October 14, 2003
Why Oh Why Can't We Have a More Effective Administration Economic Policy Staff? Part XXXVI

Does George W. Bush think that U.S. employment will rise significantly if Japan and China float their currencies? Have Greg Mankiw and John Taylor neglected to tell him about the J-Curve--that for the first twelve to eighteen months after a devaluation the trade balance worsens? Have they neglected to tell him that whatever longer-run effects changes in exchange rates have on employment can and usually are offset by shifts in the Federal Reserve's monetary policy? Have they neglected to tell him that even if the Federal Reserve does not react--that even if the Federal Reserve makes like a potted plant--that a 30% rise in both the yen and the renminbi would reduce the unemployment rate by only 0.2%? WSJ.com - Bush Pressures China, Japan On Their Currency Policies: Mr. Bush said he will keep pressuring China and Japan to stop intervening in the currency markets. "We expect the markets to reflect the true value of currency -- the way that currencies ought to be valued is based upon economic activity, a fiscal policy, monetary policy of the respective governments, the potential for growth, the potential for long-term viability of the economies," Mr. Bush said. "That's how our respective currencies ought...

Posted by DeLong at 04:48 PM

October 05, 2003
Not the Right Number to Report

Louis Uchitelle reports a number that makes no sense: A Missing Statistic: U.S. Jobs That Went Overseas: The job market finally showed some life in September, but not enough to sidetrack a growing debate over why employment has failed to rebound nearly two years after the last recession ended. The debate intrudes increasingly on election politics, but in all the heated back and forth, an essential statistic is missing: the number of jobs that would exist in the United States today if so many had not escaped abroad. The Labor Department, in its numerous surveys of employers and employees, has never tried to calculate this trade-off. But the "offshoring" of work has become so noticeable lately that experts in the private sector are now trying to quantify it. By these initial estimates, at least 15 percent of the 2.81 million jobs lost in America since the decline began have reappeared overseas. Productivity improvements at home — sustaining output with fewer workers — account for the great bulk of the job loss... First of all, "productivity improvements" do not "account for the great bulk of the job loss." Most of the time rapid productivity growth is associated with employment increases--not decreases....

Posted by DeLong at 05:42 PM

September 22, 2003
Let Me Apologize...

Let me apologize to Kaushik of the very fine India Economy Watch, who writes: India Economy Watch: ...why single out India? Honestly, that puzzles me. Has he spoken out against trade with China because of Tienanmen Square/ Tibetans/ human rights/ because of the general status of Muslims in Sinkiang? Why are we suddenly suffering from such bouts of purity with respect to India? There is so much that is logically, structurally wrong with that sentence as an answer to the original argument that I dont know where to start. I wrote this long rant largely because it touched me in the raw. I guess it touched me in the raw because the BJP is indeed a nasty piece of work. Its leadership is full of terrible, Neanderthal men whom the Vajpayees think that they are exploiting to stay in power. And India will pay a price one day. It would have taken generations to have really gotten over partition. And now we have Godha. But unfortunately that had nothing to do with what Daniel Davies was saying. Brad used a loaded statement to make a flippant response... I had not intended the response to be flippant, nor had I intended...

Posted by DeLong at 09:41 AM

The "He Said, She Said" Disease

Mike Allen and Jonathan Weisman of the Washington Post write that the effects of the Bush steel tariff are the subject of: washingtonpost.com: ...fierce debate. A study backed by steel-using companies concluded that... higher steel prices had cost the country about 200,000 manufacturing jobs... steel costs that rose in some cases by as much as 30 percent. Steel producers have their own job numbers. Investments that flooded into the protected steel industry over the past 18 months brought idled steel mills back on line and kept teetering mills from shutting down, said Peter Morici, a University of Maryland business professor hired by the steel producers. That resurrected 16,000 steel jobs, and more than 30,000 jobs when steel suppliers are included. Gary Hufbauer, a critic of the tariffs at the Institute for International Economics, said that both sides are exaggerating their numbers. The steel industry has added some jobs in the past 18 months, but not because of the steel tariffs. Steel consumers have shed jobs because of the tariffs, but he said the number was probably 15,000 to 20,000.... But Allen and Weisman's claim of "fierce debate" is false: There is no fierce debate. There is no debate. The steelmakers'...

