Topic: International Economics and Development

Americans Are Far More Generous than Europeans

USA Today reports on a new study showing that charitable contributions are at an all-time high in America. Most interesting, the report also revealed that Americans are far more generous than supposedly compassionate Europeans. Indeed, no nation gives even half as much (as a share of income) as the United States. The French are among the worst misers, giving less than one-twelfth of what Americans donate, though it is unclear whether this is because they are taxed so much that there is no money left in their wallets or whether they assume that it is now the role of government to solve every social problem:

Americans gave nearly $300 billion to charitable causes last year, setting a record and besting the 2005 total that had been boosted by a surge in aid to victims of hurricanes Katrina, Rita and Wilma and the Asian tsunami. …Individuals gave a combined 75.6% of the total. With bequests, that rises to 83.4%. …the willingness of Americans to give cuts across income levels, and their investments go to developing ideas, inventions and people to the benefit of the overall economy. Gaudiani said Americans give twice as much as the next most charitable country, according to a November 2006 comparison done by the Charities Aid Foundation. In philanthropic giving as a percentage of gross domestic product, the U.S. ranked first at 1.7%. No. 2 Britain gave 0.73%, while France, with a 0.14% rate, trailed such countries as South Africa, Singapore, Turkey and Germany.

At Least Somebody’s Listening (If Only It Were U.S. Policymakers)

Today’s Wall Street Journal reports (sub. req.) that the European Union is considering implementing a change that I have long advocated the United States implement: graduating China to market economy status for purposes of antidumping proceedings.  Among the reasons given in the article for the prospective change is that doing so might make it easier for Europe to “extract a range of concessions” from the Chinese on other issues deemed crucial to the trade relationship.

Though they have been stubbornly resistant, U.S. policymakers should be doing the same thing for the same reasons.  When we hear about the issues that define the U.S.-China trade relationship, those issues read like a litany of U.S. gripes.  The Chinese should: stop subsidizing industry; stop manipulating the currency; stop engaging in unfair labor practices; stop dumping; stop stealing intellectual property; stop imposing behind-the-border barriers; start opening services markets; start allowing uninhibited foreign ownership, start being a responsible stakeholder, and on and on.  (The presumption being that fulfillment of American objectives is the chief aim of Chinese policy.)

Can you name a single Chinese demand of the United States?  Well, there are several, but none of them are really “demands.”  They are requests, pursued diplomatically through ongoing dialogue and without a lot of political grandstanding. The single most important wish of the Chinese on the trade front is that they be given market economy status.  More than anything else, I believe, China’s interest in achieving that status is driven by a desire to be treated respectfully by the international community.  The non-market economy label carries a Cold War stigma and, in any event, is misapplied in the case of China, where the economy is increasingly market-oriented, if not market-based, by most metrics.

Under current European and American antidumping practices, China’s NME status means its rates of duty are not based on a comparison of prices.  Instead, they are based on a comparison of the Chinese company’s export prices to a fictitious guestimate of what the price would be in China if prices were in fact determined by market forces.  Got it?  Right!  NME rates tend to be higher than ME rates, but in any event are totally divorced from commercial reality.

Graduating China to ME status does not mean that Chinese exporters would be immune from antidumping allegations and actions by U.S. industries.  No, they would still be subject to a law that routinely produces high, and sometime prohibitive, tariffs.  But graduating China to that more respectable status would engender much good will and would likely inspire greater willingness among the Chinese to work with U.S. negotiators to resolve outstanding differences.

Ironically, the U.S. interests that are opposed to changing China’s status are the same interests that endorse the litany of gripes against China.  Eventually, they may smarten up like their European brethren and do the right thing.

Labor Union Members Protest against Pro-Growth Reforms in Czech Republic

Even though neighboring flat tax nations such as Slovakia are growing faster and creating more jobs, the labor movement in Prague is protesting reforms that would improve the Czech Republic’s competitiveness. The International Herald Tribune reports on this self-destructive impulse:

Around 15,000 labor union members protested in downtown Prague Saturday against the government’s proposed tax reforms and cuts in welfare spending. …If approved, a 15-percent flat tax on personal income would be introduced in 2008. Currently, the personal tax rate ranges from 12 percent to 32 percent, depending on income. The corporate tax rate would be cut from 24 percent to 19 percent by 2010. The draft also includes cuts in social benefits, unemployment benefits, maternity leave payments and health care spending. The labor unions claimed that only the wealthy would benefit from the proposed changes.

Europeans Leading on Postal Privatization

While many European governments deserve criticism for their high tax rates and destructive welfare states, sometimes America is the nation that is lagging when it comes to free market reform.

Corporate tax rates are one example, since every European nation has a lower rate than America. Social Security reform is another area, since many European nations have funded systems based on personal accounts.

