Posts tagged with: trade

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.

Last Friday, the New York Times editorialized in critique of American tariffs, which it says “raise the price of goods and are all too often based on outdated political considerations that defy logic and good sense.”

Huzzah!

A couple weeks ago the NYT magazine ran a piece by contributing writer Tina Rosenberg, which attempts to outline some of the ways in which “everyone in a wealthy nation has become the beneficiary of the generous subsidies that poorer countries bestow upon rich ones.”

What does she mean? In “Reverse Foreign Aid,” Rosenberg asserts that there are five major forms of poor-to-rich international subsidy. The first is the tendency among poorer nations to build-up great reserves of hard currency, often in the form of T-bills. The problem here is that there is an opportunity cost in holding the low-return but ultra-secure US Treasury bills: “All the money spent on T-bills — a very substantial sum — could be earning far better returns invested elsewhere, or could be used to pay teachers and build highways at home, activities that bring returns of a different type.”

A second form of subsidy is in the WTO requirements that member nations abide by copyright and intellectual property protections. “There are good reasons for countries to respect intellectual property, but doing so is also an overwhelming burden on the poorest people in poorer countries,” writes Rosenberg.

So-called “tax holidays” form a third kind of subsidy, in which poorer nations offer tax incentives and various other breaks to multi-national corporations to entice them to bring their operations to their country. Rosenberg writes, “Since deals between corporations and governments are usually secret, it is hard to know how much investment incentives cost poorer countries — certainly tens of billions of dollars. Whatever the cost, it is growing, as country after country has passed laws enabling the offer of such incentives.”

Rosenberg also describes brain drain as a form of subsidy, in which skilled professionals who are trained in poorer nations emigrate to wealthier ones. She also points out the adverse effects that domestic subsidies of various industries, such as agriculture, can have on poorer nations. Somehow or other this direct subsidy becomes a “reverse subsidy” because “corn, rice or cotton exported by rich countries is so cheap that small farmers in poor countries cannot compete, so they stop farming.”

And finally, Rosenberg calls the disproportionate negative effects of climate change on poorer nations the “ultimate subsidy.” She writes, “American energy use is being subsidized by tropical coastal nations, who appear to be global warming’s first victims.”

The essay is really a bit uneven. It’s hard to fathom why, for example, cheaper imports of agriculture commodities from wealthier nations should be seen as “reverse” subsidies. Just because a certain practice or policy negatively affects a poorer country doesn’t mean that it is a “reverse” subsidy. And just because wealth is created in the first world doesn’t mean that it comes at the expense of someone in the third world, although there are good reasons to see that Rosenberg is right about the consequences on agricultural sectors in developing nations.

With respect to the second form of “reverse subsidy,” Rosenberg is really describing a kind of competition between developing nations, and the beneficiaries aren’t so much wealthier governments but large multi-national corporations. Of course, many critics of the developed world can’t or won’t distinguish between these two (all the better to fit into the picture of a growing neo-liberal “empire”).

Brain drain is a real problem for the developing world, but as is the case with so many of these instances of “reverse subsidy,” Rosenberg is pointing to a legitimate issue or concern but failing to ask the right kinds of questions, and thus providing some questionable solutions (a neo-Keynesian answer for T-bill stockpiling?). Why, for instance, are professionals leaving developing nations to work in places like the United States? In many, if not most, cases money surely is a motivation. But there certainly are other factors at work, and the potential for greater income isn’t a sufficient explanation as to why so many people leave their home, friends, and family to go live in a foreign country. Indeed, large-scale migration out of a nation is a pretty reliable indicator that something is wrong in the native country.

And maybe the fact that poorer nations don’t respect copyright and IP rights is as much a contributor as it is an effect of their lower economic status. How can you expect to be a country that fosters innovation if there are no legal protections for innovation and invention?

A recent NBER paper, “Globalization and Poverty,” examining some of these issues makes the case that globalization is a complex phenomenon and that in some cases segments of the poor can be made worse off. This is no doubt true, and the merit of Rosenberg’s piece is that it points out some of the real-world issues that a globalized economy faces. The question remains, however, whether at least some of these negative effects might be mitigated by a freer and more liberalized system of trade rather than one which relies on subsidies, tariffs, and protectionism.

Blog author: jspalink
posted by on Wednesday, February 7, 2007

Make trade, not war? In an excerpt from his new book “The Commercial Society,” Sam Gregg examines the long held view that nations engaged in trade are less likely to wage war. He notes that nations which are busy with commercial pursuits, instead of war making, may also be more vigilant about “protecting the fabric of freedoms upon which commercial societies depend.”

Read the commentary here.

Blog author: kschmiesing
posted by on Tuesday, August 29, 2006

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.

Blog author: jspalink
posted by on Wednesday, April 19, 2006

As Earth Day approaches (April 22), Jordan Ballor reflects on the Kyoto Protocol and some of the results of the “market-based” incentives promised to those who signed on. The Kyoto Protocol created a carbon trading system, a “cap and trade” mechanism where a set number of carbon credits were established based upon the 1990 levels of emissions from the involved countries. These credits could then be sold or bought from other countries.

So what is the problem? As Ballor explains, Kyoto is having “some unintended consequences.” “Russia,” writes Ballor, “currently one of the world’s worst pollutors and emitters of greenhouse gasses, is being rewarded by the carbon credit scheme.” Russia is able to maintain current “efficiency” levels, not curbing their pollution or emissions at all, and still has carbon credits worth some $1 billiion. The so-called market incentives are completely ineffective.

Read the rest of “Cashing in on Carbon Credits” for Ballor’s full critique of the cap and trade scheme that Kyoto has initiated.

Blog author: jspalink
posted by on Thursday, April 13, 2006

When I was in college, living in the dorms, friends of mine would play a game called bigger and better. In this game, they would take an object–something that they owned–and trade it up for something that was worth a bit more to them, but worth a bit less to the person that they were trading with.

This is a perfect example of a market economy. You have something that you can trade, somebody else has something that they can trade, and both parties are better off for the transaction. My friends could go out with a pen and come home with a couch for the dorm. Don’t get me wrong, they weren’t always this successful. It usually involved a little bit of time, but it made for a fun Saturday afternoon.

Then I found this website, a blog, where a man documents his game of bigger-and-better. He started out with a little red paper-clip. Right now he’s looking to trade one year in Phoenix (which includes one year free rent in the heart of downtown Phoenix. [If needed, the apartment can also come fully furnished] and roundtrip airfare for two from any major airport in North America) for something bigger-and-better. His goal is to own a house at the end of his game.

A small example of how having something of little value to yourself doesn’t mean that you can’t leverage what you have on the market to find something of greater value to yourself.