Posted by DeLong at 09:23 AM

September 17, 2003
A Glass Half-Full

Former GATT and WTO Director-General Peter Sutherland is an optimistic man--one of those who, as Michael Mussa is rumored to have said about Michel Camdessus, is so sunnily optimistic that he sees the glass as half-full even when there is no glass at all. Financial Times: The World Trade Organisation's failed ministerial conference in Cancún was a substantial setback for all those who see the multilateral trading system as one of the principal vehicles for global growth and development. It was not, however, a tragedy. Cool heads, some political vision and responsibility and a little patience could see the experience turned to advantage......

Posted by DeLong at 08:11 PM

August 13, 2003
The Economist Is Unhappy at the U.S.-E.U. Trade "Deal"

Better than nothing, but not much better than nothing, is what the Economist says. I find this infuriating. The AFL-CIO provides a large share of funding for the Democratic Party. The AFL-CIO was scarred for life when the Reagan deficits of the 1980s pushed up the value of the dollar and devastated many union-heavy manufacturing industries. The AFL-CIO now fears free trade greatly--and this makes making progress on free trade very, very difficult when a Democrat is president. Nevertheless, Bill Clinton worked hard and made a lot of progress toward a better world. By contrast, building momentum for freer trade in a Republican administration should be as easy as falling off a log. But the Bush Administration can't even fall off a log reliably: Economist.com: LATE on Tuesday night, bleary-eyed trade negotiators from the European Union and the United States claimed to have sealed a pact for reforming agricultural trade.... But the text of this latest deal is a classic of the genre, full of fuzzy language, fussy jargon and fudged commitments. It calls for reforms, cuts and caps without putting figures on any of them.... The text offers a commitment to eliminate subsidies, over time, on those products of...

Posted by DeLong at 06:58 PM

June 05, 2003
Gains From International Trade and Investment

An Irish-Arizonian-Australian cross-disciplinary alliance of Kieran Healy and John Quiggin is thinking about Pierre-Olivier Gourinchas and Olivier Jeanne's brand-new "The Elusive Benefits of International Financial Integration"--the conclusion of which is that in standard neoclassical models freeing up capital flows across nations has the capability to boost economic welfare by an amount on the order of magnitude of one percent: John Quiggin: (Small) gains from trade: (Small) gains from trade: Kieran Healy links to a paper by Pierre-Olivier Gourinchas and the missing-from-the-web Olivier Jeanne in which a calibrated growth accounting model is used to show that the gains from unrestricted capital mobility are likely to be of the order of 1 per cent of GDP. Gains from risk sharing aren't mentioned but other papers are cited to say that these are of a similar magnitude. Those who listen to the general pronouncements of economists might be surprised by the modest size of the estimated gains. But for those who have looked at similar exercises in the past there is no surprise here. One of the better-kept secrets of economics is the fact that most studies suggest that the replacement of a typical high-tariff regime (say Australia's in the 1960s) will yield...

Posted by DeLong at 07:09 AM

April 27, 2003
A Loud Cry from Martin Wolf

It's unconscionable that so much time passes by without my reading the columns of the sharp-witted pull-no-punches guy who is Martin Wolf. I have my online Financial Times subscription. What is it that is stopping me? Martin Wolf: ...The mixture of global security risks, post-bubble adjustment and unbalanced growth in demand puts into perspective the euphoria at the end of the war. While the world economy could, in principle, enjoy a strong and durable recovery, it is unlikely to do so without vigorous policy action. The outlines of these actions are well known. That does not make them less important. The US must inject a larger fiscal stimulus, without endangering longer run fiscal solvency. The big eurozone members must take reform seriously, while the ECB should recognise its responsibilities as a central bank in charge of an economic superpower. Japan must, at last, both restructure its banks and halt deflation. Beyond this, the Doha round must be accelerated. It is grotesque that in trade, where the European Union is already a superpower, it is unable to offer radical liberalisation of its indefensible farm policies. Yet nobody looks good. The US has spent as much on its war in Iraq in...

