Archives: December, 2010

If Only the USTR Were This Enthusiastic about Liberalizing Trade

There was really never any doubt that the United States would prevail in the dispute brought by China to the World Trade Organization over President Obama’s decision last year to levy duties on tire imports from China. The WTO verdict, revealed yesterday, simply affirms that the administration acted in accordance with U.S. WTO commitments—and leaves to others, such as myself, to conclude that the duties were a highly political act perpetrated with utter contempt for the significant economic and diplomatic costs of those actions.

Thus, “prevailing” in the WTO case should not be considered a source of universal joy for all Americans or even most Americans, as one might infer from the reaction of U.S. Trade Representative Ron Kirk, who jubilantly proclaimed, “This is a major victory for the United States and particularly for American workers and businesses.” Really, Ambassador Kirk? Tell that to the American workers and businesses involved in importing, trucking, wholesaling, retailing, and installing those Chinese-made tires. Tell it to the American workers and businesses who also happen to be U.S. tire consumers and are now lighter in their wallets or dangerously riding on worn treads as a result of the duties. Feel free to ask the workers and businesses in the U.S. poultry and auto parts industries—against whom the Chinese imposed antidumping duties immediately after the tire tariffs took effect—how they feel about having “prevailed.”

In fairness to Ambassador Kirk, in addition to working to open markets abroad, the USTR’s office is tasked with prosecuting challenges of our trade partners’ allegedly non-compliant policies and actions, as well as defending challenges to allegedly non-compliant U.S. policies and actions at the WTO. In that regard, warding off a challenge from China of the U.S. Section 421 law constitutes, arguably, a victory for the USTR’s office. But to be clear, Section 421 is a blatantly protectionist law that serves, at best, a sliver of the U.S. population slightly broader than the U.S. Congress.

As part of its WTO accession agreement in 2001, China agreed to allow the United States and other WTO members to treat it differently—indeed, discriminatorily—on several matters for a number of years after it joined the WTO. The China-Specific Safeguard mechanism (known legally as Section 421 of the Trade Act of 1974 and under which the tire tariffs were implemented in September 2009) authorizes the United States to impose duties if there is a surge in imports from China that is causing or threatening market disruption in the United States. Market disruption exists “whenever imports of an article like of directly competitive with an article produced by a domestic industry are increasing rapidly, either absolutely or relatively, so as to be a significant cause of material injury, or threat of material injury, to the domestic industry.” In other words, if U.S. industry is suffering the effects of normal competition—that is, if it must compete against more capable or more efficient foreign competitors—then the firms or workers in the U.S. industry can petition the U.S. government to raise those competitors’ prices through the imposition of trade restraints.

It is also important to appreciate what Section 421 is not. Contrary to the rhetoric of too many politicians, trade lawyers, and union bosses, 421 is not an “unfair trade” statute. Unlike the antidumping and countervailing duty laws, a Section 421 case does not include allegations of prices at less than fair value or prices that benefit from countervailable government subsidies. The evidentiary threshold is much lower. All that is alleged-and all that has to be established-in a 421 petition is that imports from China are increasing in such a manner as to be a cause of market disruption (or threat thereof) to the domestic industry.

Section 421 is not intended to remedy any wrongdoing on the part of Chinese exporters, but is intended rather to give U.S. producers the opportunity to holler “time out!” as they catch their breath, assess prospects, and attempt to adjust to a new level of competition. Of course there are huge costs to this kind of intervention in the marketplace, thus the president is granted discretion, under the law, to deny relief if he determines that the costs to the broader economy clearly exceed any benefits to the petitioning industry. While such discretion provides some comfort that the law’s relaxed evidentiary standards won’t be routinely abused by domestic interests seeking to stifle competition, there are no guarantees that the president’s discretion will be based exclusively on considerations of the national economic interest. If there were, it would be nearly impossible to conjure a scenario in which the concentrated, temporary benefits to a specific industry receiving protection were not overwhelmed by the costs of that protection on the broader economy. Political considerations always influence decisions that lead to protection.

