http://www.nytimes.com/2005/03/09/business/worldbusiness/09trade.html?pagewanted=all&position=

Free Trade Proposal Splits Bolivian City
By JUAN FORERO

EL ALTO, Bolivia - This city, a poverty-stricken expanse of adobe houses considered the capital of Bolivia's indigenous people, was the flashpoint of relentless protests against globalization that toppled a government more than a year ago and had threatened another president, Carlos Mesa, who offered his resignation on Monday in the face of mounting demonstrations.

On Tuesday evening, though, Mr. Mesa said that he would stay on as president, despite his offer to quit and despite street protests that have paralyzed parts of the nation. No one, though, predicts that El Alto will remain calm. As Bolivia inches toward free trade talks with the United States, which is vilified by a powerful leftist movement in this country, the protesters have said they are not finished.

But even as this clash of views is being played out, El Alto is quietly benefiting from trade preferences provided by Washington, spawning hundreds of small businesses and thousands of jobs.

That has created a little-noticed fissure between those who maintain that Bolivia needs to enter what the Bush administration envisions as a hemisphere-wide free trade zone, and others who say that such an agreement will leave the country, South America's poorest, even more destitute.

That fierce division of opinion, most apparent in Bolivia, the most protectionist nation in the region, is echoed across Latin America - and it is driven by persistent poverty. The market-oriented changes that Washington long ago prescribed for Latin America have brought little or no prosperity to the average person, with some lands poorer than before.

Growth has been no better than halting in a region that needs galloping momentum to pull many of its people out of poverty, despite improved economic indicators seen in 2004.

The United Nations estimated the number of people living in poverty in Latin America at 221 million in 2002, up from 200 million in 1990.

"When you see that there's only been two years of growth in the last 10 years, and other years it was so-so or there was no growth at all, then the political impact is very big," said César Gaviria, a former secretary general of the Organization of American States....

"because countries are competing over trade barriers, not on products and price."
Darn those overpaid slacker Bangladeshis, Hondurans, Dominicans, Haitians...

Int'l trade 101 teaches us that a quota system leaves up for grabs the profit-box we'd call tariff revenues if the importing nation had imposed tariffs and not quotas. And the clever exporting nation can grab out this loot by imposing voluntary export restrictions. Looks like the Chinese government knows international trade better than the Bush White House!

Well, anne, if I was pushing the free trade agreement in Bolivia I would point out that the two facts about Bolivias you cited - that it is the poorest country in South America and that it is the most protectionist country in South America - just might be linked to each other.

Over the past few years more than two million jobs were lost in the Chinese textile industry. Cause? Rising productivity. Chinese employment could however increase again if output were to grow more than productivity. So exporting more textiles goods would help to stop job loss in the Chinese textile industry. But what about jobs over here then? Well, we are richer than China. We have a better working labor markets. We have unemployment insurance and we can retrain workers so that they can get other jobs. And of course there is the global economic effect of cheaper imports of textiles. Free trade here really is win-win. For Western consumers, and for Chinese workers.

Derrida Derider

Agreed. There must however be a clear understanding that trade dislocations for workers are to be cushioned. China has been reasonably adept at this cushioning, though there is more cushioning needed especially in health care, Latin America has been far less adept at protection of workers. We have to develop this topic more fully. I am thinking.

anne: "China has been reasonably adept at this cushioning ..."

?

Any country can do what these Chinese firms do: just layoff the extra workers with no unemployment insurance or any other compensations to worry about. I know you won't consider this to be adequate cushioning.

Chinese economic development has been brutal to the less fortunate. While I am having a hard time to decide whether the development strategy is a necessary evil or just evil, let's not have any illusions about the facts.

http://www.nytimes.com/2004/12/08/international/asia/08china.html?ei=1&en=97f180f904e4e7ce&ex=1111474595&pagewanted=all&position=

http://www.nytimes.com/2004/12/21/international/asia/21china.html?ei=1&en=7ab85c68f6e04943&ex=1111474707&pagewanted=all&position=

http://www.nytimes.com/2004/08/01/international/01CHIN.html?ei=1&en=efdf1f639b140b3d&ex=1111474519&pagewanted=all&position=

These are several articles about the "Great Divide" that development has opened in China. There is much more written and much sadness experienced, however there has been an attempt by China's leaders to keep much of the Iron Rice Bowl in place as the transition to a market economy takes place. There is exploitation and continued attempts to lessen exploitation. The issue of the divide has frequently been addressed by leadership, nonetheless severe dislocations are created and persist. Am I too sanguine in thinking develkopment is however being widely shared? I hope not, but the argument needs to be continually waged for the development process is not gentle.

http://www.nytimes.com/2005/03/04/international/asia/04china.html?ex=1111122000&en=46c00382c0451317&ei=5070

As far as I can tell the urban labor market in China is remarkably robust, with labor being absorbed rapdily for any developing nation. Wage levels however are a problem. Another prime problem I find involves gaps in medical care that are especially acute in rural areas. Again, there is much more to be found and discussed but I am much impressed by China's development.

anne,

I am always amazed as how widely you read and I appreciate very much various links and posts you provided. And most of the time I agree with you. But I think I know China better. "Iron Rice Bowl" only covers city residents (even that is pretty much gone in coastal cities like Shanghai). Most workers employed in exporting industries are from rural areas, there is no such thing as "Iron Rice Bowl". As far as I can tell, there isn't any form of job insurance available to rural workers (the flip side of it is that firms can't really secure long-term workers either. As currently, many factories in southern China are experiencing a labor shortage as many of their workers decide not to return to the factories after the Chinese new year -- workers' wages are too low relative to living expenses in souther China).

The divide between city and rural residence in China is very difficult for people who have never experienced it to comprehend. The government has always treated city residents better. Nowadays, if one has a lot of money, one can buy a city residence and thus the divide is not an issue. But most rural population are not rich, and partly due to government policies: government regularly take things away from rural people. For example, a friend of mine told me that one year the "agriculture tax" exceeded the entire harvest for his hometown. "Then how can people pay the tax?" I asked. "Every family has at least one person working in Shanghai and they send money back to pay the taxes", was his answer. You must also have read about how some bad firms holding on to workers' "papers" to force them continue to work for the factories. This strategy works because a rural resident without the proper paper in a city has a nontrivial probability of being detained. Sometimes even the ones with "papers". For example, a few years ago, around the time an APEC meeting was held in Shanghai, many rural workers were rounded up and detained and then put on a train going back to their home provinces, because Shanghai city government thought that would make the city more presentable. You don't read much about how rural people are systematically treated differently in China, because sadly, most city residents (and thus most of the media) don't see anything wrong with it.