Category: International Trade

Blog author: jballor
Wednesday, October 17, 2007
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In answer to the query in the headline of this week’s Acton Commentary, “Who’s Afraid of Free Trade?”, I submit the following: the ecumenical movement. Note the following news item from Ecumenical News International:

Church groups mount week of action to transform global trade

Geneva (ENI). Faith groups have joined activists around the globe in calling for fair, equitable and just trade policies while urging churches to join a Trade Week of Action that seeks to promote alternatives to the global system of commerce. “During this week, the churches and other organizations will tell the world that enforced free trade is causing poverty and that there are viable alternatives,” said Linda Hartke, coordinator of the Geneva-based Ecumenical Advocacy Alliance, which has organized the 14-21 October Trade Week of Action. “When the systems we have created to buy, sell and share goods cause hunger and suffering then these systems are wrong. Every voice counts, and every action makes a difference,” Hartke told Ecumenical News International. [ENI-07-0798]

Blog author: jspalink
Wednesday, October 10, 2007
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Society is changing as economic freedom and diversification gradually creep into the Middle East. Dr. Samuel Gregg, director of research at the Acton Institute, explores the effects of free trade on nations including Kuwait, Bahrain, Qatar, and the United Arab Emirates and, in turn, the effect those nations are having on their neighbors.

The diversification of economies, notably the development of new products and services for export, allows nations to grow out of reliance on oil production as the main source of capital. The emerging economies create an entrepreneurial atmosphere open to all and encourages foreign investment. The result is a rise out of poverty and more open foreign relations.

Read the full commentary here.

Blog author: jballor
Thursday, October 4, 2007
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The Free Exchange blog at Economist.com (HT) concludes a long and thoughtful post on fair trade, specifically in response to this recent NYT article, “Fair Trade in Bloom,” by wondering:

And how does this affect coffee supply? If a premium is available for fair-trade coffee, shouldn’t other growers enter the market to take advantage of it until the price of coffee is bid down to market levels, leaving total producer take–baseline coffee price plus premium–where it stood before? Such a scenario would also raise distributional questions. If higher coffee prices attract market entrants, then coffee-growing nations will shift resources into that sector, which might be good for grower incomes, but could potentially inhibit the development of other economic activities.

Not to take anything away from the stated goals of the fair-trade movement or the well-meaning consumers who wish to do better by farmers in poor countries. Still, in any economic process, it’s often difficult to foresee the second- and third-order effects of a decision. It will be interesting to observe how growth in fair-trade products changes the structure of markets for targeted commodities.

These sorts of questions and concerns are at the heart of my past criticisms of the fair trade movement.

To the extent that fair trade certifiers are simply acting as agents to inform consumers and guarantee certain practices, to which coffee buyers can freely respond either affirmatively or negatively, there’s no real complaint. Fair trade becomes a boutique item that has to compete in the free marketplace.

But to the extent that the fair trade movement reflects a more thoroughgoing critique of market forces and the “fairness” or justice of market prices, it becomes more problematic. It becomes an entirely different paradigmatic alternative to a system of free trade.

You’ve essentially replaced market prices with arbitrarily determined prices, which are subjectively determined to be “fair.” Compare this with the traditional and classic scholastic understanding of a “just” price as the market value in the absence of any and all fraud and conspiracy.

The Free Exchange blog piece points out all sorts of negative consequences of the change from “just” to “fair” prices, not least of which is the increasing saturation of an already saturated market because of artificial subsidization of a particular commodity. Furthermore, it’s hard to see how it makes good economic and environmental stewardship to subsidize and promote the growth and production of a commodity of which we already have too much.

For more on the disconnect between the intentions and the consequences of the fair trade movement, check out this study, “Does Fair Trade Coffee Help the Poor?”

A recent NBER paper, “Distributional Effects of Globalization in Developing Countries,” by Pinelopi Koujianou Goldberg and Nina Pavcnik examines some effects of trade liberalization on low-skill workers.

Les Picker summarizes the findings, “Not surprisingly, the entry of many developing countries into the world market in the last three decades coincides with changes in various measures of inequality in these countries. What is more surprising is that the distributional changes went in the opposite direction from what the conventional wisdom suggests: while trade liberalization was expected to help the less skilled, who are presumed to be the relatively abundant factor in developing countries, there is overwhelming evidence that they are generally not made better off relative to workers with higher skill or education levels.”