Yesterday’s WTO decision was arguably a victory for the rule of law in international trade—but also a reminder that politicians write the rules of trade, including some that are so antithetical to its purpose. I would be willing to cut Ambassador Kirk more slack for his jubilation if he were to find religion on the WTO and abide the rulings–such as on zeroing, gambling, and cotton subsidies–that his (and his predecessors’) office has lost.

Privatizing Roads

A major shortcoming of the deficit reduction plan concocted by the president’s Fiscal Commission is that it assumed that the federal government should continue doing everything it currently does. For example, the plan proposed a 15 cent per gallon increase in the federal gasoline tax to fund infrastructure projects. But why not allow the private sector to play a greater role in financing and maintaining infrastructure like roads?

That’s the topic of a new Reason TV video:

In the video, Bruce Benson explains that America has a strong history of privately-provided roads. Unfortunately, because government has come to dominate road construction, most citizens probably don’t stop to consider that the private sector can provide superior alternatives.

As Benson points out, a chief problem with government roads is that they foster armies of lobbyists and special-interests who agitate for more and more taxpayer money. Policymakers try to steer transportation dollars to their districts and states, which inevitably results in money going to projects that make little economic sense. With a private road, it has to make economic sense or it won’t get built.

Another problem is that the federal government places costly burdens on the state and local recipients of the funds. ABC News recently had story on a new federal regulation – contained in an 800 page book – that requires local governments to change the fonts on their street signs to make them easier to read. The article says that the requirement will cost Milwaukee $2 million alone, or twice the city’s annual traffic control budget.

Not surprisingly, special-interest groups had a hand in getting the federal government to implement the regulation:

The American Traffic Safety Services Association – which represents companies that make signs and the reflective material used on them – lobbied hard for the new rules.  And at least one key study used to justify the changes was funded by the 3M Corporation, one of the few companies that make the reflective material now required on street signs.

See this Cato essay for more on why federal highway funding should be abolished.

Take Your Stinking Paws Off My Benjamins You Damn Dirty Statist

Okay, perhaps the title of this post is not quite as memorable as Charlton Heston’s famous line from Planet of the Apes, but it certainly captures my sentiments after reading an article in Slate that calls for the elimination of the $100 bill. The author, Timothy Noah, says that large bills are only for “criminals and sociopaths.” Here’s the crux of his argument.

…why does the U.S. continue to print C-notes…? Technological change has reduced much further the plausible need of any law-abiding American to carry a C-note in his wallet or to stash a pile of C-notes in his mattress.

Noah’s argument is unconvincing for several reasons. First, he is underestimating the degree to which “law-abiding” Americans use “Benjamins.”  And with higher inflation almost certainly around the corner, one can safely expect that $100 bills will become even more common in the future. Second, his entire argument rests on the statist assumption that government should restrict honest people because this will somehow make life more difficult for criminals. Yet he debunks his own anti-money laundering argument by noting that the government already has stopped printing larger bills, such as the $500 note. Has that stopped the drug trade? Hello? Anyone? Bueller?

Like much of what government does, the campaign against money laundering is a costly exercise with very few tangible benefits. This video examines the cost-benefit issues.

I actually think the moral arguments against anti-money laundering laws are even more powerful. As Americans, we should have a presumption of innocence in our daily lives. What business is it of government whether we want to carry $20 bills or $100 bills? And think about the implications of these laws. What if the government said we need to ban cars, or put government-monitored homing devices in all vehicles, because bank robbers occasionally use automobiles as getaway vehicles? In this case, there is a theoretical benefit to the policy, just like there is a somewhat plausible case for anti-money laundering laws, but presumably we would reject such a policy as too intrusive.

