Trade and Agriculture

Between the Headlines:”Sustainability” Means Sustainably Poor

by Fred Smith on April 21, 2009

in Agriculture, International, Labor, Natural Resources, Private Conservation, Trade, Zeitgeist

“Mars Sets Goal for Sustainable Cocoa Sources”

Another Washington Post story suggests that “sustainability” –whatever it may mean — still can stir the cold hearts of capitalist managers.  Utopians have long been distressed by the differential working conditions around the world.  Poverty does have less pleasant impacts than affluence.  The problem is that associated with all egalitarian policies.

Our desire to improve the plight of the poor too often merely cuts away the rungs on the ladder out of poverty.

Rise of the Luddites

by Fred Smith on April 7, 2009

in Environment, Natural Resources, Odds & Ends, Personal Liberty, Precaution & Risk, Private Conservation, Regulation

When it comes to things such as environmental policy, the Progressives have been rather successful at promoting their world view.  They realized that it would be futile to argue that property rights and human ingenuity could not solve anything – so they did not try (immediately) to socialize oil or other sub-surface minerals but they did succeed in derailing the evolutionary process by which institutions emerged to resolve emerging problems.  The economist Ronald Coase  noted this in an essay pointing out that the EMS (Emergency Medical Services) was well on its way to being homesteaded with rules for allowing multiple uses – and then the Feds created the Federal Communication Commission and the spectrum is still terribly managed to this day.  

The environment is valuable and valued by many.  The difficulty is that we have relegated its “protection” and “management” to bureaucrats – and suppressed the evolution of property rights in environmental resources (wildlife, groundwater, fisheries).  These resources remain as common property resources – and we experience repeatedly the Tragedy of the Commons.  However, the most distressing aspect of the debate over environmental policy,  is that the view gaining prevalence from the Progressive side is decidedly anti-human, and anti-technology at its core.  

There are many features of the growing anti-human-relevant-science campaign.  

  •  One is the selection of the fearful – the Malthusian wing of this movement that sees “technology” as change, as a move into an untested future and, thus, to be slowed if not banned.  These people champion the Precautionary Principle – a totally Luddite rule.  Has there ever been a market innovation (one that we hoped people would buy) that created more harm than good?
  • The Economic Rational wing, which has championed “comparative effectiveness” and so on.  After all, they argue, it would be foolish and wasteful to approve a new drug or device that was not “cost effective for the median individual.”  A wonderful capture of the rational language but, of course, that approach argues that we can know in advance that a specific innovation will or will not prove beneficial (the French minitel system comes to mind).  Most – all – innovations appear first as clunky, expensive toys or (for a very few) necessities.  The purchasers are the ‘Early Adopters’ – often rich or eager to “be the first on their block.”  However, the freedom to create an infant market for a product that would be too expensive and too inefficient for most people made it possible for the thousand dollar 1940s television sets with tiny blurry pictures and very low quality to become the few hundred 34-inch flat screen marvels of today.  We will suffer in many areas for this loss but the greatest losses may be in the medical innovation area.
  • The Government Research Must be Dominant school is characterized by those who sought on “scientific” grounds for removal of any restraints on stem cell research – not because such research was banned (private parties were largely free), but rather because it meant that their approved source of scientific funding – the government – was kept from the field.  Indeed, this group is much more ambitious – their effort to drive the market from the marketplace of ideas is one of the most threatening themes.  Research that has been funded by a company, individuals who have done consulting or worked for a company, groups who’ve received support from a company – all inherently more suspect that a government-funded scientist.  One can expect that such individuals and the research work they do will soon have to wear a yellow C (for corporate) patch on their clothes, appended on every page of their journal articles.  
  • The Science Good, Technology Bad sub-class.  This refers to the observations of Joel Mokyr and others.  That it has been the close link between (largely) non-economic driven science and (largely) economic-driven technology that transformed the slow progress of most of mankind’s history to the exponential growth we have experienced in the last several centuries.  Brilliant individuals have popped up from time to time throughout history.  They expand man’s knowledge and some small use is made of that knowledge to improve man’s welfare.  In the Industrial Revolution, however, the growth of economic freedom created a more receptive and attentive audience for such knowledge.  Electricity would be discovered and Edison and others would immediately begin to think, “What is it good for?”  Then, in turn, they would go back to the science and note – “this worked OK but … why?” and those questions would both prompt and interest the science community in expanding knowledge in directions more likely to prove human beneficial.  The resulting positive “feed back loop” is critical to progress. This group would sever that link — Science Good, Technology Bad!!

