Topic: Trade and Immigration

The Upside of Nature’s Wrath

Fourteen months after Katrina devastated large swaths of the Gulf Coast, the Commerce Department has finally gotten around to promulgating new regulations that could relax antidumping and countervailing duty restrictions for a temporary period after the next national emergency.

In the weeks following Katrina, some observers (including this one) pointed to the absurdity of maintaining restrictions on foreign cement, lumber, and steel when the costs of those crucial building materials comprised a substantial chunk of the projected reconstruction bill.  Of course, trade restrictions raise the cost of production to U.S. businesses and the cost of living for U.S. citizens everyday.  But the effects of the hurricane provided an extreme example of the lunacy of trade restrictions, which is what was necessary to get the Commerce Department to acknowledge that its protectionist trade policies carry real costs.

The scope of circumstances that will trigger temporary lifting of trade remedy restraints prospectively is a bit unclear, but it requires the president to authorize Commerce “to permit the importation of supplies for use in ‘emergency relief work’ free of antidumping and countervailing duties.”  Considering that emergencies are typically met with a costly (and often mismanaged) federal response, a regulation that actually mandates loosening the federal noose is welcome news indeed.

Now, all we need is a president who will consider it “emergency relief work” to educate policymakers about the predictable impact of constrained supply on price. 

America’s National Truck?

As another election approaches, Americans have probably grown jaded toward politicians who use naked appeals to patriotism to win votes. Now patriotic appeals are being enlisted to sell pickup trucks.

Baseball fans watching the World Series game Friday night witnessed an ad by General Motors that had nothing to do with the finer qualities of its Silverado pick up truck. Set to the driving beat of a John Mellencamp song, “Our Country,” the ad flashed images designed to tug at the heart of every red-blooded American. (It certainly tugged at mine.) Here’s how a New York Times story today described the ad:

As the commercial begins, an industrial history rolls out, touching the usual icons of the Statue of Liberty, busy factory workers and Americans at their leisure. But then a more conflicted narrative emerges, quickly flashing on bus boycotts, Vietnam, Nixon resigning, Hurricane Katrina, fires, floods, then the attacks of Sept. 11, replete with firefighters.

All that’s missing is a plague of locusts, until the commercial intones ‘This is our country, this is our truck’ as a large Silverado emerges from amber waves of grain.

The not-so-subtle message is that if you are a real American, you buy a real American vehicle. Of course, this is not the first time patriotism has been exploited to sell a product, but the ad obscures an important fact about the American automobile industry: it is far more diverse today than the Big Three of Ford GM, and Chrysler.

In a Cato Free Trade Bulletin published over the summer, my colleague Dan Ikenson and I showed that, while Ford and GM in particular have struggled with declining sales and huge losses, the U.S. automobile market remains healthy. Last year, American workers produced about 12 million cars and light trucks domestically, including those made in factories owned by Honda, Toyota, Nissan, and BMW. American families can chose from a wider range of affordable, quality vehicles than perhaps ever before.

The Big Three have been losing market share, not because Americans are any less patriotic than in the past, but because Americans are increasingly exercising their freedom to decide for themselves what  is “our truck.”

Growing Well

Robert Frank has an excellent column on happiness, well-being, and economic growth in today’s New York Times. Frank rightly notes that the fact that self-reported life satisfaction does not increase with economic growth does not imply that growth is optional.

Many critics of economic growth interpret this finding to imply that continued economic growth should no longer be a policy goal in developed countries. They argue that if money buys happiness, it is relative, not absolute, income that matters. As incomes grow, people quickly adapt to their new circumstances, showing no enduring gains in measured happiness. Growth makes the poor happier in low-income countries, critics concede, but not in developed countries, where those at the bottom continue to experience relative deprivation.

All true. But these statements do not imply that economic growth no longer matters in wealthy countries. The reason, in a nutshell, is that happiness and welfare, though related, are very different things. Growth enables us to expand medical research and other activities that clearly enhance human welfare but have little effect on measured happiness levels.

