Author Archives
Doha Round stalled again — take 2
Today, as Ryan Young noted in his post, negotiations collapsed in the ninth day of talks to resuscitate the World Trade Organization’s Doha Round. Irreconcilable differences between the U.S. and India and China on what are called in trade-speak “special safeguard measures” are blamed for the bad ending to this session. SSMs are actions that developing countries can take to raise tariffs on agricultural goods when there in a surge in imports.
In a press statement, U.S. Trade Representative Susan Schwab said:
“Regrettably, our negotiations deadlocked on the scope of a safeguard mechanism to remedy surges in imported agricultural products.
“Any safeguard mechanism must distinguish between the legitimate need to address exceptional situations involving sudden and extreme import surges and a mechanism that can be abused.
“In the face of a global food price crisis, we simply could not agree to a result that would raise more barriers to world food trade.
Schwab said that the position of some of the members would have moved the WTO backwards instead of advancing more open trade.
Although some WTO members said the talks should begin again, WTO Director General Pascal Lamy said that the breakdown represents a serious setback. Trade analysts aren’t too sanguine about the chances of countries reaching final agreement before the U.S. presidential election. Time is short and the differences are great between powerhouse “developing countries” such as India, China, and Brazil, and the developed world, seeking to gain greater access to those markets.
It’s not chicken feed . . . but it is
With a lot of attention focused on the unintended consequences of ethanol policy in raising the costs of food, here’s another example of those spiraling costs. Tyson Foods says higher feed costs led to a big drop in fiscal third quarter profits. The company said that for this quarter its grain costs for chicken feed were $140 million more than a year ago. For this fiscal year, it expects grain costs to be a whopping $550 million higher than the previous year.
According to Tyson’s Investor Fact Book, “Corn and soybean meal are major production costs in the poultry industry, representing about 40 percent of the cost of growing a chicken.” And, with 25-30 percent of the corn crop diverted to ethanol production, and more farmland diverted from other crops such as soybeans to feed the corn maw, the effect on Tyson’s is only one example of the perversity of ethanol policy.
Food price rise — major cause is increased biofuels production, says World Bank
A just-released working paper from the World Bank, “A Note on Rising Food Prices,” points out that the increased production of biofuels has been “the most important factor” in the rapid rise in food prices internationally since 2002. It notes that much of the increase resulted from government policies promoting biofuels in the U.S. and the EU – subsidies, mandates, and tariffs on imports.
Here’s the abstract of the paper:
The rapid rise in food prices has been a burden on the poor in developing countries, who spend roughly half of their household incomes on food. This paper examines the factors behind the rapid increase in internationally traded food prices since 2002 and estimates the contribution of various factors such as the increased production of biofuels from food grains and oilseeds, the weak dollar, and the increase in food production costs due to higher energy prices. It concludes that the most important factor was the large increase in biofuels production in the U.S. and the EU. Without these increases, global wheat and maize stocks would not have declined appreciably, oilseed prices would not have tripled, and price increases due to other factors, such as droughts, would have been more moderate. Recent export bans and speculative activities would probably not have occurred because they were largely responses to rising prices. While it is difficult to compare the results of this study with those of other studies due to differences in methodologies, time periods and prices considered, many other studies have also recognized biofuels production as a major driver of food prices. The contribution of biofuels to the rise in food prices raises an important policy issue, since much of the increase was due to EU and U.S. government policies that provided incentives to biofuels production, and biofuels policies which subsidize production need to be reconsidered in light of their impact on food prices.
Check out CEI’s early warnings here and here and elsewhere on how such policies distort markets and have severe consequences, and visit CEI’s website on the issues, www.FactsAboutEthanol.org
WTO talks — immigration may be on agenda
As the World Trade Organization’s Doha Round negotiations continue, India has raised the immigration issue with the U.S. and the EU. This is the first time that immigration has been introduced in WTO trade talks.
It seems that India is interested in having more Indian and developing country professionals allowed into the U.S. on temporary-entry visas without cumbersome and lengthy procedures. India’s commerce minister Kamal Nath reportedly said that before India makes an offer on opening up financial services, he would like to hear what the U.S. and EU would offer on immigration.
Hänsel und Gretel – the opera — goes green
The Financial Times has terrific reviews of opera – witty, trenchant, and caustic when reviewing some of the avant-garde European productions. One such production is the Glyndebourne Festival Opera’s current Hänsel und Gretel, the opera by Engelbert Humperdinck based on the Brothers Grimm tale.