As I have stated above, the environment is valuable, and its preservation is valuable to many.  Therefore, at CEI, one of the things we have tried to do in our work is not ridicule the environmentalists or argue that environmental values are irrelevant.  We simply make the point that the Malthusian goals – less people, less consumption, less technology – is far less inspiring that the view of mankind as the Ultimate Resource.  

I am proud of the work we have done, but we have much work to do to improve our marketing skills.  The other side of this debate seems rather adept at garnering popularity, and is much better funded.  My message to those who may share our views is that we needed to find ways to create a more effective and powerful alliance between the entrepreneurial elements of the business community and the free market community.  We face many problems.  Keep up the good work – and help find the scientist-entrepreneurs who have not succumbed to this insanity.  There must be a handful of people who recognize that the politicization of science by conservatives was stupid, but the politicization of science by the Luddites is suicidal.

Banana Entrepreneurs Should Follow the Cocoa Initiative

by Silvia Santacruz on November 7, 2008 · 1 comment

in Agriculture, International, Trade

Last Wednesday, The New York Times ran an appealing story on the rise of an Ecuadorian Quichua community from a cocoa grower to a chocolate producer.  The 850-families cooperative, located in the Amazonian rainforest, sells rich chocolate bars to American supermarkets without intermediaries.

This initiative is worth emulating, and should be followed by Ecuadorian agribusiness men who export fruits with no added value, such as bananas, mangoes, passion fruits, and coffee beans.  Read NYT’s When Chocolate is a Way of Life

Wearing a faded red t-shirt and worn out sneakers, a banana farmer was happy to chat with me about the “green gold,” as the fruit is called, back in my days as an agribusiness reporter in Ecuador. Without an appointment, I was able to jump from the road into the plantation to have my first hands-on experience in the banana business.  Like the farmer I met, over two million Ecuadorians depend on banana production either directly or indirectly.  Bananas are the main agricultural export of Ecuador, with a monthly volume of 20 million boxes, according to the Banana Exporters Association (AEBE).

Despite Ecuador’s leading position in the global banana market, sales of the fruit represented only 8.1 percent of the nation’s exports between January and August 2008. That’s because Ecuador is an oil-producing country, and margins on basic products such as agricultural products are low.  A solution, then, is to graduate up the producer ladder into products that have added value such as processed agricultural goods.

If my country, like many other developing nations, could learn from the Quichua cocoa experience, maybe next time I visit my hometown I won’t provoke giggles from the skillful artisans who offer hand-woven bags and placemats made of dry banana leaves on Ecuador’s streets when I suggest they market their products overseas. After the Quichua success, my encouragement to sell such handcrafts internationally should inspire excitement rather than laughs or sighs.

Entrepreneurs are the ones that should take advantage of these opportunities, export these unique products to America or Europe, and change the lives of the world’s poorest.

Perspective on trade in the Obama Administration

by Fran Smith on November 6, 2008

in International, Politics as Usual, Trade

During the presidential primaries and in the campaigns, there was a lot of rhetoric about the need for “fair” trade instead of free trade. Candidates were in a populist mode, catering to critical manufacturing states that have lost jobs and serving up trade as the villain.

Now that Senator Barack Obama is the President-elect, there is renewed speculation on what path his administration will take on international trade. Will he make good on his campaign rhetoric that echoed the Democratic platform’s call for renegotiation of trade agreements to include even more stringent labor and environmental standards? Will he continue to hold up pending trade agreements with close U.S. allies? Will he embrace isolationism and protectionism or adapt to geopolitical realities?