Anti-money laundering laws are a classic case of bad policy leading to more bad policy. The government passes drug laws that create huge profits for criminals. But rather than getting rid of victimless crimes, the government imposes policies that make life more difficult and costly for everyone else.

Selective Deficit Outrage

Sen. Mark Udall made the national news today with his excoriation of the Senate bill for not raising taxes. “A ticking time bomb,” he said:

“Just over one week ago, the Democratic and Republican chairmen of President Obama’s deficit commission called our national debt a ‘cancer’ that is threatening our country from within.  They are right.  A massive budget deficit and a crippling national debt are perhaps the most difficult challenges our government faces.  As Coloradans know, our national security depends on our economic security - and each is threatened by skyrocketing debt and irresponsible budgeting,” Udall said.

“Days after the most substantive national conversation we’ve had about addressing the debt, the debate suddenly has turned to extending tax breaks for millionaires and billionaires that - alone - will cost $700 billion over the next decade.  That’s $700 billion in additional debt that the United States will owe to China and our other creditors around the world - debt that our children and grandchildren will be forced to pay.  It’s a ticking time-bomb that needs to be defused.”

Senator Udall has apparently had a Road to Damascus experience on the national debt. After all, he voted for the $787 billion stimulus bill. He voted for the incalculably expensive health care overhaul. He gets an F from the National Taxpayers Union every year, voting only 8 percent of the time in the last session for fiscal restraint. He sponsored bills during the 110th Congress to raise spending by $75 billion a year.

Either he’s only just discovered the national debt problem in the past few weeks, or he thinks spending is not the problem – only a bill to not raise taxes is a “cancer” and “a ticking time-bomb.”

Yes, Madam Speaker, We’re Serious

During the initial legislative debate over ObamaCare, a reporter asked (now-outgoing) House Speaker Nancy Pelosi (D-CA) whether the U.S. Constitution grants Congress the power to compel Americans to purchase health insurance. Pelosi responded, “Are you serious? Are you serious?

Today, a federal court answered Ms. Pelosi’s question when it declared ObamaCare’s individual mandate unconstitutional.

Here is Pelosi’s statement responding to today’s court ruling in Cuccinelli v. Sebelius:

Pelosi Statement on Affordable Care Act Ruling in Virginia District Court

WASHINGTON, Dec. 13, 2010 /PRNewswire-USNewswire/ – Speaker Nancy Pelosi issued the following statement today after a District Court judge in Virginia ruled one provision of the Affordable Care Act unconstitutional. The judge refused to freeze implementation of the law during the appeals process, meaning Americans already benefitting from health insurance reform – or set to benefit soon – will not be affected:

“Today’s court ruling stands in stark contrast to 14 similar challenges to the Affordable Care Act – in two, federal district judges strongly upheld the law; in the other 12, the challenges have been dismissed.

“Since its enactment, health insurance reform has delivered concrete benefits to millions of Americans. Among provisions already benefitting the American people, it has offered small businesses a tax break to cover their workers, allowed young adults to stay on their parents’ plans until age 26, and provided assistance to seniors struggling to pay prescription drug costs. These changes are good for our middle class, and will not be impacted by this court’s decision to overturn a single provision of the law.

“There have been and will continue to be a wide range of attempts to weaken this law. But as in previous court rulings across the country, I am confident that the Affordable Care Act will ultimately be sustained and will keep benefitting our middle class, our families, and our businesses, indeed every American. In Congress, we will stand firm against attempts to roll back the law, including the Patient’s Bill of Rights and the critical consumer protections enacted by health insurance reform.”

SOURCE Office of the Speaker of the House

Note that Pelosi does not address the constitutional issue.

Good News and Bad on PATRIOT Reform

Late last week, Attorney General Eric Holder sent a letter to Senate Judiciary Committee Chair Patrick Leahy (D-VT) in which he agreed to implement an array of policies designed to check abuse of USA PATRIOT Act powers. These include more thorough record keeping and more disclosures to Congress, prompt notification of telecommunications companies when gag orders have expired, and updated retention and dissemination procedures to govern the vast quantities of information obtained using National Security Letters.