Posted by DeLong at 01:42 PM

April 08, 2003
Huh?

One of the big problems with reading British periodicals is that you can never tell whether they are being sarcastic or not. For example, take last week's Economist on the Doha Round of trade negotiations: The Doha Squabble: In one corner stands the Cairns group of agricultural exporters (including Canada, Australia and Brazil), plus the Americans. Although there are differences among them, this group wants an ambitious outcome, including the scrapping of export subsidies and big cuts in trade-distorting domestic subsidies and tariffs. The Americans want to phase out export subsidies over five years, to cut subsidies to 5% of the value of farm production and to slash tariffs to no more than 25%. These radical plans admittedly stand in stark contrast to the American farm bill signed by George Bush last year, which dramatically increased farm subsidies. What this shows, argues Mr Zoellick, is that America is ready to dismantle subsidies--but only if the playing-field is level. Now we all know that George Bush's farm bill does not show any readiness "to dismantle subsidies... if the playing-field is level." It shows, instead, that the (weak) part of the Bush Administration (then led by then-NEC head Larry Lindsey, before he...

Posted by DeLong at 02:44 PM

March 22, 2003
Brink Lindsey Is Very Good Indeed

I've been rereading Brink Lindsey's book, Against the Dead Hand. God, it's good! When I compare it to other books that have gotten much more attention like... Ummm.... Well! Here's what I said about Brink's book on an earlier occasion: Now Brink Lindsey has written a book: Brink Lindsey (2002), Against the Dead Hand: The Uncertain Struggle for Global Capitalism (New York: John Wiley: 0471442771). The purpose of the book is to celebrate the end of one of what Lindsey sees as one of the great obstacles to human progress. The obstacle is "the dream of centralized, top-down control over the course of economic development" (p. 2). In Lindsey's mind, whether the policies were the bloody collectivization of agriculture by Stalin, Mao's command that peasants smelt steel in their backyards, French bureaucrats providing indicative guidance to enterprises for capacity expansion, the UK Labour Party nationalizing the "commanding heights" of the economy, Franklin D. Roosevelt commanding the separation of investment from commercial banking and decreeing the creation of the TVA, or Park Chung Hee offering large subsidized loans to chaebol that would successfully export--it was all one dream: the dream that government controls could successfully manage the economy. It is this...

Posted by DeLong at 08:40 AM

March 17, 2003
Why No Free-Trade First Downs?

One of the (few) good things about Republican administrations is that they generally find it much easier to move the free-trade ball forward than do Democratic administrations. Or, at least, they did until this one. Is the Bush Administration's failure to make progress on free trade due to ineptness or to malevolence? Do the High Politicians simply not care? Or do they care, but have no idea about how to run international economic policy? I haven't had anyone explain to me what is going on inside the West Wing, at least not in any fashion I find convincing... U.S. Unilateralism Worries Trade Officials: ... European officials have complained the loudest about the United States breaking trade rules. In one of the largest such judgments, Europe was awarded the right to impose $4 billion worth of trade sanctions against the United States for giving tax breaks to American exporters through foreign sales corporations. European officials say they are tired of waiting for Congress to approve new laws prohibiting these subsidies, and that they may impose 100 percent duties on items like precious stones, sporting goods and agricultural products by the end of the month. The most glaring example here of going-it-alone...

