Category: International Trade

The children of the Chinese One-child policy are finding new obstacles in their paths: no one wants to hire them. Incredible, but true. It seems that many of the only children have been so pampered by their parents, that employers do not find them suitable workers. Some have called these children, "Little Emperors," because their parents dote on them so thoroughly. Evidently, this is not good preparation for working in the global economy!

Recently, China Daily reports, the Sinohydro Engineering Bureau No. 1 in the central province of Henan held a job fair for students majoring in hydro-electricity. But when Chen Fengxin expectantly handed over his resume, it was not murmurs of approval he heard but these questions: "Are you from a village? Do you have any brothers and sisters?" If he was from a city, and especially if he was an only child (as city children are more likely to be), the recruiter was not interested. Chen was stunned.

A female representative of the hydro scheme explained to a local paper: "Students from cities and only children cannot endure the hardships incurred in the process of geological exploration. Brain drain is rife," she said, adding that parents of only children hope their offspring can stay close to them and not work too far away.

Just another hidden cost of China’s aggressive population control program.

Cross posted at my blog.

Transparency International is a group devoted to exposing corruption of all kinds. One of the most sickening forms of corruption in many poor countries is health care corruption. One sort of corruption is absentee-ism: medical personel bill for their services even when they aren’t at work, but are doing another job.

The increasingly large and legal market for pharmaceutical drugs is attracting criminal activity. Pharmaceuticals are high value and easily portable, and the penalty for stealing or smuggling them is far lower than for narcotics, so trade is brisk. This is especially the case in Africa where borders are porous to those prepared to pay bribes. Furthermore pharmaceutical markets are segmented internationally since companies recouping research and development costs want to charge efficient prices in vastly different settings for products with very low marginal costs. Antiretrovirals (ARVs) to treat HIV have 20-fold price differentials between western and African countries, which mean illegal but massive arbitrage possibilities exist for smugglers.

Once again, lack of virtue retards economic development.

This article, by California Western School of Law Professor James Cooper concerns me quite a bit. A legal specialist in Rule of Law, Cooper has been trying to establish legal reforms in Mexico that would make its judicial system more transparent. He isn’t getting anywhere:

By implementing more transparent, efficient and
participatory criminal judicial procedures, there may exist a better sense of fair play in judicial proceedings, and a reduction of instability and unpredictability. But that would require some action on the Mexican government’s part.
Last year, I constantly heard the mantra that
“It’s an election year,” code for “Don’t hold your breath for change.” Reforming Mexico’s justice system, with both high-and low-level corruption, according to Transparency International, coupled with a complete mistrust of law enforcement officials and the judiciary, would have to wait.
So would any sense of closure concerning the more than 300 murders of women, many of them working in the maquilas that dot the border town of Ciudad Juarez. So would the endless numbers of defendants languishing in Mexican jails, without charge or even evidence of crimes for which they had been detained. So would charges against the rich and powerful elite who enjoy an impunity seen in places such as Colombia and elsewhere throughout the region.

Once again, virtue, or lack thereof, is the determining factor in a country’s economic success. His indictment of the country’s elites is particularly damning:

Mexico’s upper class has demonstrated little interest in making things better even though its members are the ones getting kidnapped, forcing them to send their children to school with armed guards. Instead, they are making the move stateside, buying up homes in La Jolla, condominiums in Coronado and frequenting Fashion Valley. …
In the meantime, the country only a few miles away with its hard-working people, will continue to languish in a society riddled with public insecurity, public distrust and private enrichment. Mexico and Mexicans deserve better.

I agree.

I have been quite concerned for some time about the shrill debate over illegal immigration and its potential fallout for free trade. I have argued, at Acton events and elsewhere, that no long-term solution to the flow of illegal immigration from Mexico is possible, without significant economic growth in Mexico. U.S. per capita GDP is 6.5 times greater than the Mexican per capita GDP. The public service infrastructure in the US is far superior to that in Mexico. Taken together, a Mexican, even uneducated and working at the worst jobs in America, can substantially improve his standard of living in the US. Until something is done to equalize the incomes, the pressure for immigration, legal or otherwise, will be enormous.

Therefore, I was relieved to hear that Senator John Cornyn is proposing a North American Investment Fund to improve the infrastructure of Mexico. At the same time, I am distressed to see so many conservative publications denouncing this and other moves as attempts to compromise US sovereignty. See here and here, for instance. I am at a loss: if we want to control immigration, we have to do something about the earnings gap. If every attempt to help Mexico through free trade or infrastructure support is attacked as an affront to US sovereignty, what exactly do these people think is going to help?

Blog author: kschmiesing
Tuesday, August 29, 2006
By

Tension between China and Taiwan is one of the more troubling matters in geopolitical affairs. Now AsiaNews reports that trade between China and Taiwas increased by 15 percent in the first half of 2006.