The production, according to the FT, portrays ecological disaster caused by over-consumption. Here’s what happens:
When they [Hänsel und Gretel] enter the forest, they find an ecological disaster: acid rain has stripped the trees bare and the only foliage consists of plastic carrier bags hanging from the branches. Further on, the Witch’s gingerbread house has become a supermarket piled high with free offers, and the Witch is at the till.
And, when the children escape from the Witch’s supermarket that was full of junk food, they are obese.
The reviewer Richard Fairman has ideas for what to do with this version:
As for the production: one for the recycling bag, I think.
Ethanol’s effect on the “dead zone”
In a posting on Discover Magazine’s blog today, it was reported that this summer the largest “dead zone” in the Gulf of Mexico – 8800 square miles—was caused by increased corn production for ethanol and thus more fertilizer runoff, as well as Mississippi River flooding in the Midwest. The posting cited the Baton Rouge Advocate, which quoted the scientists from LSU and the National Oceanic and Atmospheric Administration who were researching the area.
LSU scientist R. Eugene Turner said this year’s record “dead zone,” which is roughly the size of New Jersey, is in large part due to nitrogen leaking into the Mississippi from a huge increase in corn planting.
The recent increase in corn crops is due to the nation’s increased efforts to find alternative fuel resources, such as corn-powered ethanol, he said.
The nitrogen from fertilizer leaks into the river, which then flows into the Gulf, Turner said.
OECD: biofuel policy is costly, ineffective, and raises food prices
Another nail in the coffin for biofuels and government support. A new report from the Organisation for Economic Co-Operation and Development (OECD) released today takes a close look at government support for biofuels – its cost and some of the unintended consequences.
Here’s what their press release states:
Government support of biofuel production in OECD countries is costly, has a limited impact on reducing greenhouse gases and improving energy security, and has a significant impact on world crop prices. . . .
The report notes:
In most countries, biofuels remain highly dependent on public support policy. This report estimates support to the US, EU and Canadian biofuel supply and use in 2006 at about USD 11 billion per year, projected to rise to USD 25 billion in the medium term. . . .
Lots of good charts and figures too. Some of their recommendations and their implementation may involve the heavy hand of government, however.
New WTO report — trade and globalization — tackles hard issues
Lots of good material in the World Trade Organization’s annual World Trade Report 2008. Released today, the report, “Trade in a Globalizing World,” in its 178 pages deals with the hard questions and issues relating to trade and globalization. As stated in the report’s Executive Summary:
Trade and globalisation more generally have brought enormous benefits to many countries and citizens. Trade has allowed nations to benefit from specialization and economies to produce at a more efficient scale. It has raised productivity, supported the spread of knowledge and new technologies, and enriched the range of choices available to consumers. But deeper integration into the world economy has not always proved popular, nor have the benefits of trade and globalization necessarily reached all sections of society.
Trade scepticism is on the rise in certain quarters, and the purpose of this year’s core topic of the World Trade Report, entitled “Trade in a Globalizing World”, is to remind ourselves of what we know about the gains from international trade and the challenges arising from higher levels of integration.
Not resorting to platitudes, the authors explore trade theory from Ricardo to the “new, new” theories and apply these to results of empirical studies. Here are a few of the topics dealt with in the discussion relating to economic theory and trade: the traditional approach: gains from specialization; “new” trade theory: gains from economies of scale; product variety and increased competition; recent developments: productivity gains; dynamic gains.
From both a theoretical and practical perspective, the report also looks at constraints holding back some of the developing countries from benefiting from globalization and trade.
Some of the report’s recommendations for dealing with countries and workers that are left behind by increased trade and globalization call for some form of safety net, whether it be Aid for Trade or improvements in a country’s unemployment and job retraining programs or perhaps trade adjustment assistance.
In the short-term, however, the need to complete the WTO’s Doha Round of trade liberalization and development is emphasized.
DLC supports multilateral trading system
Well, it’s about time. According to Reuters, the progressive Democratic Leadership Council today called upon the next president to focus on the multilateral trading system instead of bilateral deals and to approve the pending trade agreements with Colombia, Panama, and South Korea.
Long a supporter of more open trade – with caveats – the DLC and its subgroup, the Progressive Policy Institute, produce some excellent trade-related research that I’ve often mentioned on this blog. Today, the DLC released a report “Winning in the World Economy” endorsing the World Trade Organization’s Doha Round as the top priority for trade in the next administration. While the report does support the pending bilaterals, it noted that anti-union violence in Colombia needs to be addressed as well as market access for autos in Korea, as these are concerns of Congress.
From press accounts, the report also seems to support the “exports-good, imports-bad” mercantilist approach. (The report doesn’t seem to be posted yet on the DLC website.)