In itself, this is all to the good. But civil libertarians should pause before popping the champagne corks. Last year, the fight over the reauthorization of several expiring PATRIOT provisions opened the door to the comprehensive reform that sweeping legislation sorely needs to better balance the legitimate needs of intelligence and law enforcement against the privacy and freedom of Americans. Despite serious abuses of PATRIOT powers uncovered by the Justice Department’s Office of the Inspector General, no such major changes were made. Instead, Congress opted for a shorter-term renewal that will require another reauthorization this February—in theory allowing for the question of broader reform to be revisited in the coming months.

Many of the milder reforms proposed during the last reauthorization debate now appear to have been voluntarily adopted by Holder. Unfortunately, this may make it politically easier for legislators to push ahead with a straight reauthorization that avoids locking in those reforms via binding statutory language—and entirely bypasses the vital discussion we should be having about a more comprehensive overhaul. If that happens, it will serve to confirm the thesis of Chris Mooney’s 2004 piece in Legal Affairs, which persuasively argued that “sunset” provisions, far from serving as an effective check on expansion of government power, often make radical “temporary” measures more politically palatable, only to create a kind of policy inertia that makes it highly unlikely those measures will ever be allowed to expire.

With the loss of Sen. Russ Feingold (D-WI), who whatever his other faults has been the Senate’s most vocal opponent of our metastasizing surveillance state, the prospects for placing more than cosmetic limits on the sweeping powers granted since 2001 appear to have dimmed. If there’s any cause for optimism, it’s that the recent fuss over intrusive TSA screening procedures appear to have reminded some conservatives that they used to believe in limits on government power even when that power was deployed in the name of fighting terrorism.

The Current Wisdom

The Current Wisdom is a series of monthly posts in which Senior Fellow Patrick J. Michaels reviews interesting items on global warming in the scientific literature that may not have received the media attention that they deserved, or have been misinterpreted in the popular press.

The Current Wisdom only comments on science appearing in the refereed, peer-reviewed literature, or that has been peer-screened prior to presentation at a scientific congress.

History to Repeat:  Greenland’s Ice to Survive, United Nations to Continue Holiday Party

This year’s installment of the United Nations’ annual climate summit (technically known as the 16th meeting of the Conference of the Parties to the Framework Convention on Climate Change) has come and gone in Cancun. Nothing substantial came of it policy-wise; just the usual attempts by the developing world to shake down our already shaky economy in the name of climate change.   News-wise probably the biggest story was that during the conference, Cancun broke an all time daily low temperature record.  Last year’s confab in Copenhagen was pelted by snowstorms and subsumed in miserable cold.  President Obama attended, failed to forge any meaningful agreement, and fled back to beat a rare Washington blizzard. He lost.

But surely as every holiday season now includes one of these enormous jamborees, dire climate stories appeared daily.  Polar bear cubs are endangered!  Glaciers are melting!!

Or so beat the largely overhyped drums, based upon this or that press release from Greenpeace or the World Wildlife Fund.

And, of course, no one bothered to mention a blockbuster paper appearing in Nature the day before the end of the Cancun confab, which reassures us that Greenland’s ice cap and glaciers are a lot more stable than alarmists would have us believe.  That would include Al Gore, fond of his lurid maps showing the melting all of Greenland’s ice submerging Florida.

Ain’t gonna happen.

The disaster scenario goes like this:  Summer temperatures in Greenland are warming, leading to increased melting and the formation of ephemeral lakes on the ice surface.  This water eventually finds a crevasse and then a way down thousands of feet to the bottom of a glacier, where it lubricates the underlying surface, accelerating the seaward march of the ice.  Increase the temperature even more and massive amounts deposit into the ocean by the year 2100, catastrophically raising sea levels.