Posted by DeLong at 10:43 AM

February 18, 2003
Free Trade Simply Not a High Priority

The Economist writes about how free trade is simply not a priority for the governments of the industrial core--not for Japan, not for Europe, and certainly not for the Bush Administration. Given first-world attitudes, I cannot see how the Doha Round can end in anything but a very minor fig-leaf of an agreement. Economist.com: ...NEVER do today what can be put off till tomorrow. The trade ministers from 22 countries, whose three-day meeting in Tokyo ended on February 16th, managed to live down to their reputation for a reluctance to compromise?and enthusiasm for delay. Hardened trade negotiators are used to deadlines repeatedly missed, crisis talks at the eleventh hour, and second-best solutions. But the outcome of the Tokyo meeting was nevertheless disappointing for those hoping that the Doha round of trade negotiations, conducted under the auspices of the World Trade Organisation (WTO), were going to be different. For a time it looked as if they were. When the round was launched in the Qatari capital in November 2001, the atmosphere was one of rapprochement between the rich countries and their poorer neighbours, and between those rich countries that had been at loggerheads on trade issues. The aftermath of the attacks...

Posted by DeLong at 07:00 AM

September 12, 2002
Jeffrey Frankel on U.S. Economic Policy

Jeffrey Frankel asks a hard question: why, for the past two decades, have the economic policies pursued by Republican administrations been so lousy? Over the past two decades, he points out, Republican administrations have been more protectionist, less eager to promote competition, and fiscally irresponsible. Democratic administrations have been more favorable toward free trade, more eager to let competitive markets work, and strongly oriented toward budget surpluses. What's going on? Frankel's answer appears to be that Republican presidents are--don't laugh--drawn from what John Stuart Mill used to call the stupid party. They simply do not understand that bad economic policies are produced not because of the moral failings of politicians and bureaucrats, but because each interest group believes that it deserves a special favor from the government. Resisting such claims from your political supporters requires " stamina, knowledge, ability to absorb and synthesise facts, analysis, ability to communicate, and willingness to trade off issues when constraints make it appropriate, while taking unpopular stands when required." And these qualities George W. Bush's administration seems to lack, badly. FT.com / World: ...Governing is far from easy. Intelligent economic decision-making requires painstaking work: gathering detailed information, making logical analysis of trade-offs, and confronting...

Posted by DeLong at 10:03 PM

But It's Not Fair Just to Pick on the Right

But it's not fair just to pick on the right. The quality of economic analysis on the loony left is just as low as--perhaps lower than--the quality of economic analysis in National Review. Larry Kudlow finds his match in Krystal Kyer, for whom all trade is bad, all the time: Krystal Kyer: What Rhymes With NAFTA, But Smells Worse? CAFTA!: ...Since NAFTA, American, Canadian and Mexican independent farmers have seen prices plummet and safety nets removed. Thousands of small farms have gone under since NAFTA. As a result, farmland has shifted into the hands of agricultural mega-corporations such as Tyson and Cargill. Small farmers are clearly losers under NAFTA. Correspondingly, large businesses have been the greater beneficiaries of free trade. Since NAFTA began, ConAgra's and Archer Daniels Midland's profits have both tripled to $413 million and $301 million, respectively. As for American workers, or any workers for that matter, benefiting from free trade--we haven't found any. Promises of more manufacturing jobs were never fulfilled. Instead, many jobs were transferred to maquiladoras in northern Mexico, where US corporations could pay workers less while evading US worker safety standards and environmental protection laws. It is estimated that nearly 15 million peasant farmers...

Posted by DeLong at 04:13 PM

September 04, 2002
Globalization Will Continue

The always-smart Martin Wolf, writing in the Financial Times, produces a neo-Marxist analysis rejecting the belief that globalization has seen its high tide. Because the anti-globalization movement does not represent any powerful, unified, material interest group, its influence will be limited. It seems to me that he's almost surely right... FT.com Home US: ...The terrorists who attacked the US on September 11 were mortal enemies of the US. But the US is not just a country, it is also a set of ideas. Among the ideas it has stood for over more than half a century is a liberal world economy. One of the questions raised by September 11 was whether it marked the end of a second era of global economic integration during the past 150 years. The answer, I suggest, remains no.We do not know our future. But we do know the past. In the late 19th century and early 20th century, the world economy achieved a high degree of integration. Yet this integration went into reverse between 1914 and 1945. That breakdown was the consequence of the combined force of ideas, interests, economic instability and calamitous international relations. The question is whether these same four horsemen will...