In a new C:\Spin publication, I provide some perspective on the outlook for trade in the Obama Administration. I opine that President Obama will face enormous pressure to make good on some of his campaign promises on trade.  But, with his top-notch economic advisers, he may pull back from drastic anti-trade actions that would harm the fragile economy and alienate U.S. allies and trading partners.

U.S.-Colombia Free Trade Agreement Stirs in Its Sleep

by Ryan Young on October 28, 2008 · 619 comments

in Economy, International, Politics as Usual, Trade

The stalled U.S.-Colombia free trade agreement has become a campaign issue in Florida’s 25th District, which is home to a substantial Colombian-American population. Rep. Mario Diaz-Balart is using his support of the agreement as a club with which to beat his challenger.

That challenger, Joe Garcia, doth protest. He says he is “for fair trade and getting it done in a way that protects American jobs and American commerce.” That’s another way of saying that he thinks consumers are paying too little for goods and services.

Here at CEI, we believe that trade cannot be fair unless it is free. For more on how the U.S.-Colombia free trade agreement promotes both fairness and freedom, see this study that Fran Smith and I co-authored in July.

More Trade Means More Peace

by Ryan Young on October 21, 2008

in Odds & Ends

If goods do not cross borders, then soldiers will.

It’s an old saying. Maybe even a cliché. But there is some truth to it. What wonderful news, then, that India and Pakistan have re-opened a trade route through the Kashmir region.

Soldiers have been crossing that border for 60 years. Replacing those soldiers with spices, apples, and other, ahem, non-fatal goods will have two positive effects. First, those goods will become cheaper and more abundant in India and Pakistan.

Second, the new trade route will help to strengthen the blossoming but still fragile peace; killing the customer is bad for business. Indians and Pakistani in and around Kashmir are developing a financial incentive to get along.

Expanding international trade is not just good economics. It is good foreign policy. Congress and our next president, whoever he is, would do well to heed that lesson.

Manhattan “farmers” get a lot of pork

by Fran Smith on June 22, 2007 · 1 comment

Great farm subsidy database — now updated — maintained by EWG using USDA and other government data. Here’s just one example: a map of Manhattan showing a lot of red dots signifying farm subsidy recipients living in the Big Apple. You can click on the dots and get the names of the recipients.

Much more on this website, such as that only 19 percent of the congressional districts account for one-half of all crop subsidy payments between 2003-2005; and the top 10 percent of crop subsidy program beneficiaries accounted for 66 percent of subsidy benefits.

Four nation talks on Doha trade round break down

by Fran Smith on June 22, 2007

Talks broke down among a group of four countries — the U.S., the EU, India, and Brazil — to move forward on the WTO Doha Round negotiations. The discussions in Potsdam were considered important in trying to reach agreement on greater market access in both agriculture and manufactured goods.

Previous talks saw the U.S. and the EU blaming each other for the lack of agreement. But this time, those countries blamed India and Brazil for not wanting to move at all in opening their markets further to outside goods and products.

With Trade Promotion Authority expiring at the end of June (which gives the Bush administration the ability to negotiate trade agreements with an up-or-down vote by Congress), some had thought that progress at this meeting might spur support for renewing TPA. With the failure of these talks, trade negotiators will be continuing Doha discussions in Geneva. However, if Brazil and India do represent the views of many developing countries, the outlook isn’t promising.

As reported by Bloomberg, here’s what the U.S. Trade Representative said:

U.S. Trade Representative Susan Schwab has said the U.S. can trim more, but only if advanced developing nations and the EU open their markets to more U.S. farm goods. Today, she questioned whether Nath and Amorim were even prepared to negotiate as the “rigidity” of Brazil’s and India’s position “seemed quite different from the positions of the G20.”

The EU, on the other hand, “showed this week it was ready to stretch,” Schwab told a news conference. “The only way you get to a trade agreement is willingness to compromise.”