According to Christian Schoof of the University of British Columbia (UBC), “The conventional view has been that meltwater permeates the ice from the surface and pools under the base of the ice sheet….This water then serves as a lubricant between the glacier and the earth underneath it….”

And, according to Schoof, that’s just not the way things work. A UBC press release about his Nature article noted that he found that “a steady meltwater supply from gradual warming may in fact slow down the glacier flow, while sudden water input could cause glaciers to speed up and spread.”

Indeed, Schoof finds that sudden water inputs, such as would occur with heavy rain, are responsible for glacial accelerations, but these last only one or a few days.

The bottom line?  A warming climate has very little to do with accelerating ice flow, but weather events do.

How important is this?  According to University of Leeds Professor Andrew Shepherd, who studies glaciers via satellite, “This study provides an elegant solution to one of the two key ice sheet instability problems” noted by the United Nations in their last (2007) climate compendium.  “It turns out that, contrary to popular belief, Greenland ice sheet flow might not be accelerated by increased melting after all,” he added.

I’m not so sure that those who hold the “popular belief” can explain why Greenland’s ice didn’t melt away thousands of years ago.  For millennia, after the end of the last ice age (approximately 11,000 years ago) strong evidence indicates that the Eurasian arctic averaged nearly 13°F warmer in July than it is now.

That’s because there are trees buried and preserved in the acidic Siberian tundra, and they can be carbon dated.  Where there is no forest today—because it’s too cold in summer—there were trees, all the way to the Arctic Ocean and even on some of the remote Arctic islands that are bare today. And, back then, thanks to the remnants of continental ice, the Arctic Ocean was smaller and the North American and Eurasian landmasses extended further north.

That work was by Glen MacDonald, from UCLA’s Geography Department. In his landmark 2000 paper in Quaternary Research, he noted that the only way that the Arctic could become so warm is for there to be a massive incursion of warm water from the Atlantic Ocean.  The only “gate” through which that can flow is the Greenland Strait, between Greenland and Scandinavia.

So, Greenland had to have been warmer for several millennia, too.

Now let’s do a little math to see if the “popular belief” about Greenland ever had any basis in reality.

In 2009 University of Copenhagen’s B. M. Vinther and 13 coauthors published the definitive history of Greenland climate back to the ice age, studying ice cores taken over the entire landmass. An  exceedingly conservative interpretation of  their results is that Greenland was 1.5°C (2.7°F) warmer for the period from 5,000-9000 years ago, which is also the warm period in Eurasia that MacDonald detected.  The integrated warming is given by multiplying the time (4,000 years) by the warming (1.5°), and works out (in Celsius) to 6,000 “degree-years.” 

Now let’s assume that our dreaded emissions of carbon dioxide spike the temperature there some 4°C.  Since we cannot burn fossil fuel forever, let’s put this in over 200 years.  That’s a pretty liberal estimate given that the temperature there still hasn’t exceeded values seen before in the 20th century.  Anyway, we get 800 (4 x 200) degree-years.

If the ice didn’t come tumbling off Greenland after 6,000 degree-years, how is it going to do so after only 800?  The integrated warming of Greenland in the post-ice-age warming (referred to as the “climatic optimum” in textbooks published prior to global warming hysteria) is over seven times what humans can accomplish in 200 years.  Why do we even worry about this?

So we can all sleep a bit better.  Florida will survive.  And, we can also rest assured that the UN will continue its outrageous holiday parties, accomplishing nothing, but living large.  Next year’s is in Durban, South Africa, yet another remote warm spot hours of Jet-A away.

References:

MacDonald, G. M., et al., 2000.  Holocene treeline history and climatic change across Northern Eurasia.  Quaternary Research 53, 302-311.

Schoof, C., 2010. Ice-sheet acceleration driven by melt supply variability. Nature 468, 803-805.

Vinther, B.M., et al., 2009.  Holocene thinning of the Greenland ice sheet. Nature 461, 385-388.