Posted by DeLong at 06:45 AM

September 02, 2002
Mozambique's Cashew Exports

Margaret McMillan, Dani Rodrik, and Karen Horn Welch take a look at trade cause celebre of the 1990s: Mozambique's cashew exports. This is important because they are trustworthy--and virtually no one else with a loud opinion on this is. Unfortunately, I haven't been able to do anything other than skim it yet, but here's the abstract and the introduction: When Economic Reform Goes Wrong: Cashews in Mozambique by Margaret McMillan, Dani Rodrik, Karen Horn Welch. NBER Working Paper No. w9117. Issued in August 2002 Abstract: Mozambique liberalized its cashew sector in the early 1990s in response to pressure from the World Bank. Opponents of the reform have argued that the policy did little to benefit poor cashew farmers while bankrupting factories in urban areas. Using a welfare-theoretic framework, we analyze the available evidence and provide an accounting of the distributional and efficiency consequences of the reform. We estimate that the direct benefits from reducing restrictions on raw cashew exports were of the order $6.6 million annually, or about 0.14% of Mozambique GDP. However, these benefits were largely offset by the costs of unemployment in the urban areas. The net gain to farmers was probably no greater than $5.3 million, or...

Posted by DeLong at 09:18 AM

August 30, 2002
The Economist on the WTO

The World Trade Organization is getting a new head. I don't envy him: it's hard to push for free trade when there is every sign that the biggest participants in negotiations--the U.S. and its Special Trade Representative on the one hand and the EU on the other--really don't care much about the issue. The WTO can succeed only with leadership from both sides of the North Atlantic. Economist.com: Helping to steer America and the EU through the current dispute without a trade war breaking out will be Mr Supachai's first challenge .The more important question in the long run, though, is whether he can also steer the Doha process towards a successful conclusion. It will not be an easy task. Although the negotiations are not due to be completed until January 2005, the obstacles to success are huge, and even a deadline three years away may be too tight. The change of leadership looks like an attempt to switch jockeys in the middle of the race. Yet the handover was long-planned. The bizarre struggle which led to the appointments of both Mr Moore and Mr Supachai is itself a good illustration of the difficulties involved in reaching agreement among WTO...

Posted by DeLong at 04:35 PM

August 22, 2002
Glenn Hubbard Keeps Pitching

From the Financial Times: CEA Chair Glenn Hubbard: "If you ask the narrow question, are steel tariffs in the US economic interest, the answer is no." Good to see that Council of Economic Advisers Chair Glenn Hubbard is still in there pitching, still clear on what the difference between good and bad economic policy are. But where are the Trade Representative, the Assistant to the President for Economic Policy, and the Treasury Secretary? If CEA gets no support from anywhere else in the government, the White House tends to treat the question "are these economic policies good for the country?" as an irrelevant academic distraction. By contrast, if Treasury and the National Economic Council strongly back the proposition that the most important thing is getting policies right for the long run, then the CEA's arguments become very powerful. If you read the full interview of Glenn by the Financial Times, you see a striking disconnect: the FT wants Glenn to talk about whether the Waco Economic Forum and the tax cuts for investors likely to be proposed as a result of it will strengthen the short-run recovery. Glenn doesn't want to talk about that. (In his shoes, I wouldn't want...

Posted by DeLong at 08:34 AM

August 02, 2002
Brink Lindsey on Trade Promotion Authority

Brink Lindsey worries that winning Trade Promotion Authority--restrictions on Congress's ability to amend any trade agreement the President negotiates in the process of approving it--will turn out to be a hollow victory for free trade: BrinkLindsey.com: What Next after TPA? "...Indeed, the way the TPA fight has been fought will make the real job of trade liberalization more difficult. To get TPA through Congress, the Bush administration made one concession after another to protectionist and pro-subsidy lobbies -- imposing steep duties on steel and lumber; caving in to textile-industry pressure against opening markets to Caribbean, South American, and Pakistani goods; and, perhaps worst of all, acquiescing in egregiously profligate new farm subsidies. "After this string of sellouts, U.S. credibility with our trading partners is currently hovering near zero. As a result, America's ability to assume its normal role in leading trade negotiations is now in serious doubt. How can the U.S. tell other countries to take political risks for freer trade when we are unwilling to follow our own advice? The administration may find that, in winning congressional authority to promote trade, it has lost the moral authority to do so..."...

