The Democrats and trade - again
It really is splendid news that Richard Gephardt is out of the race for the Democratic nomination. The man has founded a political career on economic demagoguery, and it's fitting to the merits of his case that he should have turned out to be the perpetual loser. I hope, though am not confident, that the Democrats can now abandon the anti-trade stance that Gephardt has popularised and with which he has impoverished American political debate.
To that end, and with obviously minuscule influence, I want to pin down the criticisms of free trade before moving on to other matters. Fortunately two of my correspondents have objected, from incompatible standpoints, to my last post but one, entitled Democrats against the world, and I will address their objections directly.
The first correspondent, from the US, maintains:
"'Level playing field' advocates—including, most prominently, the labor unions—say that it will prevent American jobs from being stolen. Another way to say this is that it will prevent jobs in poor countries from being created."It's this simple: why should a job in one country be lost so that a job can be created in another country? What obligation does the US have to the world that is so important that it must allow its own citizens to be deprived of jobs so that someone overseas can have one?
Is this just down to the have-nots drowning out the voices of the (for the time being) haves or is there some silver lining for the recently fired American employee in this picture that I am missing?
I'm not saying free trade is good or bad, just raising a very simple point -- one which I have yet to see any Gephardt opponent / anti-anti-free trader / etc take the time to respond to. It was one thing when it was just textiles jobs that were headed overseas, but now it's the tech sector, and that's going to hit a lot closer to home with anyone who dreamed of hopping on the PC/e-gravy train of the 80s and 90s, once it gets up to speed.... [He then argues that protecting American jobs will be a huge vote-winner for the Democrats.]
Well, I'll respond to it. I believe that even if it made economic sense to protect US (or British) industry from foreign competition in order to safeguard jobs, it would still be morally wrong to do so at the expense of Third World development. But fortunately (for I am no moral philosopher), the argument for protecting jobs through trade restrictions is bad economics as well as bad ethics.
The overall effect of trade on aggregate US employment is (approximately) zero. Of course trade destroys some jobs, in import-competing industries; it also creates new jobs, in export-competing industries. Over time these will balance each other. This happens because if there is an imbalance between jobs destroyed and jobs created then it will be generally be offset by either an adjustment in wages or a shift in macroeconomic policy. For example, a rise in unemployment will typically result in an easier monetary policy by the Fed, which will stimulate growth and put downward pressure on the exchange rate. This in turn will, other things being equal, expand demand for exports and dampen demand for imports, causing employment to rise. In the long run the variable that total employment most closely tracks is the number of people in the labour force. This will depend on such things as demographics and labour market policies (which affect the so-called non-accelerating inflation rate of unemployment) rather than trade.
This is not just a matter of theory. This table from the Council of Economic Advisors' Economic Report of the President shows annual data going back to the 1940s for the civilian labour force and civilian employment (these are columns C and D in the table; the most recent data are on the second sheet). They track each other closely. There is always some unemployment, but this is determined in the short run far more by the decisions of the Federal Reserve Open Market Committee than by trade, while over the long run employment will resume its relationship with the labour force.
The reason jobs lost will be balanced by jobs created is that imports and exports are not independent. It is not possible to boost exports without at the same time expanding imports. In order to import goods and services we need to generate the earnings to pay for them, which is to say we need to export. (Putting it like this brings out the fact, as frighteningly few politicians understand, that exports are a cost, not a benefit: they are what we have to give up in order to enjoy the benefits of imported goods.) If we impose import controls, then our trading partners will be unable to generate the foreign earnings necessary to buy our exports.
So it's not true that trade costs American jobs. It's not true either that the jobs that are destroyed by imports are high-wage jobs. Before he was Treasury Secretary in the Clinton administration, Larry Summers co-authored a 1989 Brookings paper that concluded "after being adjusted for skill differences, wages in export-intensive industries are 11 per cent above average, whereas wages in import-intensive industries are 15 per cent below average". Every subsequent study that I know of has been consistent with these findings: the two big industry exceptions to this conclusion, steel and autos, are unrepresentative of the wider economy.