There’s a lot more here to digest and the article has some predictably necessary nuances and caveats, not least of which concerns the problematic elements of trying to find a causal link between temporally related phenomena: “The authors’ findings suggest a contemporaneous increase in various measures of globalization and inequality in most developing countries, although establishing a causal link between these two trends has proven more challenging. However, the evidence has provided little support for the conventional wisdom that trade openness in developing countries would favor the less fortunate.”

It’s one thing to say that globalization proportionally rewards more highly educated and skilled workers relative to less educated and skilled workers. This by itself is not obviously unjust, and indeed, it seems to pass a basic sense of justice that jobs that require more skills and training ought to command a higher wage. Maybe a system that distributes more unevenly according to a measure of merit such as education or skill-level is more just than another system which is more equitable in purely distributive terms.

That said, it’s quite another thing to say that low-skilled workers are not made better off in absolute terms by globalization. I’m inclined to think that we shouldn’t be so concerned about relative disparities as we are by comparing in absolute terms the state of the working poor under systems of liberal versus illiberal trade.

If the working poor are better off under a liberal trade regime than an illiberal one, and higher educated workers are paid relatively more, there is a simultaneous increase in the poor’s immediate economic prospects as well as a relative increase in the economic incentive to improve their skills.

But his latter point only is effective in a situation where labor mobility is a real option, and as the NBER paper points out, “the strict labor market regulation that many developing countries had in place prior to the recent reforms is a potential source of labor market rigidities.”

So, for the promise of globalization to be realized, trade not only needs to be liberalized, but so does labor. Workers need to be free to move between sectors, both within and without national boundaries. As I’ve argued before in another context, we need both free trade and free labor.

For more on international labor mobility among low-skill workers, see this NYT piece, “Short on Labor, Farmers in U.S. Shift to Mexico.” See also, “New UN Report Underscores Ties between Poverty and Productivity.”

A few weeks ago I was listening to a very engaging American RadioWorks documentary, rebroadcast from last October, “Japan’s Pop Power.” The show focused on the increasing cultural imports to America coming from Japan, which by some estimations will soon dwarf industries typically associated with American-Japanese trade like automobiles, technology, and electronics. Japan’s economic success is a sure sign that human creativity and inventiveness are more important factors in human flourishing than mere material concerns or natural resources.

Some of the commentary expounded the typical pattern and dynamics of a sub-culture movement becoming mainstream. A great deal of the program focused on Japanese art, film, and media products, including the form of Japanese comic known as manga. Beginning with Mighty Morphin Power Rangers, the growing Japanese dominance of programming oriented toward youth is especially noteworthy (I’m a Yu-Gi-Oh! fan and my wife likes Ninja Warrior).

One portion of the program interested me especially because we have been discussing the importance of narrative here lately. As Chris Farrell and John Biewen spoke with an American teenager, it became clear that in part what draws our youth to contemporary forms of Japanese storytelling, beyond the inherent exotic elements, is the disjointedness of the narrative. It’s often a challenge to figure out who the main characters are and what they are doing. Some of the attraction is no doubt the mental agility that is required to induct a logical flow from the sometimes confusing morass.

But on another level, the attraction is undoubtedly a reflection of a post-modern mindset, which isn’t so concerned with logical plot progression. Japanese shows are renowned for their emphasis on glitzy effects, explosions, and action (oftentimes at the expense of sanity) such that they’ve become a staple of American parody:


It’s always a challenge for Christians to determine when and how to engage cultural movements. Some businesses and industries are without a doubt beyond the realm of moral permissibility, and the Christian is barred from licit participation. The message to those who are involved must be only, “Go and sin no more.”

But other times keen discernment is called for, and Christians at different times and places have come up with very different answers about how to engage the broader culture. At some point soon, for instance, we’ll look in more detail at the Christian Reformed Church’s synodical reports from 1928 on “Worldly Amusements” and from 1966 on “Film Arts.”

One approach I’m familiar with in a professional capacity is the attempt by some Christian publishers to transform the manga genre into something that is a positive and constructive influence, conducive to Christian piety, rather than one that celebrates moral depravity (for which manga is infamously renowned).

Zondervan, for example, has newly available a number of new manga series aimed towards youth or “tweens” audiences (full disclosure: I provided theological review services for a number of these products). On example is a series that follows the fictional exploits of Branan, the son of the biblical judge Samson. Other series follow a team of time-travelling flies and relate the biblical narrative in the form of a Manga Bible (the latter produced by a Korean author/illustrator team).

