Tag: wto

Did The U.S. Lose 2.4 Million Jobs from China Imports?

A major Wall Street Journal article claims, “A group of economists that includes Messrs. Hanson and Autor estimates that Chinese competition was responsible for 2.4 million jobs lost in the U.S. between 1999 and 2011.”  In a recent interview with the Minneapolis Fed, however, David Autor said, “That 2 million number is something of an upper bound, as we stress.” The central estimate was a 10% job loss which works out to 1.2 million jobs in 2011, rather than 2.4 million.  Since 2011, however, the U.S. added 600,000 manufacturing jobs – while imports from China rose by 21% – so both the job loss estimate and its alleged link to trade (rather than recession) need a second look.

“The China Shock,” by David Autor, David Dorn and Gordon Hanson examined the effect of manufactured imports from one country (China) on local U.S. labor markets. That is interesting and useful as far as it goes.  But a microeconomic model designed for local “commuting zones” cannot properly be extended to the entire national economy without employing a macroeconomic model.  

For one thing, the authors look only at one side of trade – imports – and only between two countries.  They ignore rising U.S. exports to China - including soaring U.S. service exports to China.  They are at best discussing one side of bilateral trade. And they fail to consider spillover effects of China’s soaring imports from other countries (such as Australia, Hong Kong and Canada) which were then able to use the extra income to buy more U.S. exports. 

Autor, Dorn and Hanson offer a seemingly rough estimate that “had import competition not grown after 1999” then there would have been 10% more U.S. manufacturing jobs in 2011.  In that hypothetical “if-then” sense, they suggest that “direct import competition [could] amount to 10 percent of the realized job loss” from 1999 to 2011. 

Green Energy Cronyism Strikes Out Again at the WTO

Yesterday, a dispute settlement panel at the World Trade Organization released an official report finding that local content requirements in India’s solar power scheme violate global trade rules.  The ruling condemns a particular protectionist policy that dilutes the effectiveness of solar subsidies by diverting them to inefficient domestic manufacturers.  The case is one more example of how global trade rules help to prevent green energy initiatives from becoming expensive crony boondoggles.

Although the report was just released, we’ve known what the outcome would be since last September.  At the time, I wrote about how India’s local content requirement harms its own green energy initiative:

The ruling ought to be celebrated by advocates of solar power.  The local content requirement acts as a drag on the program by making solar power plants more expensive to build.  Allowing solar energy producers to purchase panels on the global market not only reduces prices for those producers, it also furthers the development of efficient supply chains for solar panel production.

Predictably, however, some green groups are not happy with the decision.  According to the Sierra Club, “the WTO has officially asserted that antiquated trade rules trump climate imperatives.”  They’re fully committed to the idea that—contrary to the lessons of history and economics—full-fledged green industrial policy will lead to a future of “100 percent clean energy.”  They believe filling the economy with “green jobs” is politically and economically necessary to achieve their environmental goals.


How To Get Back To Multilateral Trade Liberalization: Cut Agriculture Subsidies!

Recent discussions of trade negotiations have focused on the Trans Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP), often referred to as “mega-regional” trade talks.  But most economists and other trade experts agree that trade liberalization would be more beneficial if done on a multilateral basis, at the World Trade Organization (WTO).  There are talks going on at the WTO, referred to as the Doha Round, but they started in 2001 and are widely seen as not likely to achieve much.

What would it take to get WTO liberalization going again?  There are lots of theories on this, but my view is that it’s really pretty simple:  The major trading countries need to propose significant liberalization.  That hasn’t happened yet, and that’s why there has been so little progress.

TTIP Is More Likely to Reinvigorate Than Subvert the WTO

In his Cato Online Forum essay, Georgetown University law professor Joost Pauwelyn deftly rebuts some of the central – but, as you will be convinced, outdated – objections to the Transatlantic Trade and Investment Partnership. Joost’s essay supports two main points:

First, the Transatlantic Trade and Investment Partnership (TTIP) is less of a threat to multilateral trade than were first generation free trade agreements (FTAs), which involved a proliferation of preferential tariff treatment.  And second, unlike these shallow FTAs, deep FTAs – such as TTIP – force us to re-think the operating system of the World Trade Organization (WTO).

