Topic: Trade and Immigration

And a Pony…

By
Sallie James

In a move that should surprise precisely no-one, the American Farm Bureau Federation, the nation’s largest lobby group for agriculture, this week endorsed an “everything for everyone, all the time” approach to farm policy. Meeting at the AFBF’s annual conference, the delegates endorsed an approach similar to the House Agriculture Committee-passed bill. The House bill supporters made a big show of cutting direct payments to farmers, a program that runs at an annual cost of $5 billion, and goes to those who own farmland or former farmland, regardless of whether they still farm. Direct payments have to go, and the farmers know it. The “savings,” however, went to expanding crop insurance; a program that costs U.S. taxpayers$16 billion last year. The House bill also included a new “margin protection” plan for dairy farmers, which would essentially set domestic quotas for milk production and tax any producer who made above quota (an idea that John Boehner rightly said was “even worse” than the current, “Soviet-style” policy).

The bill never made it to the House floor, and in the end the current 2008 farm bill was extended until Septmber 2013 as part of the fiscal cliff deal. The farmers and their congressional supporters were disappointed, to say the least, but they’ve come back swinging.

Via FarmPolicy.com, an article in DTN contains the wish-list, and it’s analogous to the sort of thing I’d present to my parents at Christmastime before I knew better:

“Delegates for the country’s largest general farm organization passed resolutions Tuesday seeking immigration reform while also crafting broad policy language asking for Congress to give farmers a menu of commodity programs.

The group also reaffirmed its support for renewable fuels.”

Farm Bureau members don’t want caps or limits applied for crop insurance premium subsidies to producers… Farm Bureau delegates argued that such a cap would be detrimental to producers.

The group also opposes means testing and payment limitations for crop insurance.

“Farm Bureau supports the development of a revenue insurance program for peanuts and rice. The group also would like to see a risk-management program for forage producers.”

Earlier in the piece we learn that delegates “called on Congress to…tighten the country’s fiscal policies” which is, you know, hilarious given the context. I understand the concept of groupthink, but did anyone in the room feel squeamish about the audacity of calling for fiscal consolidation while asking for handouts?

Farm subsidies are wasteful, anachronistic, expensive, regressive blights on the U.S. economy. It’s well past time to eliminate them.

Topics: 
Tax and Budget Policy, Trade and Immigration

New Trade Negotiations on Services

By
Simon Lester

Of all the international trade negotiations being talked about these days, the one I’m most enthusiastic about is on trade in services.  Today, the U.S. Trade Representative’s Office notified Congress of the Obama Administration’s intent to enter into negotiations for a new trade agreement on international trade in services, with a group of 20 trading partners.  Brazil, China and India are not participating, which is disappointing, but most other major trading nations are in.  (This is in contrast to many of the narrower bilateral or regional trade agreements under discussion, which create a mess of overlapping agreements.)

It can be frustrating to hear how the U.S. government talks about these initiatives, for example, when they refer to “a new international services agreement to support additional U.S. exports and jobs.”  Producer interests are always put front and center, while consumer interests are ignored.  And they say:  ”The agreement we envision will place a high priority on enabling our service suppliers to compete on the basis of quality and competence rather than nationality.”  Here, I like the general sentiment, but I would simply apply it to service suppliers from foreign countries as well – we should be able to compete there, and they should be able to compete here.  It’s great that U.S. producers will benefit from this agreement, but it’s just as good that U.S. consumers will have additional choices.

In terms of the scope of the agreement, services holds great potential for opening up a variety of new sectors to competition.  Liberalization started much later with services than with goods, so there is more that can be accomplished.  As USTR puts it:  “The agreement must also permit comprehensive coverage of all services, including services that have yet to be conceived.”  In the Internet age, trade in services is now possible in many new sectors.  It would be nice to get as many service sectors covered as possible.

It’s not clear yet which sectors will be the focus.  Let me give two suggestions.  First, there has been a lot of talk recently about online higher education.  In a policy analysis to be published soon, I argue that we should encourage free trade in online higher education, and this new trade in services agreement would be a good place to do it.  And second, I have written about the idea of free trade in health insurance.  I’d love to see that included in these talks.  But those are just two small possibilities, and I look forward to seeing the United States and other governments push to liberalize as many service sectors as possible.

Topics: 
International Economics and Development, Trade and Immigration

Trade with China: An Opportunity, Not Something to Fear

By
Simon Lester

For years now, there has been hand-wringing about trade with China.  Critics argue that China manipulates its currency, treats its workers terribly, and sells us toxic products, among other things.  Proposed responses involve a wide range of barriers to Chinese imports.

But let’s take that last one, dangerous Chinese products.  It turns out that this provides a good opportunity to sell products to China.  The New York Times reports:

A number of recent high-profile scandals involving tainted food products in China have shaken public confidence in the safety of domestic supplies. …

Concerns about the safety of domestic supplies have led to a sharp rise in demand for imported [baby] formula among urban middle-class households, sending prices of foreign brands soaring in Chinese supermarkets. According to the United States Department of Agriculture, the retail price of a 28-ounce package of imported formula is 290 to 350 renminbi, or $46 to $56 — about 50 percent higher than most domestic brands.