Let’s Kill the Bilateral Agreement

by Eli Lehrer on June 19, 2007

in Economy

Fran, you make a very good point. The big problem, as many of us at CEI have discussed, has been our nation’s approach and our focus on bilateral trade agreements. Although tempting at first because they gave quick wins, the bilateral agreements have opened up great opportunities for the anti-trade forces to do all kinds of mischief. Meanwhile, we get caught fighting for agreements that are trivial in every possible way and a Doha round that’s obviously going nowhere.

When I was working on the Hill, we tried to calculate the benefits of the Central American Free Trade Agreement (CAFTA). Free traders loved it and the Left-Right anti-trade/anti-freedom coalition hated it; we all acted like it was a big deal. But we all hid a secret: CAFTA didn’t matter.

In my boss’ home state of Tennessee, the benefits came to less than $10 per month with a significant margin of error. The other side had similar numbers that showed a household income loss of about the same magnitude and a decline in payrolls less than the margin of error. In other words, whichever side you believe, it’s unlikely that anybody will notice CAFTA. Except perhaps for Miami-based financial services firms, there simply weren’t any big benefits at all when it came to implementing CAFTA. So why did we bend on anything?

I don’t see why the United States should ever invest significant energy in bilateral agreements. In a way, we’ve done all we can with bilateral agreements. We have a pretty good trade agreement in place with Canada and Mexico. Ditto for our two closest political allies, Australia and Israel. And even CAFTA isn’t bad. E.U. policy, of course, makes it impossible for us to conclude agreements with the U.K., Ireland, Poland, or the Nordic countries. (I think that France and Germany are lost causes anyway.) China and Japan won’t play ball. India probably would, but domestic politics here make a U.S.-India free trade agreement impossible in the near term. So what’s left? South Africa? New Zealand? Not worth fighting over and certainly not worth letting the Left extend the regulatory state even further.

One could say that the WTO provides an answer but, of course, with the collapse of Doha, it seems unlikely that we’ll see much coming from there either.

So what’s left? What about unilateral action? With cuts in income and payroll taxes likely off the board for the foreseeable future, it strikes me that there might be some value in agitating for unilateral reductions in our own tariffs and other trade barriers. I realize that they’ve already fallen a good deal but every time we reduce them, it improves consumer welfare. Explained the right way, tariff reductions may have more popularity than income tax cuts: since so many families no longer pay net federal income taxes, but every consumer pays for trade barriers/quotas etc, they actually have a broader constituency.

Prospects for more open trade closing up

by Fran Smith on June 18, 2007

in Politics as Usual

Lots of articles on trade issues today — and most of them are bleak in terms of trade liberalization. Instead, reporters are focusing on the strong protectionist sentiment in the U.S. and what that portends for the World Trade Organization’s faltering Doha Round of trade negotiations and for the renewal of “fast-track” trade promotion authority, which expires at the end of this month.

Bloomberg News focuses on the Doha Round negotiations and the last-gasp attempt in Germany this week to resuscitate the talks. The article discusses this new era of protectionism, the waning appetite for multinational deals, and the increased focus on bilateral pacts.

The Wall Street Journal (June 18, p. A2, subscription required) meanwhile gives attention to the soon-expiring Trade Promotion Authority, through which Congress gives the President the ability to negotiate trade agreements and have them voted up or down by Congress without amendments. Prospects for TPA renewal don’t look good.

According to the WSJ,

More broadly, the expiration of fast-track is likely to move the U.S. into a new era of trade uncertainty. It isn’t clear that whoever follows Mr. Bush will have much luck winning renewal of fast-track, given the deep reservations about trade that have taken hold in both parties on Capitol Hill. The prospects will be especially bleak if Democrats retain their majority. Rank-and-file Democrats are particularly anxious about trade, citing the impact on workers and families. Antitrade sentiments helped elevate the party to power in 2006 and are already roiling the 2008 contest.

With protectionist sentiment high on the Hill, the Democratic leadership is pushing for trade agreements to include stringent labor and environmental provisions — mandates that will hobble the ability of developing countries to benefit from more open trade.

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