Frank is right. Happiness is a component of welfare or well-being, but well-being includes much more than happiness. Health, longevity, opportunity, the realization of potential, and meaningful work are aspects of well-being that go beyond how good we feel. Growth promotes all those things. But there is also some decent evidence, which I report in this Prospect article, that economic growth has about as strong a positive correlation with self-reported happiness as anything else. Furthermore, I say:

The fact that average self-reported happiness has not risen with average incomes does not imply that there is no point in becoming richer. A steady rate of growth may be necessary to keep happiness and other good things at a high stable level. (Imagine a guillotine, on which a kitten is strapped, connected to a bicycle that must be pedalled ever more quickly to keep the blade aloft. Slow down, and the kitten gets it.) In The Moral Consequences of Economic Growth, Harvard economist Benjamin Friedman argues that steady economic growth “fosters greater opportunity, tolerance of diversity, social mobility, commitment to fairness and dedication to democracy”—a list I doubt any politician would come out against.

Frank also mentions Friedman in this regard, to good effect. In short, the evidence clearly points to the fact that economic growth is incredibly good for well-being, as Frank explains so well, and that it correlates positively with happiness as strongly as almost any other variable. (Life-expectancy or economic freedom look even better, depending on the study you consult.) There is no good happiness-based case against growth, and there is an exceedingly strong well-being-based case for growth.

Be Careful What You Wish For…

A couple of people over recent days have asked my opinion on the prospects for reform of agriculture policy should Democrats take over the House and/or the Senate. My usual reply is to lament the depressingly bipartisan nature of support for farm subsidies and trade barriers, and to also point out that the recent farm bill (implemented by a Republican congress) has been one of the most expensive in history: $23 billion last year. In a nutshell, I had thought that the prospects for reform could not be any worse under the Democrats than under Republicans.

It turns out that I may be wrong (yes, it happens occasionally). In a recent press release from Texas A&M University, the ranking member of the House Agriculture Committee (and probable chairman of that committee should the Democrats regain the majority in the House), Colin Peterson (D-MN) seems to support extension of the current farm bill, egregious though it is, but with yet more pork added.

Rep. Peterson would implement permanent crop disaster relief (I have blogged on this idea previously), and was indirectly quoted as calling renewable energy derived from crops ”the most exciting development in agriculture in his lifetime.”

Rep. Peterson does seem to have a point about the scope for the addition of expensive and agriculture-irrelevant rider amendments to ad-hoc disaster relief bills, but describing a permanent disaster relief program as a way to “save taxpayer dollars” is disingenuous, to say the least.

Rep. Peterson seems to have no truck with the idea that agriculture should contribute to deficit reduction, either: “I reject the idea that because we have a $9 trillion deficit, we have to get rid of farm programs. We didn’t cause that problem. In fact, agriculture was the only government initiative that actually spent less than was projected, $13 billion less so far. Besides, if you got rid of all agriculture programs, it wouldn’t make a dent in the deficit. So we need to do what’s right for agriculture, and that’s where I’m coming from.”

On ethanol, which my colleague Jerry Taylor has blogged about here, Rep. Peterson wheeled out the old “foreign oil dependency” issue and put his full support behind investing significant resources (that’s your resources) into more research into bio-fuels, describing the profits that investors are making currently from ethanol as “obscene.”

You said it, sir.

Vegemitegate: the Saga Continues

An update from my post yesterday on the supposed ban on Vegemite: its not true. According to this article, it is all just a misunderstanding between friends:

Under US regulations, folate can be added only to breads and cereals. One of the Vitamin B components (in Vegemite) is folate,’ [FDA spokesman] Herndon explained. ‘In and of itself, it’s not a violation. If they’re adding folate to it, boosting it up, technically it would be a violation. But the FDA has not targeted it and I don’t think we intend to target Vegemite simply because of that.’