Summers's conclusion points to one facet of why trade benefits America and indeed its trading partners. Trade is valuable not because it boosts employment - it doesn't, as we free traders should acknowledge - but because it raises living standards by allowing specialisation in production. Trade is especially important for Third World development, because it enables gains in productivity and thereby increases in real wages, and from that the ability of a country to lift itself out of poverty. I argue below that an anti-trade bias in domestic policy by Third World nations is a more important obstacle to their economic betterment than rich-world protectionism, but rich-world protectionism is certainly an obstacle and progressives will wish to lift it rather than compound it.
On which point, I turn with a heavy heart to a comment posted by one of my regular contributors, who lives in Manchester. He writes (beginning with a quotation from me):
"Trade is not a zero-sum game: it's a mutually enriching exchange that allows gains in living standards through each country's being able to specialise in what it produces."I'm surprised noone [sic] has challenged this. As you may be aware, I am not an expert in economics. Nonetheless this sounds like a ridiculous statement. Trade will ideally be a mutually enriching process, sure. But sometimes you get ripped off, no? Sometimes a country like Vietnam starts selling a whole load of coffee on bad IMF advice, and there's a glut in the coffee market, and prices plummet, and this is enriching for consumers of coffee and enpoverishing [sic] for producers of coffee.
Sometimes countries aren't able to specialise in what they have a competitive [sic - I think he means comparative, but can't be sure from the context] advantage in, for example when the US/UK floods the developing world with agricultural products and erects tarrifs [sic]. It's still trade, if not 'free' trade. So I dispute your claim that trade is a mutually enriching exchange.
Go ahead Mr Kamm, sneer at my ignorance, I thought I'd rattle the cage anyway.
PS: Gore and Leiberman [sic] wanted to protect the environment and labour standards? No way! What fools! If we insisted that products were built in factories with a fire escape, then the poor would never escape from poverty! - he writes with sarcasm.
It's not my purpose to defend the IMF. (Though in fact the IMF has had an unfair press: in many countries over some decades its policies have contributed to sound economic management. The British Labour Government's borrowing from the IMF under certain conditions in 1976 was much criticised at the time both by the Conservatives and by the Labour Left, but it was an entirely sensible recourse for a country that was soon to become a net oil exporter. The Chancellor in that government, Denis Healey, in my view did an excellent job of dealing with a wretched economic inheritance and a recalcitrant party - but that's a post for another time.) But it's worth interjecting that whatever anti-globalisation web site my interlocutor has got his Vietnam example from didn't trouble to check its facts. The usual villain cited in this case is the World Bank, which allegedly lent large sums to expand the Vietnamese coffee industry, whereupon prices collapsed on the world market and hardship resulted. In fact, the World Bank - which has become commendably open and self-critical about schemes that have failed - played almost no part in this at all, and made no investments designed to boost coffee production. Only two of its projects in rural Vietnam had even a connection with coffee, and one of them - an agricultural diversification project - was intended to diversify Vietnamese production away from this single, highly-cyclical commodity.
On the question of trade more generally, there is no question but that Vietnam has benefited from a more open economic regime. Between 1990 and 2002, total exports and imports of goods (in US dollar terms) both increased on average by 21 per cent a year, significantly faster than GDP, while the merchandise structures of exports and imports became - as the IMF had intended and advised - more diversified. In 1992 almost half of Vietnamese exports were in the commodity sector (12% rice and 37% other primary commodities); in 2002 the equivalent figure was 25% (4% rice and 21% other primary commodities). Crude oil was down from almost a third of exports to a fifth, while manufactures in this rapidly industrialising nation grew from 6% to 32% of exports. (All these data are taken from the IMF report Vietnam: Selected Issues, 5 December 2003, page 14.)
Poverty in Vietnam has declined sharply since the policy of Doi Moi - a greater openness compared with the Stalinist command economy, and most particularly the abolition of the state's monopoly in foreign trade - was introduced in the late 1980s. In a recent paper on Vietnam's economic performance since 2001, David Dapice, Senior Fellow in the Vietnam Program at Harvard, noted that the poverty rate had fallen from 75% at the initiation of Doi Moi to 37% in 1998 and perhaps 32% in 2001. Dapice speculates that declines in some agricultural prices, including coffee, have contributed to a slackening in the pace of poverty reduction, which I guess is my interlocutor's point - but I give all this background to indicate that if you concentrate on one fashionable campaign without examining the wider economic context, you're liable to miss quite a lot.
