Archives: 08/2013

Is the FTA Responsible for the Plight of Colombian Farmers?

Colombian farmers have staged widespread and sometimes violent protests over the past week demanding a change in economic policies. One of their main complaints is over the Free Trade Agreement with the United States.

The farmers complain that cheap imports from the United States are crippling their sector. In particular, they complain about three specific products: poultry, dairy and potatoes. Is it the case that freer trade with the United States is responsible for the difficulties of Colombian farmers?

The U.S.-Colombia Free Trade Agreement went into effect on May 15, 2012, which means its prerogatives have been in place for over a year. As in the case with all the other agreements negotiated in the last decade, the FTA with Colombia got rid of most—but not all—tariffs immediately. In the case of some “sensitive” products there is a phasing out of tariffs that can take up to almost 20 years. Let’s take a look at the tariff elimination schedule of the three specific products that draw the loudest complains from Colombian farmers:

Potatoes: Prior to the FTA, Colombia applied tariffs on U.S. potatoes that ranged from 5 to 20 percent. Upon implementation of the agreement, those duties were abolished. According to data from the International Trade Comission, U.S. potato exports to Colombia did increase in 2012 by approximately 25 percent. However, in 2011 (when there was no FTA) potato exports went up by 77 percent. Still, U.S. potato exports to Colombia totaled just $5.6 million in 2012. As a comparison, Panamá (also a potato producer with 1/13th of the population of Colombia) imported more potatoes from the United States in 2012 (almost $7 million).

Poultry: Unlike the case of potatoes, Colombian tariffs on U.S. poultry imports (which range from 5 to over 160 percent) will be phased out over an 18-year period. Moreover, there is a 6-year grace period after the implementation of the FTA. That is, there will be no tariff reduction in poultry products until 2018.

The United States did secure a 27,040-ton quota at zero duties for chicken leg quarters which will increase 4 percent every year. However, that quota only represents 2.5 percent of Colombia’s annual chicken consumption. That’s hardly a massive flood of cheap U.S. chicken imports.

Dairy: As in the case with poultry, most diary imports from the United States will still face tariffs in the early years of the FTA. Some diary products will enjoy tariff protection until 2027. However, several duty-free quotas were secured. One of those is a 5,500-ton quota for milk powder that will increase by 10 percent every year. For 2013 that quota would represent less than 230 grams of powdered milk for every Colombian (that is 1.7 liters of milk). According to the local Federation of Livestock Farmers, each Colombian drinks on average 141 liters of milk every year, which means that duty-free milk powder imports from the United States represent just 1.2 percent of milk consumption in Colombia.

The impact of U.S. milk imports might be even lower given the fact that powdered milk is commonly used as an input for the processed food industry rather than a final consumption product.   

As we can see, the FTA is not responsible for the troubles of Colombian farmers. The amount of duty free imports due to the agreement is still quite small. However, it is a fact that U.S. agricultural imports will increase once remaining tariffs barriers are effectively removed and U.S. farmers realize the potential of Latin America’s third largest market. Colombian farmers will then face stiff competition if they don’t adjust. Colombian consumers, 32.7 percent of whom still remain in poverty, would greatly benefit from cheaper food. Ironically, Colombian farmers themselves realize the benefits of free trade since one of their demands is to eliminate tariffs on fertilizers.

If Colombian farmers are hurting, it is not because of freer trade with the United States.

A School Monopoly? What a Great Idea?

I’m reluctant to give more attention to the steaming pile of dreck that Slate is using as linkbait this morning, but someone should point out how incredibly asinine it is. The author argues that anyone who sends their child to a private school is a “bad person” because, well, see for yourself:

I am not an education policy wonk: I’m just judgmental. But it seems to me that if every single parent sent every single child to public school, public schools would improve. This would not happen immediately. It could take generations. Your children and grandchildren might get mediocre educations in the meantime, but it will be worth it, for the eventual common good. 

The first sentence is clearly true but it’s downhill from there. There’s a lot of economic illiteracy to unpack there as well as some rather frightening assumptions about the duty of individuals to sacrifice themselves for some ill-defined “common good” (on Twitter, the New York Times’s Ross Douthat notes that this argument has an eerie resemblence to the Italian fascist motto, “Everything for the state, nothing outside the state, nothing against the state”).

I’ll let others heap on the mocking and scorn that this argument so richly deserves. What I want to focus on is the evidence.

Had this self-declared non-education wonk bothered to take even a cursory look at the research literature, she’d find that competition actually improves the public schools. Of 23 studies of the impact of school choice programs on public school performance, 22 studies find a small but statistically significant positive effect and one finds no visible effect. None find any harm.