OK, Mr. FDA. I’ll call off the hounds. But I will be testing your system in January when I return from Australia with a year’s worth of Vegemite in my suitcase.

With Allies Like These…

Close readers of my blog entries will have detected an increasingly irritated tone of late. What with farm subsidies, Doha doldrums, idiotic “solutions” to the trade deficit “problem” and a campaign season upon us, my long-suffering colleagues have become used to my cries of despair.

And now this, through a tip from my colleague and next-door-office-mate, Brink Lindsey (who has no doubt tired of my “You’ve got to be kidding me” exclaims as I read the headlines every morning). The United States has banned Vegemite, that staple food of Aussies everywhere and an emotionally crucial link to the motherland for all us expatriates living in the United States.

According to this article, the FDA allows folate (or folic acid, which has been added to Vegemite) to be added only to breads and cereals (never mind that Vegemite was practically invented for nutritional purposes, to stave off Vitamin B deficiencies).  From a 1996 news release from the FDA:

specified grain products will be required to be fortified with folic acid at levels ranging from 0.43 milligrams to 1.4 mg per pound of product. These amounts are designed to keep daily intake of folic acid below 1mg, because intakes above that amount may mask symptoms of pernicious anemia, a form of vitamin B12 deficiency which primarily affects older people.

Heaven forbid that the flood of Vegemite pouring into the United States should upset the delicately balanced just-enough-but-not-too-much-folic-acid directive from the FDA.

Australia is an ally of the United States. A small ally, yes, but loyal. Our troops have served side by side in World War II, Korea, Vietnam and the Gulf wars. Australian troops are in Afghanistan and Iraq. And, more to the point, our countries have signed a free-trade agreement

Part of me is taking comfort that this truly is a non-tariff barrier implemented to protect consumer health (misguided though that aim may be), rather than an act of disguised protectionism designed to shield the politically powerful import-competing domestic Vegemite industry located in electorally important swing-states. But it’s unfair all the same. And I’m angry.

Thank goodness my parents smuggled contraband Vegemite through customs when they visited me in July, but I think not of my own well-stocked shelves, but the growling bellies of my compatriots. I plan to share this story with my Australian friends. Expect outrage.

(Please note I am filing this under Civil Liberties, as well as Trade).

I Hear Voices

I don’t want to tempt fate by declaring that the tide is turning against the costly and interventionist federal agriculture programs, but there have been several critical (in both senses of the word) editorials and investigative series this year on farm subsidies. The voices protesting about farm programs seem to be getting louder.

For a recent example, bravo to the Washington Post, for its editorial on Saturday denouncing the crop insurance boondoggle – yet another agricultural policy fleecing consumers and taxpayers in order to make farming a risk-free enterprise. The editorial follows a series earlier this year from the Post, entitled ’Harvesting Cash’ (you can view that series here).

The insurance program works thus: the government pays 60 percent of the premiums for crop insurance ($2.3 billion last year), and also pays a fee to insurance companies for administering the program (over $800 million). All this for crop failure losses of $752 million (yes, that’s right, the losses cost less than the administrative fees). The insurance does not, however, remove the “need” for disaster payments – over $6 billion worth since 2000, according to the Roanoke Times.

Taxpayers can sleep well at night, however, knowing they are funding “something good, the rural life”, in the words of a farmer quoted by the Post. (I wonder how much money would flow to farmers if the charity was voluntary?)

Kudos also to the Boston Herald, for their Sunday editorial on the subject (view here) and the Roanoke Times (here) for their own version. The latter editorial could be especially influential since Bob Goodlatte is the representative for Roanoke County and Chairman of the House Agriculture Committee.

It is encouraging to note the number and breadth of newspapers covering this subject. The LA Times, the Minneapolis Star-Tribune, the Des Moines Register, the Denver Post, the Chicago Tribune and the Orlando Sentinel have all run editorials on farm programs this year. Let’s hope that the voices are heard, and that voters and their representatives start to demand change.