On the question of western agricultural tariffs, I am of course opposed to them. Yet - as I mentioned above - rich world protectionism is not an insuperable obstacle to the betterment of developing nations. I wrote about this a few months ago when criticising a report written by my friend Stephen Pollard:
It is simply not the case that EU protectionism is the major cause of restricted growth in Third World exports. A more important factor is the import-substitution strategies that developing countries, especially those in sub-Saharan Africa, have used. An anti-trade bias has hurt export performance by restricting domestic competition. That bias takes the form of significantly higher levels of protectionism in developing countries – in textiles, food and industrial products - than in the rich world. (This chart, constructed for a World Bank working paper from figures compiled by Michael Finger and Ludger Schuknecht, demonstrates the point.)
The point is expounded lucidly by the trade economists Jagdish Bhagwati and Arvind Panagariya (from whom I took the link to the chart) in this article from the OECD Observer:
The recent castigation of rich-country protectionism by the heads of international agencies and in the media, while welcome, is ... little more than a reiteration of the obvious. But the absence of a simultaneous and equally pointed focus on the protectionism of poor countries, which has also been amply documented by informed trade economists, has encouraged several fallacies which can only make it harder to reduce protectionism in those countries. These fallacies need to be exposed and the latest critics, far too often non-trade experts, asked to always condemn protectionism in both poor and rich countries, even as they wreak more contempt on the rich ones.
I hope that my interlocutor in Manchester, and other readers who think like him, will ponder Bhagwati's advice carefully before condemning as 'nonsense' the benefits of the international trading system.
Finally, there's probably little to be gained from instructing a certain type of mind-set on the economics of trade and labour standards, but I'll do it anyway. I'm in favour of good working conditions and environmental protection, and I certainly consider no factory in the world should be without a fire escape; I object strongly to making trade agreements conditional on labour and environmental standards. The reason was well stated by 100 or so Third World intellectuals and NGOs (including incidentally the Secretary of the All-India Trade Union Congress) in a Statement Against Linkage in 1999 to coincide with the failed Seattle summit of the World Trade Organisation. (Contrary to popular mythology, the summit's failure was due not to the anti-globalisers' protests but to the insistence of the United States that trade agreements should be linked to labour and environmental standards. The conjunction of the world's richest country protesting about labour standards ought to have given even the most passionate anti-trade campaigner cause for thought, and perhaps even stirred the realisation that the demand is a transparent protectionist ruse.) The statement observed:
The WTO's design must reflect the principle of mutual-gain; it cannot be allowed to become the institution that becomes a prisoner of every developed-country lobby or group that seeks to advance its agenda at the expense of the developing countries. The game of lobbies in the developed countries seeking to advance their own interests through successive enlargement of the issues at the WTO by simply claiming, without any underlying and coherent rationale, that the issue is "trade-related", has gone too far already. It is time for us to say forcefully: Enough is enough.
Those familiar with the recent history of US labour campaigning will recognise the pattern. In 2000 the US adopted the African Growth and Opportunity Act, which aimed to stimulate development in Africa by offering similar tariff preferences to those enjoyed by Caribbean nations. And you know what? The AFL-CIO, that supposed bastion of progressive values, opposed the legislation.
And this is where we came in. Thank goodness the champion of the cause of American big labour has been knocked out of the presidential race once and for all. May his influence not linger with the remaining candidates.
Do you think Roger Bootle makes sense in this article from Sunday's Telegraph? He points out that the rise of China has hurt Mexico's terms of trade. Does this affect the gains from trade or is in practice unlikely?
(Filed: 18/01/2004)
Why we should wave the jobs goodbye
Last week my column drew forth a hail of e-mails from outraged Nimbys across the land. This week I fear I must face an even greater onslaught, for my subject is "offshoring". What's more, I believe that it is good for you - or at least for the rest of us.
The whys and wherefores
As commonly used, the word offshoring refers to the relocation of a service process abroad. This is little different from the loss of manufacturing jobs to cheaper locations which has been going on since the war, and no different from the displacement of agricultural labour by the import of cheap foodstuffs from the New World, which dates back to the 19th century.
