Archives: 03/2014

Free Trade: Do It for the Children

Here’s a WSJ article describing a Chinese investment in France, made for the purpose of exporting back to China:

Mayor Christian Troadec is trying a new formula to revive his sleepy town in central Brittany: quenching Chinese thirst for baby milk.

On a recent damp morning at exactly 08:08—a lucky number in Chinese culture—workers broke ground on a 37-acre tract the municipality sold to Synutra International Inc., one of China’s top 10 baby-formula makers, to build a milk plant.

“In Brittany, we produce some of the world’s best-quality milk but we don’t have enough [economic] activity,” said Mr. Troadec, walking the muddy field where a dozen Caterpillar bulldozers and other earth movers lined up to start laying the foundation for the factory.

Synutra is investing €90 million ($125 million) to build what will be the region’s largest milk-drying factory and the first infant-formula plant on French soil entirely in the hands of a Chinese company.

The plant feeds two needs. China’s voracious demand for infant formula is surging as the middle class flourishes. But since a 2008 scandal, when Chinese-made formula tainted with the industrial chemical melamine killed six infants and sickened 300,000, parents have preferred to buy formula from well-known Western brands. Now, dairy companies in China, already the world’s largest importers of milk, are racing to win back consumers by tying up with producers abroad.

At the same time, Chinese investment offers a lifeline to Brittany, a farmland on the western tip of Europe that has been hurt by the unwinding of European subsidies.

Synutra plans to ship the entire output from its new plant swiftly to China. The company teamed up with French dairy cooperative Sodiaal to secure access to 300,000 million liters of milk a year over the next decade—the entire milk production of farmers within a radius of 20 kilometers of Carhaix—and 30,000 tons of whey, all of which will be transformed into dried baby milk and sent by boat.

So it’s a win-win. France gets investment; Chinese consumers get high quality products, for babies nonetheless.  It can help to put a human face on free trade, especially when it’s this one:

 

WaPo Blogger Wrong About School Choice… Again

Once again, the Washington Post’s education blogger, Valerie Strauss, failed to do her due diligence before posting a hit piece on school choice. A year ago, she falsely claimed that scholarship tax credit programs benefit corporate donors and wealthy recipients. In fact, donors break even at most and the best evidence suggests that low-income families are the primary beneficiaries even in the few programs that are not means-tested. Unfortunately, Strauss has still failed to issue a correction.

Now Strauss has posted an op-ed from an anti-school choice activist in Florida that contains numerous additional errors, which the good folks at RedefinED.org have thoroughly debunked, including the following canard:  

Any way you look at it, private entities receive public tax dollars with no accountability.”

One can certainly debate whether there is sufficient accountability, but there is certainly more than none. All scholarship students take state-approved nationally norm referenced tests such as the Stanford 10 or Terra Nova. The gain scores are reported publicly, both at the state level and for every school with 30 or more tested scholarship students. Additionally, schools with $250,000 or more in scholarship funds must submit independent financial reports to the state.

Not only did the op-ed’s author fail to correctly explain the law, she failed to understand that school choice is accountability. As explained in an open letter that the Cato Institute recently issued along with the Heritage Foundation, Friedman Foundation for Educational Choice, and others: “True accountability comes not from top-down regulations but from parents financially empowered to exit schools that fail to meet their child’s needs.” 

Moreover, the claim that “private entities receive public tax dollars” is also false. The money flows from private donors to private nonprofits to private citizens to spend on their children’s tuition at private schools. That the donors receive a tax credit does not transmogrify their donation into “public” money. Indeed, the U.S. Supreme Court ruled that this view erroneously “assumes that income should be treated as if it were government property even if it has not come into the tax collector’s hands. Private bank accounts cannot be equated with the … State Treasury.” Likewise, neither tax deductions for donations to a church nor the church’s own property tax exemption mean that churches are therefore funded by “public tax dollars.”

The Washington Post has an in-house fact-checking team. They should not have to rely on RedefinED.org or others to ensure the veracity of what their bloggers post. 

Putin’s Animal Farm

In today’s Washington Post, Pamela Constable describes the scene in Crimea, and it reminds me of George Orwell’s Animal Farm.

Vladimir Putin is playing the starring role of Napoleon the pig. To consolidate his power, Putin is employing menacing dogs, just as Napoleon did. Constable writes:

As the referendum approached, the capital was calm, but the streets were filled with a swelling number of stocky security men on corners and outside government facilities … For the most part, they stood around looking tough, but their mere presence was intimidating …

As on Orwell’s farm, Crimea has a few skeptical donkeys, but most people are apparently gullible sheep:

Occasionally, I met someone who questioned the official line … One was a stocky former soldier in his 50s named Volodya who was downing shots of vodka between bites of potato salad at a working-class cafe. “They say my pension will go up, but so will this meal,” he said. “People in a crowd tend to hear slogans and get excited.”

In Orwell’s book, the animals are propagandized with “four legs good, two legs bad.” In Crimea, people are being told that the folks in Kiev have two legs. Constable talked to one person who: “confided that his parents had been won over by the barrage of pro-Russian propaganda warning of fascist threats from Kiev. ‘They told me to be careful and not to associate with people there,’ he said with chagrin. ‘It is like a demon that possesses people and they are no longer able to think.’” 