During the bitter Democratic primary battles, one couldn’t really expect the DLC and the PPI to criticize the two leading candidates’ positions on trade, even when they escalated their hyperbole on the North America Free Trade Agreement as the bane of American jobs. The PPI, however, did publish a study noting that NAFTA was not responsible for the loss of middle-income jobs.
Now one would hope that this progressive arm of the party would come to the forefront in defending free trade, but without the shackles of non-trade related issues that can restrict the economic growth that trade can bring.
OECD Employment Outlook — some intriguing data
The Financial Times noted today that the OECD’s recently released report on employment prospects in the developed world showed an uptick in unemployment through 2009, largely due to credit problems in the aftermath of the subprime lending crisis.
The full report, the OECD Employment Outlook 2008, is only available online to subscribers and journalists. One can review summaries, a limited selection of tables, as well as the Statistical Annex, which looks at trends in employment over the past several years.
Some of the data are intriguing, such as Table G, which shows the incidence of long-term unemployment as a percentage of total unemployment. For 2007, the data show that in Germany a whopping 56.6 percent of the jobless have been unemployed 12 months and over. That compares with only 10 percent in the U.S. In fact, Germany has a higher rate than the Czech Republic, Italy, Greece, Poland, and Portugal, among others. The country with the lowest rate of long-term unemployed is Korea, at 0.6 percent for 2007. And that’s not an anomaly; since 2004 that rate has been either below or slightly higher than 1 percent.
The data in Chapter 5 were compiled in response to the question: Do multinationals promote better pay and working conditions? The answer was “yes,” or in the words of the report:
The evidence suggests that MNEs [multinational enterprises] tend to provide better pay and working conditions than their domestic counterparts, especially when they operate in developing and emerging economies . . .
So much for the “race to the bottom” that anti-globalization activists mouth.
McCain’s Colombian trip: Strong support for free trade
Senator John McCain, the Republicans’ presumptive presidential candidate, continued his strong support for free trade with a visit to Colombia and discussions with its president, Álvaro Uribe.
McCain praised the pending trade agreement between the U.S. and Colombia, which has been held up by the Democratic leadership. He noted that although Colombia has made great progress in improving its human rights record in the face of drug cartel murders and paramilitary violence, it still needs to do more.
In contrasting his trade views with those of the expected Democratic candidate, Senator Barack Obama, McCain turned to history:
“We just have a difference of opinion,” Mr. McCain said, “and I’m a student of history.” He added: “An overwhelming majority of historians will tell you that protectionism and isolationism were a major factor in one of the greatest depressions in the modern history of this country. I’m not going to sit by and see that happen.”
Check out CEI’s “On Point” on the U.S.-Colombia Free Trade Agreement, which has just been posted.
AmEx reaps “windfall profits” from antitrust suit
American Express will be $4 billion richer, thanks to the U.S. Department of Justice and a 2004 antitrust suit against Visa and MasterCard.
According to the New York Times and other sources, MasterCard has agreed to pay AmEx $1.8 billion on top of Visa’s earlier payout of $2.2 billion in the antitrust settlement. The Supreme Court in 2004 let stand an appeals court ruling that Visa and MasterCard had violated antitrust laws. With that decision, American Express then sued for damages.
The original antitrust case was brought by the Justice Department in 1998. Justice accused the two bank card systems of not competing with each other and stifling competition by requiring that their member banks not issue other systems’ cards. American Express and Discover Card had claimed they were harmed by not being able to have their cards issued by the members of Visa and MasterCard.
One of the major criticisms of antitrust policy is that often it shows little understanding of market evolution and instead – with its clout – helps determine the winners and the losers.
The response of American Express to the huge settlement noted that the monies will help the company weather the economic downturn and allow them future ability to increase their business investment:
With losses rising and the economy slowing, the deal comes at a time when American Express could use the money.
“Business conditions continue to weaken in the U.S. and so far this month we have seen credit indicators deteriorate beyond our expectations,” the chairman and chief executive of American Express, Kenneth I. Chenault, said in a statement. “The antitrust settlement we’ve reached with MasterCard provides us with a multi-year source of funds that should, among other things, help to lessen the impact of this weakening economic cycle and, when conditions improve, give us the ability to step up investments in the business.”
Seems like, even with this antitrust windfall, American Express is still having trouble competing in the market, despite Justice’s help. Here’s a piece I wrote in 1998 for the Legal Times criticizing that DOJ action. It’s now up on CEI’s website.
Another sweet deal for Big Sugar?
Environmentalists are ecstatic over the state of Florida’s announced purchase from United States Sugar of a vast tract of land – 187,000 acres – abutting the Everglades National Park.