Click to enlarge
So why the new word? It is a response to the phenomenon of relocating part of the production process, which makes it seem as though the offshore centres are becoming a lower-cost part of the domestic economy, and to the fact that this is now affecting the service sector. It was apparently alright when it was steelworkers or shipworkers who were losing their jobs but now that it is office workers that is an altogether different thing. And this point has resonance beyond mere self-interest. It might be acceptable to be losing so many jobs in manufacturing when our comparative advantage was supposedly in services but now that services are also under threat, people are worried that we face economic ruin.
It is important to get some perspective. Only last week came news that Axa and Abbey are to transfer jobs to Bangalore. This follows similar announcements from HSBC and a host of other companies. In fact, though, the total loss of jobs so far is comparatively modest. But I suppose that it is the potential that scares people. As our lower chart shows, India is nearly the largest player but the worry is that she will soon become for services what China has already become for manufacturing. Then where would we be?
Call centres are currently the most vulnerable. There are about 370,000 people employed in them here and, as our upper chart shows, they are widely spread, although with some heavy concentrations in particular places.
Gains from trade
How can losing such jobs be good for us? Because offshoring is in principle no different from other forms of trade, all the usual arguments apply. This is a classic case of the gains from trade being thinly spread and almost invisible while the losses are concentrated and highly visible. The losers from offshoring are those people who are forced to accept lower paying or less desirable jobs elsewhere. The gainers are, in the first instance, their employers, but ultimately the employers' customers as costs are lowered and they are able to buy the services at a lower price.
But there is another type of gainer who is still more difficult to identify - the purchasers of all those goods and services which can now be produced more cheaply here thanks to the supply of cheaper labour which has now been released following the loss of jobs through offshoring.
Yet how can we be sure that the UK gains as a whole? It is just like the import of cars from Germany or apples from France. The key to understanding why we should import these even though we can produce them here ourselves is to appreciate that there are limits to what an economy can produce overall. Given those limits, we achieve the highest overall output if we concentrate on those things in which we have a comparative advantage, and importing those things in which we do not.
Moreover, trade, including offshoring, benefits countries such as India which are thereby helped on the road to development. It is staggering the number of Westerners who are concerned about Third World poverty but when confronted with the realities of liberal trade policies which would help these countries sink back into knee-jerk protectionism.
Nor is helping Third World countries to develop merely altruistic. As they get richer they will buy more things from us. Offshoring is our experience of the great process of the international relocation of labour which dominates our times. When 3bn people join the world economy, you should expect some changes. But the overall effect on us is clearly positive.
Mexican wave
Is it not possible, though, for a country's income to be reduced by the emergence of a new producer which takes away your markets? The straight answer is "yes", and there is a clear example of such a country - Mexico.
Before the emergence of China it made a success out of exporting goods to the US. Now China has emerged onto the scene with even lower labour costs and it threatens to supplant Mexico in many areas. It has worsened her terms of trade.
Then why could the same thing not happen to the UK? In principle it could. If Bombay supplanted the City of London as a financial centre, for instance, this would harm one of the UK's major export industries and worsen the UK's terms of trade.
And some skilled financial sector jobs are already going to India. In practice, though, I doubt that large numbers of them will migrate. In finance, personal contact and networks matter and established centres are extremely difficult to dislodge. If Frankfurt could not dent London's position I somehow doubt that Bombay will be able to.
But even it were able to, this would not change my view on offshoring. What is currently going on in the UK is principally not the loss of export markets but rather the replacement of the supply of some domestic services by a cheaper source from abroad. This is not wealth threatening but wealth creating.
In any case, as and when India does take export markets from us - what on earth are we supposed to do about it? Stopping the loss of domestic jobs through offshoring would not stop the loss of exports and would make our overall losses worse. It would be cutting off our nose to spite our face.
Lie back and think of India
Offshoring is simply the latest development in a long line of economic progress which has taken the creation of wealth from self-sufficient farming to integration with other local producers, to a national economy, then an international one.
It represents a shift towards the true globalisation of production. At each stage there has been an increase in specialisation, inter-dependence and wealth. And at each stage there have also been individual losers. This is no different.
So what should we do about it? Be generous to the losers but welcome the process with open arms. And don't be surprised if I am soon replaced by a Mr Bootleji, based in Bangalore!
Posted by: Matthew | January 20, 2004 at 09:14 PM
I quite agree: it does stress the importance of ensuring that Britain remains a competitive and strong international player in the areas in which we do have a comparative advantage. Exactly how we go about that is the harder part...