The reason that competition works is because it makes schools responsive to the needs of parents. What’s so astounding is that the author wants schools to be responsive to parents, but thinks that the best way to do it is to have a government monopoly, as though Ma Bell would’ve eventually produced an iPhone.

Many of my (morally bankrupt) colleagues send their children to private schools. I asked them to tell me why. Here is the response that most stuck with me: “In our upper-middle-class world, it is hard not to pay for something if you can and you think it will be good for your kid.” I get it: You want an exceptional arts program and computer animation and maybe even Mandarin. You want a cohesive educational philosophy. You want creativity, not teaching to the test. You want great outdoor space and small classrooms and personal attention. You know who else wants those things? Everyone.

Whatever you think your children need—deserve—from their school experience, assume that the parents at the nearby public housing complex want the same. No, don’t just assume it. Do something about it. Send your kids to school with their kids. Use the energy you have otherwise directed at fighting to get your daughter a slot at the competitive private school to fight for more computers at the public school. Use your connections to power and money and innovation to make your local school—the one you are now sending your child to—better. Don’t just acknowledge your liberal guilt—listen to it.

Scratch away the economic ignorance and smug self-righteousness and you find a compelling argument for school choice. Yes, low-income families also want access to good quality schools that meet their kids’ individual needs. But forcing everyone into the same school isn’t going to help. The author correctly identifies the problem but fails to arrive at the right solution. If we want true equality of opportunity, we should expand the educational options available to low- and middle-income families, not restrict the choices of everyone.

“Vanishing” Job-Bias Lawsuits Keep On Not Really Vanishing

Remember all the hand-wringing about how the Supreme Court in Wal-Mart v. Dukes had choked off the chance for lawyers to file company-wide class actions claiming workplace discrimination? Sen. Al Franken (D-Minn.), for example, in introducing a bill meant to overturn the decision, charged that it established an “impossible standard” for lawyers to meet.

Someone forgot to tell the plaintiff’s lawyers who just settled a race discrimination case against Bank of America’s Merrill Lynch brokerage for a reported $160 million. That’s being called the biggest-ever payout in a case charging race bias against a big corporation.

Under discrimination law’s disparate-impact theory, no actual intent to discriminate is needed to find liability; it is enough (to simplify) that a challenged policy results in worse outcomes for employees of one race and cannot be justified by business necessity.

As Alison Frankel points out at Reuters, the named plaintiffs claimed “a disparate racial impact from Merrill’s policies of permitting brokers to form their own teams and of permitting managers to distribute client accounts to brokers based on past successes and failures.” Black brokers on average tended to be poor producers at Merrill, a problem the company’s CEO conceded might in part be owing to the industry practice of letting clients (who at Merrill, as at most firms, are predominantly white) pick their own brokers.

Plaintiff’s lawyers charged that Merrill’s management unlawfully ignored chances to address these disparities by adopting different company policies. Part of the high court’s Wal-Mart holding was that company-wide class actions are generally suitable only when a company-wide policy is being challenged, but in a ruling by Judge Posner, the Seventh Circuit agreed that the Merrill Lynch case fit that pattern.

This isn’t the only instance in which the Supreme Court’s supposed abolition of some class of employment lawsuits turns out to be nothing of the sort. On Tuesday the Times suggested that the 2009 high court decision of Gross v. FBL Financial Services has made it nearly impossible to pursue age-bias lawsuits — even though, as employment-law blogger Daniel Schwartz points out, the number of age bias charges at the Equal Employment Opportunity Commission (EEOC) has in fact gone up since 2009, not down.

Federal Homeownership Policy: Money for Nothing

Earlier this week, the Los Angeles Times ran a column repeating the simplistic notion that since homeownership is “good” then subsidies for homeownership must therefore also be “good.” Never asked, or apparently even contemplated, is the question of whether all our various homeownership subsidies actually deliver homeownership. Let’s start with the ever popular mortgage interest deduction (MID). The chart below, reproduced from Glaeser and Shapiro, shows the value of the MID and the homeownership rate. Hard to see any relationship there, probably because there isn’t one. I discuss the MID in more detail here.  

 

Next would be Fannie Mae and Freddie Mac. The chart below shows the homeownership rate and the Fannie/Freddie share of the mortgage market. What should be immediately obvious is that the long run homeownership rate steadied out in the mid-60 percents when Fannie & Freddie were bit players, having a market share in the single digits. In no way can we say that Fannie & Freddie have increased the long-run trend rate of homeownership.   So even if one believes homeownership is worthy of subsidy, a questionable proposition on its own, it should be beyond question that our current system of homeownership subsidies has not delivered long run gains in the homeownership rate.