For years, groups have opposed the Florida company’s sugar cane production as a major contributor to Everglades water pollution. The announced deal, for $1.75 billion, would amount to about $350 per share, much higher than two previous offers for the company and its land. It’s expected that under the deal, the sugar company will continue operating for six years without paying rent or taxes. According to reports, the state would issue bonds and add to water fees to pay for the purchase.
U.S. Sugar is the largest sugar cane producer in the U.S. and has become almost synonymous with Big Sugar. It was formed in 1931 and is a privately held, employee-owned firm.
According to an article in the Sun-Sentinal, U.S. Sugar will be going out of business based on the long-term outlook for sugar cane and the possible erosion of its heavily protected status in the U.S. The U.S. sugar program restricts domestic supply, supports prices for sugar producers, and limits imports in a complex system. However, the program is increasingly under attack, and a greater amount of imported duty-free sugar is or will be allowed into the U.S. under several bilateral and regional free trade agreements.
Other observers have said that the state is paying too much and will be bailing the company out of debt and possibly getting it out from under an employee lawsuit over the share price provided to them.
“Verità Inconveniente” — the opera
In today’s New York Times, John Tierney has a wonderful spoof of the world-famous opera house, La Scala, commissioning a new opera based on Al Gore’s PowerPoint presentation “An Inconvenient Truth.” It is no spoof, however, that the opera is indeed scheduled to be completed for a La Scala premiere in 2011.
In the form of a letter ostensibly from the commissioned Italian composer Giorgio Battistelli to Al Gore, Tierney creates an almost plausible plot (remember, this is opera) with the hero named Algorino and the heroine Gaia. Of course, the villain is Petroleo. In the letter, the composer is objecting to some of Al Gore’s suggestions for plot revisions. Here’s an example:
I’m sorry you were so saddened by the battle scene and the finale. I agree it would end more happily if Algorino vanquished Petroleo and reburied the Minemaidens’ treasure. No doubt we could create a fine aria for Carbonia as she is “sequestered” underground (although we might be accused of copying the “Aida” entombment finale). As you suggest, we could end with an ensemble celebration of Algorino’s marriage to Gaia.
But would a happy ending truly satisfy your devotees — or La Scala’s? Better to stay with tradition. I feel sure that audiences, like the earth goddess, will be moved to tears by the “Ciao, Gaia” aria of the mortally wounded Algorino, and then riveted as she feverishly wanders the stage. With the right soprano, I believe “Basta con la temperatura!” could be an unforgettable Mad Scene.
Read the whole letter — don’t miss the discussion of the High CO2 Duet — and consider submitting your own libretto to Tierney.
Bush defends open trade, hits protectionism
In a strong defense of international trade and the pending U.S.-Colombia Free Trade Agreement, President George W. Bush in a Fox interview today also worried that many world leaders think that the U.S. is turning “inward.” The Baltimore Sun today posted a transcript of the president’s interview with Neil Cavuto, which will appear on Fox tonight. In the interview, President Bush said:
BUSH: I fear that a great nation like the United States becoming protectionist - that means that we’re not opening up markets, that we’re turning inward - we’ll miss, one, economic opportunity and, two, miss leadership opportunities.
I mean, these leaders that I talk to - and I talk to leaders a lot
- are just, one, amazed and, two, very concerned that the United States is turning inward.You know, people who worry about global poverty, for example — and I do - must understand that the best way to help people come out of poverty is for there to be economic vitality. And the best way to create economic vitality is for there to be trade of goods and services.
And, you know, I hear people say, “Well, I’m for free trade. I just want it to be fair trade.” Well, if Colombia’s goods and services come, as a result of the acts of Congress, many of whom are now opposing this bill, they have said, “Let their goods and services come in duty-free.”
And all I’m saying is, if you let Colombia’s goods come in duty-free, you owe the same thing to American job-creators and American workers.
In his interview, he also strongly criticized the Senate and the House support for the new Farm Bill, which survived a Presidential veto this week.
. . . the truth of the matter is they send a clear message that they’re willing to pass a massive farm bill to pay rich people to farm and a massive farm bill that sends a lot of taxpayer money at a time when commodity prices are high.
Amen.
-
About Us
OpenMarket.org is the staff blog of the Competitive Enterprise Institute. We believe that people improve their lives not through government regulation, but by making their own choices in a free marketplace. -
Search
-
Categories
Agriculture
Bureaucrash
CEI in the City
Culture
Economic Liberty
Energy
Environment
Global Warming
Healthcare Reform
Insurance
Intellectual Property
International
Legal
Mobility
Nanny State
Nano & Biotech
Odds & Ends
Personal Liberty
Politics as Usual
Precaution & Risk
Privacy
Sanctimony
Tech & Telecom
Trade
-
RSS Center
