anti-dumping penalities are hit twice - once by the original tariff, and again when their competitors get the income from the tariffs. Recall that there are already problems with the fairness of the anti-dumping laws in any event: "Friends of anti-dumping negotiations".

The WTO has ruled that the Byrd Amendment violates the trade agreements to which the U.S. has committed itself.

The Consuming Industries Trade Action Coalition (CITAC) reports on FY 2004 Byrd Amendment payouts, here: "Repeal The "Byrd Amendment".

Total disbursements under the law to date (FY 2001 to FY 2004) are just over $1 billion. Total disbursements in FY 2004 were about $284 million. Total FY 2004 disbursements to the Timken Company, a maker of bearings - about $53 million; total FY 2004 disbursements to the Lancaster Colony Corp, a maker of candles - about $26 million. The impact on industries using imports:
    "Many consuming industries rely on imports of raw materials or components to maintain global competitiveness. The Byrd Amendment provides a double hit on importers of products subject to antidumping and countervailing duties. They not only must pay these duties (which, because of the "retrospective" system of collection, are of uncertain amount) but also must see them transferred to their U.S. competitors. The Byrd Amendment encourages U.S. producers to file... actions knowing full well they will be eligible for monetary distributions. U.S. companies in line to receive these payments have a clear incentive to include more products within the scope of cases, including products not even made in the United States. Consumers see cases filed because of the promise of Byrd money (such as the infamous shrimp case). Other cases include within their scope products not produced here, such as certain antifriction bearings (e.g., certain metric sizes and metallurgical requirements); and steel wire rod for "cold-heading" and manufacture of wire for tire cord."
CITAC is an association of businesses that use imported goods in their production processes, and want to protect their access to foreign markets.

The CITAC web site has several other resources on the Byrd Amendment. The "Rushford Report" describes the case against the Amendment. Here is a Congressional Budget Office (CBO) report on the Byrd Amendment: "Economic Analysis of The Continued Dumping and Subsidy Offset Act of 2000". The CBO's bottom line?
    "The Continued Dumping and Subsidy Offset Act (CDSOA) of 2000 was enacted on October 28, 2000, as part of the appropriations act for Agriculture, Rural Development, Food and Drug Administration, and Related Agencies programs for the fiscal year ending September 30, 2001. CDSOA requires that the revenues from antidumping and countervailing duties on a given import be distributed on an annual basis to the domestic producers that were either petitioners or interested parties supporting the petition in the case that resulted in the duties being levied on that import. Under CDSOA, $231 million in duty revenues was distributed in 2001, $330 million in 2002, and $293 million in 2003.(1) The Congressional Budget Office (CBO) projects that distributions will total $3.85 billion from 2005 through 2014. On June 16, 2003, the World Trade Organization (WTO) Appellate Body agreed with the ruling of an earlier panel that CDSOA violates the WTO agreement by providing remedies for dumping and subsidies beyond those permitted by the agreement. The United States is therefore vulnerable to retaliation--the amount has not yet been determined--if it does not repeal or modify the law.

    In addition to the prospect of foreign retaliation against U.S. exports, the distributions mandated by CDSOA are detrimental to the overall economic welfare of the United States because (1) they encourage the filing of more antidumping and countervailing-duty cases, resulting in more duties that on balance harm the economy; (2) they subsidize the firms receiving them, preventing resources from flowing to higher-value activities in other firms and industries; and (3) they increase the private and public cost associated with the operation and implementation of the laws. They also discourage settlement of cases by U.S. firms, which has mixed effects on the economy."

Loose use of term of abuse

Ian Cook, at Truck and Barter reports on casual media claims of price gouging at the Michael Jackson trial: "Price Gouging Sans Tragedy?"

Competition and newspaper bias

Mahalanobis points to a lecture by Andrei Shleifer outlining a "demand-based theory of media bias": "The Marketplace of Ideas"