The Downside of Alliances: Being Dragged into Other People’s Conflicts

British territorial disputes with Argentina and Spain are heating up, leading to demands that Washington support its foremost ally. However, George Washington was correct when he warned the U.S. against permanent foreign entanglements.

In 1982, the Argentine military junta failed in its attempt to seize the Falkland Islands from Great Britain. Three years ago, the prospect of energy development triggered renewed claims from Buenos Aires and a campaign of commercial harassment. 

Tensions between Britain and Spain over Gibraltar, a peninsula, also have flared. Last year, Spanish Prime Minister Mariano Rajoy urged talks over the island’s sovereignty. In July, the Gibraltar authorities blocked access by Spanish fishermen to surrounding waters, leading Spain to initiate lengthy border inspections and threaten other retaliatory measures.

London’s control of the two territories may not be logical or fair, but that’s international relations. History can’t be easily “fixed,” at least at reasonable cost to everyone involved.

So far Washington has avoided taking sides in either dispute. The Obama administration has ignored the Gibraltar contretemps while opining that the Falklands are “a bilateral issue that needs to be worked out directly between Argentina and the United Kingdom,” in the words of State Department spokeswoman Victoria Nuland.

However, some analysts have criticized such “neutrality” as being the equivalent of surrender, and demanded that Washington ostentatiously back the U.K.

Why should Washington, with a full international plate, meddle in other nations’ peripheral but emotional controversies?

Will the Administration Make a Run at Transparency?

Last fall, I reported that the Obama administration lagged the House of Representatives on transparency. The conclusion was driven by a study of the quality of data publication regarding key elements of budgeting, appropriating, spending, and the legislative process. (Along with monitoring progress in these area, we’ve been producing data to show that it can be done, to produce a cadre of users, and to simply deliver government transparency at a less plodding pace.)

There are signs that the administration may make a run at improving its transparency record. Buried deep in the FY 2014 budget justification for the Treasury Department’s Bureau of the Fiscal Service, it says that funds will support “government-wide data standardization efforts to increase accuracy and transparency of Federal financial reporting.” That means the public may get better access to where the money goes – outlays – in formats that permit computer-aided oversight.

In parallel, a Performance.gov effort called the Federal Program Inventory says that, in May of 2014, it will publish a Unique Federal Program Inventory number (pg. 4-5) for each federal program, along with agency IDs and bureau IDs. This may be the machine-readable federal government organization chart whose non-existence I have lamented for some time.

If this sounds jargon-y, you’re normal. Think of federal spending as happening on a remote jungle island, where all the inhabitants speak their own language. On Federal Spending Island, no visitor from the U.S. mainland can understand where things are there, or who is saying what to whom.

True machine-readable data will turn Federal Spending Island into a place where English is spoken, or at least a some kind of Federal Spending-English dialect that makes the movement of our tax dollars easier to track.

The Tenuous Link between Stronger Winter Storms and Global Warming Becomes Even Weaker

Global Science Report is a weekly feature from the Center for the Study of Science, where we highlight one or two important new items in the scientific literature or the popular media. For broader and more technical perspectives, consult our monthly “Current Wisdom.”

Come the cold season, whenever there is some type of strong storm system near the U.S. Eastern Seaboard—be it a Nor’easter, a blizzard, or ex-hurricane Sandy—you don’t have to look very hard to find someone who will tell you that this weather is “consistent with” expectations of climate change resulting from human greenhouse gas emissions. The worse the storm, the more “consistent” it becomes.

The complete collection of climate science describes just how complex the physical processes are governing such storm systems. Teasing out any anthropogenic influence, including even the direction of any influence, is darn near impossible. Claims to the contrary are usually based on a highly selective assessment of the science or the data.

A case in point:

The latest en vogue explanation linking human greenhouse gas emissions to strong winter-season East Coast storms involves changes in the characteristics of the jet stream—a river of fast moving air in the atmosphere that influences both the strength and the forward speed of extratropical storm systems. A prominent (in the media, anyway) research study last year by Rutgers’s Jennifer Francis and University of Wisconsin’s Stephen Vavrus suggests that the declining temperature difference between the Arctic and the lower latitudes (adding greenhouse gases into the atmosphere warms colder, drier regions more so than warmer, wetter ones—with the notable exception of Antarctica) has led to changes in the jet stream which result in slower moving, and potentially stronger East Coast winter storm systems.