Hoping to stem the loss of market share to foreign competitors — and perhaps to reap the higher margins on foreign milk — some Chinese producers are investing in plants overseas. One of China’s leading makers of baby formula, Synutra International, announced plans in September to invest about $130 million in a new milk-drying plant in the western French region of Brittany that will be operated by Sodiaal, a French dairy cooperative.

It’s clear that the Chinese market offers a great opportunity for U.S. exports.  Chinese consumer tastes are becoming more like Western consumer tastes.  If Western producers are smart, they will take advantage of this.  And if they do, we might hear a bit less about China as an economic competitor, and more about how positive mutual trade relations benefit all of us.

Topics: 
International Economics and Development, Trade and Immigration

Driver’s Licenses for Unauthorized Immigrants

By
Alex Nowrasteh

Yesterday Illinois approved a law allowing unauthorized immigrants to obtain temporary driver’s licenses.  The rationale for the law is that it would increase public safety by allowing many unauthorized immigrant drivers to get proper training and to buy auto insurance.  A similar law passed in New Mexico in 2000 likely resulted in a slight decrease in the percent of uninsured drivers on the road in that state but the effects were negligible.    

Economic benefits are a better rationale for allowing unauthorized immigrants to obtain driver’s licenses.  Many who were deterred from driving either to work or as part of their job will soon be able to do so legally.  The types of jobs available to some unauthorized immigrants and, consequently, their productivity will improve because of this law.

As columnist Ruben Navarrette pointed out, a driver’s license is the most coveted piece of government issued paper besides a work permit or a green card.  The ability to drive is inseparable from the ability to work in many parts of the country.  The Illinois law will likely have a bigger positive impact on the lives and productivity of unauthorized immigrants than any other government issued piece of paper besides a work visa or green card. 

Topics: 
Trade and Immigration

Foreign “Currency Manipulation” Does Not Warrant Washington’s Attention

By
Daniel J. Ikenson

In a Wall Street Journal oped today, Former Council of Economic Advisors chairman Ed Lazear pokes some big holes in the theory that Chinese currency manipulation explains that country’s big trade surplus, contradicting the central argument of a recent paper from the Peterson Institute. 

I concur with Lazear and offer my own critique of the Peterson paper on Forbes, today.

Topics: 
International Economics and Development, Trade and Immigration

How Trade Agreements Stray from Free Trade

By
Simon Lester

I’ve mentioned before on this blog my concern that some provisions in trade agreements have little to do with free trade. Here’s a good example, from the specialty trade publication Inside U.S. Trade

U.S. labor unions are keeping an eye on the U.S.-European efforts to deepen economic ties, and believe a potential U.S.-EU trade agreement could provide an opportunity to raise some U.S. labor standards to the level prevailing in EU member states, according to labor sources.

…

This source noted that the EU is a community of nations that tends to have stronger labor laws than the U.S., higher union density and better wage rates. U.S. unions do not want to see a trans-Atlantic trade agreement used as a vehicle to lower labor standards in Europe, and they also view it as an opportunity to try to “raise up” U.S. standards to the European level, this source said.

I’ve talked about the proposed U.S.-EU free trade agreement before. To repeat what I said previously, there are some benefits to these kinds of agreements (although multilateral agreements would be much better). But I would really like to see the negotiators stick to the core issue of reducing protectionism, and not get distracted by domestic regulatory issues like the appropriate level of labor standards.

Topics: 
Trade and Immigration

Rum Subsidies Included in Fiscal Cliff Pork

By
K. William Watson

Among the various provisions in the recent fiscal cliff deal was a two-year extension of the rum cover-over program that sends federal revenue from rum excises to the governments of Puerto Rico and the U.S. Virgin Islands.  The program was originally designed to provide development aid to these U.S. territories, but in recent years it has become a tool of industrial policy and corporate welfare. 

I wrote about the program back in May last year: 

As it does with all distilled spirits, the federal government charges an excise tax of $13.50 per proof gallon of rum sold in the United States. This equates to roughly $2 per bottle. Under the cover-over program, almost all of that money is directly granted to the U.S. Virgin Islands and the Commonwealth of Puerto Rico using a complex formula so that each receives a share of the money based on how much rum it produces relative to the other. The tax is collected from sales of all rum imported to the mainland, even from other countries.

In 2009 the U.S. Virgin Islands figured out how to increase its haul under the program by luring Captain Morgan maker Diageo to relocate its production facility there from Puerto Rico with a promise to share the loot.  Diageo now has a 30 year deal to produce rum in the Virgin Islands backed by subsidies that cover almost the entire cost of production. 

The use of the funds this way and the program’s extension have two major consequences.

First, the ensuing rum war between U.S. Virgin Islands and Puerto Rico to secure a larger portion of the cover over funds has crippled the ability of producers in other Caribbean island nations to compete in the global rum market.  The potential for an embarrassing WTO challenge grows greater now that the program has been extended.

Second, Diageo now has a strong incentive to lobby Congress to keep the program in place.  As the invaluable Tim Carney reports today in the Washington Examiner, Diageo hired ex-senators Trent Lott and John Breaux to lobby their former colleagues on the issue.  The recent extension is merely a sign of more to come.

The program is worth about $450 million per year to the governments of these Caribbean territories.  Giving a slice of that to rum producers brings in the lobbying power to keep the program in place, even as it drastically distorts the rum market at the expense of everyone else.

Topics: 
Regulatory Studies, Tax and Budget Policy, Trade and Immigration

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