Whether such ventures are judged to be successful depends on the standards applied by individual Christians. No doubt many will be thankful for offerings in a pop culture genre whose contents are sincerely counter-cultural.

What is certain is that there is no better place to address the needs for a new generation of readers eager for meaningful narrative than to rely upon mythopoeia and, indeed, the greatest story ever told, the “True Myth,” the biblical drama of creation, fall, redemption, and consummation.

Blog author: abradley
Tuesday, August 7, 2007
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New Haven, Conn., isn’t waiting for a green light from the federal government to solve its illegal immigration problem: Two weeks ago, it became the first city in America to issue its own ID card. Already considered a “sanctuary city,” as the latest issue of The Economist reports, New Haven has forbidden its police force to ask anything about immigrants’ status and offers illegals help with filing federal taxes. Now with the new ID card — good for all sorts of fun perks — New Haven is offering even more provisions for illegal immigrants. The ID functions as a debit card at downtown shops, restaurants, and parking meters; grants access to public beaches and libraries; and allows undocumented immigrants to open accounts at two New Haven banks. Costing only $10 for an adult card and $5 for a children’s card, the IDs are mostly funded by a $250,000 grant from First City Bank (one of the two banks accepting the card as valid identification).

But will making life more livable for New Haven’s illegal immigrant community do anything to solve the real problem, which is (a) that they are there and (b) that they are illegal? The immigrants could still face deportation at any time the federal government decides to enforce the current laws. Thirty-two arrests of undocumented immigrants were made almost immediately after the cards were issued, calling into question the entire concept of a “sanctuary city.” New Haven’s solution brings to mind the image of a disobedient child whose father has banished him to his bedroom, complacent but looking over his shoulder as his mother sneaks DVDs and apple pie to him through the window. It makes the child’s captivity more pleasant, to be sure, but at the end of the day he is still culpable and locked in his room with no way out. What kind of overall stability does this approach contribute? I would argue, none.

Another city is making provisions for its non-violent lawbreakers in a completely different way. The New York Times reported two days ago that Nashville, Tenn., has instituted Fugitive Safe Surrender, a program of the U.S. Marshals that allows individuals with outstanding arrest warrants — for “smaller” offenses like missed court dates, traffic violations, or minor drug offenses — to turn themselves in at designated churches, which provide a more “neutral setting” than a police station or courthouse would. When offenders present themselves, they are given the chance to work out a plea with city lawyers and to go before a judge, who typically dismisses the warrant, clears the backlogs, and sends the former fugitives on their way.

Fugitive Safe Surrender is a way of acknowleging that a law has been broken, but it provides a legal, mutually beneficial remedy to the minor issues that clog the courts, and it helps to prevent violent confrontations between fugitives and police. It requires something of the offenders — turning themselves in — and relies neither on total blindness to illegal behavior nor on the sporadic, nocturnal kicking-in of doors to prove the law’s point (which measures usually turn out to be counterproductive for those on both sides of the law).

A beach pass and a debit card won’t do a thing to justify an illegal immigrant’s presence in the States, even if they make his stay a bit more comfortable. But a voluntary acknowledgement of wrongdoing, answered by a serious and thoughtful pardon, resulting in a peacable relationship … that sounds like it might have a ring of justice to it.

Five U.S. cities have implemented Fugitive Safe Surrender to deal with their non-violent criminals, albeit not with illegal immigrants. More than 100 cities have declared themselves “cities of sanctuary.” Could the 100+ learn anything from the principles of the five? Perhaps.

Blog author: jcouretas
Monday, August 6, 2007
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Australian blogger Barney Zwartz, writing for the Australian newspaper The Age, tracks down intrepid research director Sam Gregg, who participated in a Melbourne book launching for Catholic Social Teaching and the Market Economy. After noting that “it seems counter-intuitive to me to consider market-theorist heroes such as Maggie Thatcher and Ronald Reagan friends of the poor,” Zwartz asks:

Is Dr Gregg right? Is a market economy the primary tool for addressing poverty, are other economic approaches better, or are there still-deeper issues that underlie the economic? And what about the churches? Vatican teaching on economics in the past century has been socially liberal, endorsing the right to trade unions for example. The churches still play a leading role in welfare, usually with some government funding. (Often this dissatisfies Christians, who think the agencies become hostage to government policy, and non-believers, who feel the churches are an anachronism who should have no role.) Is this partnership a problem? Should the churches do less – or more? Do other faiths have a better approach? What is the morality of welfare, and how does it apply? Should the old notion of the deserving poor regain some purchase or is welfare simply an obligation of a civilised society, as part of which we accept that some people will take unfair advantage? Is poverty an institutional or a personal responsibility – what do you do to help?