It’s been said that “where goods cross borders, armies don’t,” a reference to the fact that historically nations with commercial ties rarely go to war against each other. Without reading too much into one trade report, it may be a hopeful sign for the prospects of peace in southeast Asia.

From the “why didn’t we think of that first” department:

The trade which can lift peoples out of poverty is assailed from many directions. A motley assortment of protectionists and anti-capitalists use every argument they can lay their hands on to protect their interests. From the CAP to ‘food miles,’ the effect is to deny poorer people the chance to gain wealth by selling us what they produce. Those who embrace free trade as an instrument of good can now express their support for poorer peoples by proclaiming an intention to buy their produce.

Yes, you can now have your own trendy wristband to show your support for free trade, courtesy of the Adam Smith Institute.

Blog author: kschmiesing
Thursday, August 10, 2006
By

US News and World Report has a little feature on a drapery company that has expanded into more distant markets and thereby grown. The article identifies trade agreements and technology as paving the way for such expansion by many small, local businesses.

Decreasing tariffs and regulation and improving technology—these are examples of what economists call “lowering transaction costs,” which improves efficiency and benefits producers and consumers alike.

The US News article highlights an American business, but, even more crucially, opening international markets also helps producers in the developing world.

Unlike the flooded market for conventional coffee products, the specialty coffee market enjoys increasing demand along with limited supply. This means that the potential exists for developing countries to increase the quality and quantity of their coffee production to meet the demand.

Rwanda is a case in point, and shows how market pressures help to effectively and efficiently signal which and in what quantity such commodities should be produced. As Laura Fraser writes in The New York Times, “From the late 1960’s until the genocide, most of Rwanda’s coffee was sold to Rwandex, a virtual monopoly controlled by the postcolonial government, for whatever price the company would offer, so farmers had no incentive to pick out the bad cherries.”

The government monopoly stifled any incentives to innovate and improve quality, since there was no potential for increased profits. More recently, however, under the administration of President Paul Kagame, the coffee industry has been liberalized and Rwandan growers are now enjoying the increased ability to compete freely with other specialty growers around the globe.

Over the last decade, “Worldwide, overproduction of high-yielding varieties caused conventional coffee prices to bottom out, but specialty coffee prices remained relatively strong. President Kagame liberalized coffee trade, sold the government’s interest in Rwandex and began working with A.I.D. to develop specialty coffee.”

According to the International Coffee Organization, Rwanda’s production of coffee has remained relatively steady between the years 2000-2005. But with the increased competitive incentives and profit motivations, the quality of Rwandan coffee has blossomed.

Writes Fraser, “Partly because of abundant labor, which allows farmers to pick through and hand-sort cherries, the coffee that goes to market is exceptionally clean, or free of imperfect beans.”

“Geoff Watts, who oversees coffee buying for Intelligentsia Coffee and Tea Inc., a premium roaster based in Chicago, said, ‘Rwanda’s gone from zero to sixty, from a complete unknown in the specialty coffee industry to becoming the source of some of the cleanest coffees in East Africa.'”

“Five years ago, all Rwandan coffee sold at the C-grade, or lowest-quality, price. Now, demand for fully washed Rwandan coffee (about 7 percent of the crop) far exceeds supply.”

The liberalization and opening the Rwandan market to freely compete has allowed the specialty coffee industry to thrive, without artificial incentives of “fair trade.” The incentives of the market are helping reward an area that has natural resources well-fit for the production of quality coffee. Coffee exports now account for about thirty percent of Rwanda’s exports, or about $35 million.

From the abstract of a new paper from the NBER, “Globalization and Poverty,” by Ann Harrison:

“This essay surveys the evidence on the linkages between globalization and poverty. I focus on two measures of globalization: trade and international capital flows…. The collected evidence suggests that globalization produces both winners and losers among the poor. The fact that some poor individuals are made worse off by trade or financial integration underscores the need for carefully targeted safety nets.”

Yes, I realize that no one likes the current version of the Comprehensive Immigration Reform bill. But it is possible to make constructive changes without being comprehensive. Here are a couple of recent examples:

1. Assimilation needs to be a priority. The Administration just formed a Task Force on New Americans to help legal immigrants become more fully Americanized. Whether the Task Force will do anything substantial remains to be seen. But it is encouraging that someone in the Adminstration understands that this is an important issue.

2. New rules requiring documentation of legal status for Medicaid go into effect on July 1. There will be problems of course. (The story linked is basically all about how difficult it will be for people to come up with the required documentation, even for people who are here legally and are entitled to Medicaid.) But the principle is sound: enforce the law we already have. The documentation problems can and should be addressed.