Posted by DeLong at 11:21 AM

July 26, 2002
Larry Lindsey Endorses Strategic Trade Policy

Larry Lindsey has always been a supply sider: believing that the benefits in terms of enhanced work effort and productivity from cutting marginal tax rates are enormous, at least a full order of magnitude larger than I believe the evidence shows. (The fact that the Reagan tax cuts were followed by large deficits and the Bush-Clinton tax increases were followed by large surpluses should give him pause.) Now it turns out that Larry Lindsey has become a strategic trader: someone who believes that the government, by imposing selective tariffs and quotas in the interest of important and strategic industries, can "pick winners" and shape the distribution of industries across nations in such a way as to ultimately enhance productivity. Back in the Clinton administration, we economists spent a lot of time arguing against this strategic-trader belief: we argued that the U.S. government lacked the analytical capacity to make such judgments, that the U.S. political process was much too subject to industry lobbying for the government to be able to make good trade-industrial policy even if it did have the analytical capacity, and that the consequences of attempting such policies would be disastrous for world economic growth--that even if we did...

Posted by DeLong at 10:15 AM

Treasury Secretary O'Neill Defends the Steel Tariff

I still don't understand why this decision didn't provoke at least one high-level resignation from Bush's economic policy people. WSJ.com - Major Business News Mr. O'Neill got a taste of that credibility gap during a speech Thursday to the National Association of Manufacturers. From the lectern, he talked about the strength of the U.S. economy, predicting that "over time, the market will again focus on our economy's fundamentals." But during a question-and-answer session afterward, Richard Wilkey, president of a 180-employee maker of lawn-mower blades, blasted Mr. O'Neill and the administration for its decision to raise tariffs on steel imports. "I'm going to spend $1.2 million more for steel this year. Now, I don't make $1.2 million," he declared. The secretary gave a lengthy defense of his own efforts to address overcapacity in the global steel industry. But Mr. Wilkey, president of Fisher Barton Inc. in Watertown, Wis., walked away unsatisfied. "Look at what we're getting -- how can I say these guys are doing a wonderful job?" he said. "I've been Republican all my life, but why do we have these problems?......

Posted by DeLong at 08:23 AM

July 22, 2002
The Anti-Globalization Movement Seeks Another Victory...

Once it becomes known that New York tickets are being digitized in Ghana, the firm promises to end the practice--fearful of some political backlash. And 40 other workers in Ghana may, as a result, lose the opportunity to be hired for what they see as good jobs at good wages. In New York Tickets, Ghana Sees Orderly City ...Charles Sturcken, chief of staff for the city's Department of Environmental Protection, which signed a two-year, $910,000 contract with Data Management, said he had no idea that the work was being done in Ghana. Although many United States corporations and some other cities rely on similar back offices to input data in distant countries, several current and former city officials said they were unaware that any city contract had ever been handled abroad. It may not last much longer. Once a reporter started asking about the Ghana contract, Data Management said it planned to start handling New York City's business domestically and have the Accra office work on other accounts. The company worries that it will be perceived in New York as taking jobs from American workers, said William Swezey, a manager at Data Management. From New York's perspective, it hardly matters...