Posted by: Ed | January 21, 2004 at 02:58 PM
Christ, I must use a spellchecker in future.
"I hope that my interlocutor in Manchester, and other readers who think like him, will ponder Bhagwati's advice carefully before condemning as 'nonsense' the benefits of the international trading system."
You put the word 'nonsense' in quote marks, as if I had used it. I don't think, though, that I did. I didn't think I expressed those sentiments either.
I questioned your assertion that "Trade is not a zero-sum game: it's a mutually enriching exchange that allows gains in living standards through each country's being able to specialise in what it produces," and furthermore I questioned it not on the grounds that trade is bad, but that trade can be bad in some instances.
The instances I referred to were ones where trade had been distorted by tariffs or by what I wrote was bad IMF advice. I was writing off the cuff, rather than from an 'anti-globalisation website', and got it wrong - the coffee industry was founded on World Bank loans not IMF advice.
You wrote that you would address my objections directly, but I don't think you have. Rather, you've accused me of saying something I didn't. My point was that trade is not always mutually enriching. I would suggest that it can be more so when rich countries remove tariffs, when poor countries act sensibly, and when basic considerations are paid to the conditions of workers and the environment.
Posted by: Your interlocuter in Manchester | January 21, 2004 at 03:46 PM
Matthew - While I find that remark of Bootle's slightly confusing (especially as it's lodged in an article that makes good points), I can explain what I think it means. There may well be a time when Mexico, for one reason or another, cannot attract foreign investment to the extent necessary to fund a current account imbalance (or rather that it could do so only by raising interest rates to a level that would severely damage growth and employment) at the exchange rate currently in operation. My reading of Bootle's argument is that this is now happening owing to shifts in the demand for labour among developing countries. If so, I wasn't aware of it, but there's no reason in principle to say it can't happen. If Bootle's analysis is right then there is indeed a narrow technical sense in which Mexico can be said to be uncompetitive, which is that its costs need to be adjusted by a currency depreciation. Provided that nominal wages remain constant, then this will effect a cut in real wages, and thereby conform to what I described in my post as an imbalance's being offset by either an adjustment in wages or a shift in macroeconomic policy.
As I say, that's my reading of the passage you point to but I don't find it clear. Because it's not clear, it arguably risks misleading readers into drawing other inferences, such as Ed's belief in the "importance of ensuring that Britain remains a competitive and strong international player in the areas in which we do have a comparative advantage". With due respect to Ed, I don't know what this means.International trade is not a competition. Britain could be less efficient than every country in the world in producing every good, but it would still be perfectly possible for us to trade; it would also be beneficial, for we would be able to concentrate production in areas of comparative advantage.
Ryan - You're right on your first point. I inadvertently misquoted you as saying my post was 'nonsense', whereas in fact you said it was 'ridiculous'. My apologies for this, though I'm not sure where the substantive difference between these charges lies.
You maintain "not ... that trade is bad, but that trade can be bad in some instances." Well of course it can. Every economics undergraduate knows that you can construct a textbook case in which relative prices are the same in both countries and thus there's no possibility of gains arising from trade. It's also possible to come up with textbook cases where a country imposing tariffs benefits through being able to shift prices in its favour. So what's your point? I wasn't referring to textbook cases: I was making an observation about the world as it operates, and I don't believe a single one of my readers will have understood me to have said anything else. That trade is a system of mutually enriching exchange - a positive-sum rather than zero-sum game - is an observable part of recent, and indeed distant, economic history.
I'm unsurprised that the only empirical case you have cited to the contrary turns out to have been a fabrication, and even then you got your account of the fabrication wrong. The IMF is obviously not the same as the World Bank, and your revised claim that "the [Vietnam] coffee industry was founded on World Bank loans" is ill-informed propaganda. The expansion of the Vietnam coffee industry began significantly before the World Bank began extending loans to the rural sector in 1996, no investments were designed to support coffee production, and only two loans even had any connection with coffee - one of which was explicitly designed to diversify Vietnamese crop production *away* from coffee. More to the point, I have already - in my original post - corrected you on this, yet you carry on regardless. I have to say that I consider that type of contribution to this site to be a discourtesy to me and, more important, my readers.