An op-ed in today’s NYT by James E. McWilliams, “Food That Travels Well,” articulates some of the suspicions I’ve had about the whole “eat local” phenomenon.

It seems to me that duplicating the kind of infrastructure necessary to sustain a great variety of food production every hundred miles or so is grossly inefficient. Now some researchers in New Zealand have crunched some numbers that seem to support that analysis:

Incorporating these measurements into their assessments, scientists reached surprising conclusions. Most notably, they found that lamb raised on New Zealand’s clover-choked pastures and shipped 11,000 miles by boat to Britain produced 1,520 pounds of carbon dioxide emissions per ton while British lamb produced 6,280 pounds of carbon dioxide per ton, in part because poorer British pastures force farmers to use feed. In other words, it is four times more energy-efficient for Londoners to buy lamb imported from the other side of the world than to buy it from a producer in their backyard. Similar figures were found for dairy products and fruit.

McWilliams closes with some compelling questions about stewardship of the environment, food production, and trade:

Given these problems, wouldn’t it make more sense to stop obsessing over food miles and work to strengthen comparative geographical advantages? And what if we did this while streamlining transportation services according to fuel-efficient standards? Shouldn’t we create development incentives for regional nodes of food production that can provide sustainable produce for the less sustainable parts of the nation and the world as a whole? Might it be more logical to conceptualize a hub-and-spoke system of food production and distribution, with the hubs in a food system’s naturally fertile hot spots and the spokes, which travel through the arid zones, connecting them while using hybrid engines and alternative sources of energy?

Read the whole thing, as they say.

In today’s Detroit News, Rev. Robert A. Sirico discusses free trade and the conditions it creates for peaceful and flourishing societies.

Every few years, a new round of trade negotiations hits the news, and the same debate takes place on the merits of free trade. But this time around, as we discuss a new round of trade relaxations between the U.S. and Latin America, there is an added element.

The religious left has entered to argue against free trade on grounds that it is incompatible with humanitarian concerns. Somehow, they argue, free trade rewards large corporations at the expense of all workers in all countries. They say that free trade amounts to a kind of American imperialism.

For example, a number of Catholic clerics in Costa Rica have weighed in against a free trade agreement with the U.S. on grounds that the agreement as it stands does not have a “human face.”

I admit that I can’t follow their logic. The case for free trade between nations is no different than between you and your local grocery store. All parties to the exchange benefit. What is to be gained by preventing exchanges that people want to make from taking place? Who could possibly benefit from that?

Read more on the Detroit News editorial page.

In today’s NYT: “Oxfam Suggests Benefit in Africa if U.S. Cuts Cotton Subsidies.”

“Eliminating billions of dollars in federal subsidies to American cotton growers each year would reduce American cotton production and exports, raise world prices by about 10 percent and modestly improve the incomes of millions of poor cotton farmers in Africa, according to a new study by Oxfam, the aid group.”

About how many other industries could a similar thing be said? It’s also good to see that some of these multinational aid groups sometimes focus on liberalizing trade, rather than simply on direct government-to-government compensatory aid packages. Apparently Oxfam “has long campaigned for reductions in rich country agricultural subsides as a means to fight rural poverty in the developing world.”

One reason Oxfam is critical of bilateral free trade agreements is that they “do not address the adverse impacts of rich-country subsidies on poor countries through dumping, or the plethora of non-tariff barriers that continue to impede access to rich-country markets.” Their claim is that the bargaining power of individual developing nations is reduced under such agreements, so that the developing nation ends up giving up concessions to the wealthier nation, while the latter does no such thing. Reducing tariffs without addressing subsidies and other “non-tariff barriers” works to undermine the interests of developing nations.

The NYT piece ends on a bit of a pessimistic note, and no doubt the elimination of subsidies alone will not be enough to combat the grinding poverty that is so prevalent in the developing world. But it would do a lot to level the playing field and give resources and products from the developing world a fighting chance in the global market.

“Subsidy reform alone will not resolve all the challenges facing the cotton sector,” Oxfam said. “But it could significantly ease the burden on poor cotton farmers struggling to support their families.”