Posted by DeLong at 07:28 PM

June 29, 2002
Side-Effects of Agricultural Subsidies

Why do international rules-of-the-game organizations like the WTO seek to reach inside national governments and alter their policies? Because national special-interest subsidies can be as effective in destroying the gains from international trade as tariffs and quotas. Consider subsidies for U.S. cotton producers. U.S. Cotton producers are the winners. U.S. taxpayers are (bigger) losers. And the biggest losers of all from a utilitarian or human happiness standpoint are poor cotton growers in other countries. This is one of the things that Ralph Nader and company are careful not to tell you. WSJ.com - Major Business News. PAGE ONE FROM THE ARCHIVES: June 26, 2002: U.S. Subsidies Create Cotton Glut That Hurts Foreign Cotton Farms By ROGER THUROW and SCOTT KILMAN, Staff Reporters of THE WALL STREET JOURNAL KOROKORO, Mali -- After the first good rains of the season visited this West African village earlier this month, Mody Sangare hitched his one-blade plow to two lanky oxen and began turning over the dirt of his fields. Walking barefoot behind the plow, the 22-year-old farmer would spend the next 14 days tilling and planting 15 acres of cotton . And for what, he wonders? The price being offered to Mali's cotton farmers...

Posted by DeLong at 08:32 AM

June 25, 2002
The Anti-Globalization of Fools

Lance Knobel cites Nicholas Kristof and Phil Jones on the anti-globalization of fools... Davos Newbies Tuesday, June 25, 2002: In support of sweatshops Nicholas Kristof says the unsayable in The New York Times: "It's catastrophic for muddle-minded liberals to join in and cudgel impoverished workers for whom a sweatshop job is the first step on life's escalator." I remember the BBC report he cites which led to Nike leaving Cambodia. It did explain that the low-paid factory jobs were far preferable for Cambodian girls to the sex trade or staying in their impoverished villages. But the outcry that followed the accurate report overlooked those realities. Phil Jones offers an intelligent reply to Kristof's argument. I agree that the first condition -- ensuring adequate health and safety standards, even in "sweatshops" -- is fundamental. I know there have been documented cases of global corporations violating these standards, but from what I've seen in the developing world, multinationals are generally better upholders of standards than local companies. I don't think this is altruism on their part. They are worried about reputational damage if they have woefully low standards. As to the disparity between advocating openness for western manufacturers while slamming the door...

Posted by DeLong at 10:56 AM

June 16, 2002
Consequences of the Recent Farm Bill: Does It Mean Deadlock in the Doha Round?

Yet another one of an increasing number of things I run across that suggest that this spring's farm bill was a serious mistake. We, after all, gain enormously from freer trade--both in prosperity and security. I am kinda surprised that there have been no resignations-on-principal from the free trade wing of the administration yet. Were I a senior administration official concerned with trade, I would have gotten my peers together and drawn straws for who would resign on principal.

Posted by DeLong at 08:52 AM

June 12, 2002
Comparative Advantage

Question: What do you think is the most misunderstood concept in your discipline? Answer: For Economics this question has a stock answer. The most misunderstood concept in Economics is the concept of "comparative advantage." First developed early in the nineteenth century by David Ricardo, "comparative advantage" holds that we should export not those commodities that we can make more efficiently than people in other countries can make them, but those commodities that we can make most efficiently relative to the efficiency with which we make the average good or service. This principle has a corollary: we should import not those goods and services that we make less efficiently than other people make them, but those goods and services that we make less efficiently than we make goods and services in general. A country that allows its trade to be shaped by this principle of comparative advantage will find that its workers find employment in those industries in which they are most productive. It will find that its profitable firms grow and its unprofitable firms shrink. And it will find that those goods that used to be produced domestically at relatively high prices--because the country was unable to produce them efficiently--will...

Posted by DeLong at 12:37 PM

May 31, 2002
U.S. Feels the Pain of Steel Tariffs

Less than three months after the Bush administration suggested its stiff new tariffs on steel imports would have only a limited impact on prices, the levies are sending waves of pain through America's manufacturing sector -- including steep price increases, supply shortages and layoff threats...

Posted by DeLong at 02:13 PM

May 07, 2002
Free Pants!

"Free pants!" I say, coming into the bedroom, waving them around. "Yes, dear," says Ann Marie.

Posted by DeLong at 03:09 PM

March 19, 2002
Steel Tariffs

Well, it's been a couple of weeks since I started hearing that George W. Bush was going to cave on free trade and impose steel tariffs carefully crafted to boost employment in swing states. I've been waiting for the response, and it seems rather... quiet...

Posted by DeLong at 04:11 PM