I certainly agree that the removal of tariffs - in developed and developing countries - is a good thing in principle, though why you suppose that the existence of tariffs negates, rather than tempers, the benefits of trade is a mystery you do not explain. And as you prudently elect not to deal with my observations on the undesirability of linking labour and environmental standards to trade agreements, I shall resist the temptation to explain the point to you again.
In the same spirit of graciousness, let me commend your helpfulness in providing the information that you are not an expert in economics, presumably in case any of my readers assumed otherwise.
Posted by: Oliver Kamm | January 21, 2004 at 07:23 PM
Thank you Oliver. I'm still a little unclear about Bootle's Mexico example, but essentially I guess overall he's saying that the rise of China has meant Mexico's gains from trade are less than they were, but nevertheless they remain gains.
Posted by: Matthew | January 22, 2004 at 09:42 AM
>"Ryan - You're right on your first point. I inadvertently misquoted you as saying my post was 'nonsense', whereas in fact you said it was 'ridiculous'. My apologies for this, though I'm not sure where the substantive difference between these charges lies."
No. You misquoted me as referring to the benefits of the international trading system as 'nonsense'.
I said that a particular statement of yours, claiming that "Trade is not a zero-sum game: it's a mutually enriching exchange that allows gains in living standards through each country's being able to specialise in what it produces," was ridiculous.
The difference is substantial.
>"You maintain "not ... that trade is bad, but that trade can be bad in some instances." Well of course it can."
That was the point I was making. Your assertion seemed to be that trade was always mutually enriching. I was pointing out that this wasn't always the case. The rest of your readers may have seen that this was obvious, but it certainly didn't seem clear to me. So we agree. Good. Thankyou for clarifying this.
To reflect on the undesirability of linking labour and environmental standards to trade agreements,
>"I'm in favour of good working conditions and environmental protection, and I certainly consider no factory in the world should be without a fire escape; I object strongly to making trade agreements conditional on labour and environmental standards."
I'm glad. This was far from apparent when you poured so much scorn upon Gore and Leiberman for "insist(ing) on and use the authority to enforce worker rights, human rights, and environmental protections in those agreements. We should use trade to lift up standards around the world not drag down standards here at home."
This seemed eminently reasonable to me. I am interested by this statement by third world intellectuals, and will give it further attention. I wonder how the developed world can help to raise labour and environmental standards in the developing world, if not through trade agreements. I expect (though I don't wish to assume) that your answer would be through free trade - that eventually countries which open themselves to trade will experience rising labour and environmental standards as the natural course of things. I'm concerned about the word 'eventually', and concerned that the costs of waiting (the costs to the people and the planet, that is) will be too high.
Posted by: Ryan | January 22, 2004 at 09:42 AM
Ryan - I'm unwilling to allow you to continue with contributions like this. As I've said, they do not show courtesy to me or my readers, but I will respond anyway at this stage. Your statements are in italics.
1. I said that a particular statement of yours, claiming that "Trade is not a zero-sum game: it's a mutually enriching exchange that allows gains in living standards through each country's being able to specialise in what it produces," was ridiculous.
Having read your protests carefully, I still don't see that my inadvertent misquotation misrepresented the substance of your position, but as you claim it did I'm glad to quote you directly in restating your point. The trouble is that the statement you castigate as 'ridiculous' is one that almost all economists would assent to. The statement doesn't even necessarily rule out (though I am opposed to them in practice) some exceptions to free trade (e.g. the 'optimum tariff' argument) that are presented in economic textbooks. If you don't believe me, then consider this 1997 paper by Paul Krugman from the Journal of Economic Literature, or this interesting review-article from the Federal Reserve Bank of St. Louis. To quote the latter directly:
My quoting these sources doesn't of course establish my case on trade, but you should be aware that your objection is not only to my judgements but also to those of almost the entire economics profession. (It's often claimed back by non-economist opponents of trade - I recently came across this on Harry Hatchet's blog - that you can find any conclusion you want to in the economic literature, but this is not actually true. On issues of microeconomics economists are largely of like mind, and on some issues of microeconomics - this being one - they are almost unanimous.) If you want to persist in this argument on a sensible level then I'm happy to do so, but please leave words like 'ridiculous' at the door: my arguments may conceivably be mistaken but they are not ill-informed.
2. >"You maintain "not ... that trade is bad, but that trade can be bad in some instances." Well of course it can."