Thoughout his presentation, Pauwelyn challenges certain long-held assumptions about the trade-diverting effects of preferential trade agreements, making a compelling case for why TTIP is a different animal.  He also exposes some of the conventional wisdom and calls into question some of the purist gospel about the need for WTO primacy, arguing that its role should be diminished and more focued.

Read Joost’s essay here.

Read the other essays published in conjuction with the Cato TTIP conference here.

How TTIP Will Affect the Structure of Global Trade Policy

Swedish economist Fredrik Erixon, an authority on international trade policy, who heads up the Brussels-based think tank known as ECIPE (the European Centre for International Political Economy), was a big contributor to the discussions held this week in conjunction with Cato’s TTIP conference.  Among many other trade topics, Fredrik has written extensively on TTIP, the WTO, and how the former may impact the latter.

In his conference essay, Erixon agrees with alarmed, “pure” multilateralists that the TTIP will supplant the WTO as “the organising entity of future trade policy,” but explains why that is not necessarily a bad thing.  While he dismisses fears that the United States and European Union may be turning toward an arrangement that excludes the rest of the world, and explains how they will “leverage TTIP for global trade liberalisation,”  Fredrik does worry that TTIP – if it “succeeds” in the area of regulatory harmonization – will result in the export of failed regulatory policies to the rest of the world.

His concluding remarks on that topic: 

Currently, the differences between EU and U.S. regulations and regulatory approaches are far too wide for the TTIP to be a realistic candidate for setting the global rules in this area. But TTIP will likely push trade agreements further in the direction of prescriptive regulatory conditionality, making it harder for trade agreements in the future to advance global commercial freedom through deregulation and simple, transparent rules.

Read Erixon’s essay here; see him discuss the issues during this conference session; see all the conference essays here.

How Will TTIP Affect Developing Countries and the Multilateral Trading System?

By all accounts (well, at least those conveyed to me), this week’s TTIP conference at the Cato Institute was a resounding success. It featured a diversity of excellent speakers from across the political, ideological, geographic, and professional spectra, and it covered a broad swath of economic, political, geopolitical, and technical issues. Though opinions varied over the numerous substantive issues discussed by the conferees, there was fairly strong agreement that TTIP (at least the TTIP envisioned at the outset of the negotiations) will require an enormous amount of effort, political will, and flexibility to deviate from script to have any chance of coming to fruition.

As if the road to success weren’t daunting enough, many observers worry that success, if not too elusive, might be too costly.  That is, as a large exclusive club, TTIP would hasten the demise of the World Trade Organization and the multilateral trading rules under its auspices, and that it would put third countries–especially developing ones–at disadvantages that reduce their economic prospects.

One of the panel discussions was devoted to consideration of the impact of TTIP on the multilateral trading system, including the impact on developing countries. Two of the speakers in that session were former WTO heavyweights: Joakim Reiter (former Swedish Ambassador to the WTO) and Harsha Singh (former Deputy Director General of the WTO), who are now, respectively, Deputy Secretary-General of the United Nations Conference on Trade and Development and Senior Associate at the International Centre for Trade and Sustainable Development. In their conference essays, each explains how a successful TTIP can be formulated to ensure that it doesn’t subvert the WTO or hurt developing countries.  

Harsha’s essay is TTIP: A Bridge or Gulf for Multilateralizing Plurilaterals.

Joakim’s essay is The Effects of TTIP on Developing Countries.

All of the essays published in conjunction with the conference can be found here.

U.S.–China Relations Hurt by American Antidumping Abuse

As expected, Chinese President Xi Jinping raised the issue of antidumping abuse during his recent visit to Washington.  Specifically, he called on the United States to stop using “nonmarket economy” methodology when imposing antidumping duties on imports from China.  The issue is going to become more and more pressing as a diplomatic problem over the next year, because the United States is required under WTO rules to end NME treatment by December 2016. 

NME methodology is one of many ways the United States inflates the protectionist impact of U.S. antidumping law.  My colleague Dan Ikenson has thoroughly documented the senselessness of NME treatment.  Last year, I wrote a Cato Policy Analysis looking at how U.S. officials and policymakers might respond to the December 2016 deadline.

That deadline coincides closely with the end of President Obama’s term in office.  The president can choose to leave his successor years of trade conflict and WTO litigation by refusing to act.  Or he can do the right thing for the American economy and U.S.–China relations by ending NME treatment as soon as possible.