And, as the Wall Street Journal explains, the Europeans are also beating America when it comes to postal reform. Several nations already have eliminated government monopoly systems and others are heading in that direction, though backwards nations such as France are trying to block continent-wide liberalization:

Bulgaria, Estonia, Finland, Sweden and the U.K. have opened their postal markets completely; Germany and the Netherlands have said they plan to do so soon. Brussels began liberalization efforts back in 1997 and a 2002 law envisioned an open postal market by January 1, 2009.

Yet five years after that tentative deadline was set, and with 18 months still to go, the likes of France’s La Poste complain that they need more time to prepare. It’s unclear what exactly they will be able to accomplish in those extra two years that they couldn’t manage in the first dozen.

One safe bet is they’ll continue piling up easy profits to use in new businesses they’ve started. To take one example, La Poste, Deutsche Post and others have used the proceeds from their letters monopolies — a €90 billion business in Europe — to open banks.

In the meantime, consumers increasingly have to break the bank just to send a letter. In the 10 members of the EU-15 that haven’t completed or planned postal liberalization, the average stamp price rose by 7 European cents, or about 18%, between December 2001 and February 2007, according to data from the Free and Fair Post Initiative. In the five countries that have liberalized, the average price fell by 2 cents, or about 4%. Studies show that full market opening, including cross-border competition, could drive prices down by as much as 20% to 25%.

Harsh Criticism for the Re-Packaged EU Constitution from a British Newspaper

The EU Constitution is being resuscitated by Europe’s political elites, and those elites are doing their best to figure out ways to bypass voters. British voters are the best chance of saving Europe from further centralization, but Tony Blair is maneuvering to avoid a referendum. An editorial from the Sun strongly denounces the EU Constitution and hopes that Gordon Brown will protect British interests:

Tony Blair faces a stark choice at his last EU summit. He can stand up for the country that trusted him with power in three general elections. Or he can sell us down the river to the faceless EU politicians and bureaucrats who run Europe … Mr. Blair’s vaunted “red lines” won’t protect the United Kingdom from the relentless erosion of power by our EU masters. Whatever written guarantees are offered in the coming days, Britain would be folding its hand into a European superstate … Gordon Brown may not be in Brussels — but he will have the final say on how the result is sold at home. We have been promised a referendum. The incoming Prime Minister cannot allow this deal to go through without one.

A columnist in the same paper outlines the many ways in which the EU Constitution gives more power to Brussels and threatens the UK’s more open economy:

…the Reform Treaty, is virtually the same as the rejected EU Constitution. It will rob us of powers to set our own laws and put industry back 30 years … Early drafts of the document show Britain will surrender 30 per cent of its voting power in EU meetings. This will make it far harder to stop barmy EU diktats becoming UK law.

Britain’s vetoes will be axed in as many as 51 areas … The power to set tax and spend policy could also be stripped away. The Commission also wants to rob us of our right to set social security payments. Experts say the draft Treaty would mean huge changes to British law. They say a Charter of Fundamental Rights would become more legally-binding than UK law. The Charter will also lumber Britain’s economy with job-destroying EU laws.

How Not To Rear Pigs (And Receive Money For Not Doing So)

I have only so much contempt to go around, and my job calls me to expend most of it on U.S. government policies. But I have of late been so immersed in criticizing U.S. farm programs (and rightly so) that I have to remind myself of the insanity across the pond.

Or my friends remind me. My mate Ken sent me this letter from a would-be non-pig-farmer from the U.K., anxious to feed at the European Union’s trough.

My favorite excerpt:

“In your opinion what is the best kind of farm not to rear pigs on, and which is the best breed of pigs not to rear? I want to be sure I approach this endeavour in keeping with all government policies, as dictated by the EU under the Common Agricultural Policy. I would prefer not to rear bacon pigs. But if this is not the type you want not rearing, I will just as gladly not rear porkers.”

Read the rest, though. It’s worth the time.

Antigua and Barbuda Raises the Stakes

$3.4 billion. That’s the price tag Antigua and Barbuda, the island nation which successfully argued that the United States was violating its obligations to open its market to foreign online gambling providers, puts on its lost revenues as a result of the U.S. ban on some internet gambling. (More here and here.)

They are seeking to recover the money by withdrawing the protection they provide for American intellectual property (see here). The idea behind this sort of action is to harness the power of a powerful lobby group (in this case, Hollywood and the software industry) to counteract the influence of anti-internet gambling groups: If intellectual property owners are caught in the cross-fire of the dispute, maybe the United States government would feel more pressure to comply with the series of rulings against current U.S. regulations.

The push to seek compensation through the World Trade Organization comes just one day after the European Union has indicated it wants compensation for the loss of market access, but through further opening of other sectors in lieu of lifting the ban. When the United States announced last month that it was responding to their loss at the WTO by seeking to “clarify” its commitments, they indicated that they would not provide compensation to Members harmed by the ban, as is called for by WTO rules. The USTR had reasoned that since they never intended to allow internet gambling in the first place (suggesting that their commitment to do just that was an “oversight”), then Members could not expect to receive any sort of compensation in return for solidifying the ban.

We’re planning to hold a forum on this topic on 25th July. Stay tuned for details.