That was the point I was making. Your assertion seemed to be that trade was always mutually enriching. I was pointing out that this wasn't always the case. The rest of your readers may have seen that this was obvious, but it certainly didn't seem clear to me. So we agree. Good. Thankyou for clarifying this.
No, we do not agree; don't be so presumptuous and evasive. I said 'can', and gave a textbook counterexample in which relative prices are the same in both countries. You said 'isn't', and gave what you supposed to be a real-world example. That example was in fact a garbled misrepresentation of someone else's fabrication, yet even when I pointed this out you went ahead and repeated it. Now you merely ignore it as if your point has been made. I repeat that I'm happy to have a sensible discussion with you on international economics, but this type of contribution is not acceptable.
3. >"I'm in favour of good working conditions and environmental protection, and I certainly consider no factory in the world should be without a fire escape; I object strongly to making trade agreements conditional on labour and environmental standards."
I'm glad. This was far from apparent when you poured so much scorn upon Gore and Leiberman for "insist(ing) on and use the authority to enforce worker rights, human rights, and environmental protections in those agreements. We should use trade to lift up standards around the world not drag down standards here at home."
It's quite frustrating. Not only do you fail to check your empirical claims, you don't even trouble to read the statements that you quote. Look carefully at the second part of that sentence: I am proclaiming my disagreement with the notion of linking labour and environmental standards with trade agreements. You accuse me of being unclear, but no reasonably intelligent, attentive and literate reader could possibly misunderstand the point I have made. (Please note also that the man's name is Joe Lieberman, not Leiberman.)
4. This seemed eminently reasonable to me. I am interested by this statement by third world intellectuals, and will give it further attention. I wonder how the developed world can help to raise labour and environmental standards in the developing world, if not through trade agreements. I expect (though I don't wish to assume) that your answer would be through free trade - that eventually countries which open themselves to trade will experience rising labour and environmental standards as the natural course of things. I'm concerned about the word 'eventually', and concerned that the costs of waiting (the costs to the people and the planet, that is) will be too high.
I suggest that instead of giving the statement 'further attention' you give it initial attention, for the answer to your question - or at least one answer, with which I agree - is contained and expounded at some length within that statement (which was drafted by the economist Jagdish Bhagwati). That's a more useful exercise than merely interpolating statements and attributing them to my mental processes, would you not agree? I have, however, discussed one aspect of the relationship between foreign direct investment and environmental standards here in my blog, and perhaps you would read that if you want to continue with this discussion.
Posted by: Oliver Kamm | January 22, 2004 at 12:05 PM
You utterly misrepresented the comment I made, and now you are telling me that my comments are not valid.
Granted, the word 'ridiculous' was too strong.
Granted, the real-world example I gave was flawed. I would be surprised if there were no real-world examples where trade is not beneficial to both parties.
I was seeking clarification on a particular point - I didn't ask for you to devote half a post to some argument that misrepresented my opinion as being anti-trade. It's difficult to debate sensibly with someone who devotes such space to misrepresenting, and misquoting, my own brief comment on another post.
When I said "I'm glad" I meant to refer to the statement "I'm in favour of good working conditions and environmental protection, and I certainly consider no factory in the world should be without a fire escape".
The "I object strongly to making trade agreements conditional on labour and environmental standards" should not have been included. Having misquoted me already, you have little grounds to call me on this.
Please stop pointing out every spelling error I make. It doesn't improve your argument - it just makes you appear pedantic. I am one of your readers, and if you wish me to show you courtesy, you could start by doing the same to me.
This whgole thing is a stupid, circular argument based on a comment which was innacurate (mine) and a legnthy post which misrepresented it and misquoted it (yours) - Neither of us are doing the world any favours continuing with it. So I suggest we bring it to the end. You are of course entitled to the last word.
Posted by: Ryan | January 22, 2004 at 01:59 PM
The word 'ridiculous' was not 'too strong': it was wrong.
The 'real-world example' you gave was not 'flawed': it was false.
It is not a circular argument - though plainly it's an inefficient use of my time - when you make claims and I refute them. Having refuted them, I'm glad to acquiesce in your wish to drop the subject, but please be aware that I'll respond similarly in future if you behave similarly.
Posted by: Oliver Kamm | January 22, 2004 at 02:13 PM