Finally, the Russian national anthem is stirring the nationalist sole in Crimea, just as “Beasts of England” did on Animal Farm. Constable says:

Even if you don’t know the lyrics, the state anthem of the Russian Federation is one of the most stirring national anthems ever written. This week, on assignment in Crimea, I heard it in full rousing splendor, sung by a chorus of uniformed young men standing at attention, and I had to catch myself from being swept up in the moment.

The Administration’s Plan to Kill Elephants and Treat Americans as Criminals

Today the Advisory Council on Wildlife Trafficking is meeting near the nation’s capital to plot the administration’s impending ban on ivory sales. The plan is typical for counterproductive government regulation.

The panel’s proposals would accelerate the slaughter of African elephants and turn millions of law-abiding Americans into criminals. The Council also would destroy hundreds of millions of dollars worth of property legally acquired by everyone from antique dealers and restorers to tourists and retirees.

Elephants are magnificent creatures—intelligent, social, and expressive—and threatened by widespread poaching. Unfortunately, international activists sometimes appear more interested in feeling virtuous than in deterring poaching. In 1989 an international convention outlawed the sale of new ivory.

Unfortunately, the ban increased the price of ivory, which remains in high demand, especially in Asia. Daniel Stiles of the IUCN/SSC African Elephant Specialist Group explained: “The inconvenient truth is that the CITES ivory trade ban and [subsequent CITES] votes to cut off legal raw ivory supplies are the real causes of the recent elephant holocaust.”

Yet the U.S. Fish and Wildlife Service plans what it calls “a nearly complete ban on commercial elephant ivory” trade.

Government Infrastructure Is Inefficient Everywhere

An op-ed in the Wall Street Journal today indicates that Edwards’ Law of Cost Overruns is an international standard. If a politician says that a project will cost $100 million, it will end up costing $200 million or more.

The WSJ piece by Bent Flyvbjerg and Atif Ansar examines the results of an Oxford University study looking at 245 dam projects around the world. The projects had a “dismal track record” in terms of sticking to their promised budgets. The “actual construction costs of large dams are globally on average 96 percent higher than their budgets,” say Flyvbjerg and Ansar. That means a doubling, which is right in line with Edwards’ Law.

Rachel Maddow has drawn the lesson from Hoover Dam that big government projects are really great. But Flyvbjerg and Ansar describe a more typical government project: “Brazil’s Itaipu Dam was built in the 1970s. It cost nearly $20 billion, 240 percent more in real terms than predicted and it impaired Brazil’s public finances for three decades.”

I’ve written in detail about the history of U.S. government dam building, which has been chock-full of economic and environmental mismanagement. One reason for large cost overruns is that policymakers lie or conceal. I wrote that the Bureau of Reclamation “began constructing the Grand Coulee Dam with $63 million in funding from Congress, but it later became clear that the agency had a $270 million project in mind.” And I wrote regarding Jerry Brown’s father that “in pushing for approval of the huge State Water Project in California in 1959, Gov. Pat Brown kept throwing out a bogus cost estimate of $1.75 billion, even though he knew it would cost far more, as he later admitted.”

Liberals, such as Maddow, who hunger for big government infrastructure projects would cure their misguided lust by reading Cadillac Desert. Written by an environmentalist, I think it is one of the best public policy books of recent decades.

I’ve written about government cost overruns here, partly drawing from Flyvbjerg’s excellent research on the topic.

While You Fill Out Your Bracket, Chris Christie Busts the NCAA’s Racket

After considerable debate, the Founding Fathers elected to give the new federal government the power of regulating commerce among the several states. We’ve all seen what’s become of that power, but in the beginning, giving the federal government the ability to regulate—literally, to “make regular”—interstate commerce made good sense as a way to avoid the otherwise inevitable collective-action problems, like trade wars and anti-competitive jockeying for monopolies. The goal was to ensure that federal law would not permit or bestow any unfair competitive advantage to any one state or group of states over the others.

Throughout much of our nation’s history, the federal government has, for the most part, succeeded at this particular goal. Thanks to the Professional and Amateur Sports Protection Act of 1992 (PASPA), however, Congress’s power to keep states from obtaining unfair advantages is being used to grant some states (most notably Nevada, but also Oregon, Montana, and Delaware) an unfair advantage: a special right to license gambling, which PASPA prohibits to other states.

In 2012, New Jersey Governor Chris Christie signed a sports-gambling bill into law, and as a result was sued by the NCAA, NFL, MLB, NHL, and NBA, who believed that additional sports betting would result in corruption and game-fixing. Christie defended his actions by arguing that PASPA violates the 10th Amendment by restricting New Jersey’s right to govern itself, and also that it violates the equal-sovereignty doctrine by giving an unfair advantage on certain states.

The federal district court and the U.S. Court of Appeals for the Third Circuit failed to recognize these constitutional flaws, so New Jersey has now asked the Supreme Court to hear its case. Cato has joined the Pacific Legal Foundation on a brief supporting New Jersey’s petition.

We explain that the principle of equal sovereignty was central to the creation of Congress’s power to regulate interstate commerce, and that conferring state-specific advantages is precisely opposite to the federal power that the Framers created. We think it important that the Supreme Court hear this case because it offers an excellent opportunity to explain the equal-sovereignty doctrine and how it furthers federalism, and to provide guidance as to the scenarios in which the doctrine applies. Congress shouldn’t be able to pick winners and losers among the states.

The Supreme Court will likely decide whether to take the case of Christie v. NCAA before recessing for the summer at the end of June.

This blogpost was co-authored by Cato legal associate Julio Colomba.