"Obama, the Optimist on Trade"

This argues that Barack Obama "is a trade enthusiast" who "has put forth a consistently positive vision of the potential of trade to promote human rights":

Obama, the optimist on trade, by Susan Ariel Aaronson, Vox EU: Around the world, the press has portrayed the 2008 US presidential election as a choice between freer trader John McCain and “protectionist” Barack Obama. That traditional paradigm has helped the media simplify the differences between the two men. However, such these labels do not accurately describe either candidate. And it does not fully portray the candidate, Mr Obama, who has the more optimistic vision of trade.

The conventional wisdom labels Mr McCain as a freer trader because he supports three bilateral trade agreements negotiated by the Bush administration.[1] Mr Obama, in contrast, has come out forcefully against these agreements. Moreover, because Mr Obama states that he wants to review the effects of existing trade agreements, the press has found him to be unenthusiastic about trade liberalisation.[2] (It is important to note that the United States is already conducting a similar review of the World Trade Organisation.)

Finally, Mr Obama has support from many US unions, which traditionally have taken a protectionist stance.[3]

In fact, both men are pro-trade. They each support using trade agreements to open markets and create economic efficiencies. But the two have different perspectives regarding what trade agreements should do, what rules these agreements should include, and whom these agreements should directly benefit.

Mr McCain sees trade as a means to the end of economic growth and trade agreements as simply economic instruments. While he consistently expresses a more forceful commitment to using trade agreements to free trade, he has said very little about how he would use trade agreements to address negative side effects of globalisation, such as pollution. Nor has he articulated how the United States can ensure that the economic growth stimulated by trade is equitable.[4] Beyond suggesting tax breaks for business, he has not explained how the United States can ensure that companies remain in the United States and continue to hire US workers, rather than rely on technologies to remain productive. To bolster his freer trade bona fides, he has stated: “Only risks to the security of our vital interests or egregious offences to our most cherished political values should disqualify a nation from entering into a free trade agreement with us.” But Mr McCain’s support for freer trade has limits – especially when important constituents are adamant about trade bans. As an example, he supports continued trade sanctions against Cuba and Iran and enhanced targeted sanctions against human-rights-abusing nations Zimbabwe and Burma.

Mr Obama, in contrast, is a trade enthusiast as well as a trade agreements reformer. He sees trade as a means to the end of enhancing human welfare. Thus, he has stated: “From financiers to factory workers, we all have a stake in each other’s success.” He recognises that Americans cannot succeed unless globalisation promotes greater access to resources and opportunities for more of the world’s people (our future growth markets). Mr Obama also believes that trade agreements are essential tools of global governance.[5] He seems to understand that public concerns about trade are really concerns about inadequate governance – instances where our trade partners are unwilling or unable to adopt and enforce rules to protect workers, consumers, and the environment. Demanding such standards in bilateral agreements will not alter global market conditions or empower all workers. Nonetheless, trade agreements can, if properly written, improve both the supply and demand for good governance at the national and international level.

Mr Obama also has put forth a consistently positive vision of the potential of trade to promote human rights. Many human rights activists think trade with human-rights-abusing regimes is a form of complicity that can indirectly perpetuate wrongdoing in countries such as Sudan. But Mr Obama has openly questioned this view, asking whether the US has more or less leverage with less commerce. He has argued that cutting off trade may not be the best (or only) strategy to bring democracy to Cuba or Iran.

Like Mr McCain, Mr Obama’s vision of trade has some inconsistencies. He has yet to reconcile his internationalist and co-operative worldview with his promises to Democratic special interests. In addition, he has relied on jargon such as fair trade, without defining such terms in a global context.

Press coverage and public rhetoric about trade lags reality.[6], [7] Clearly when we talk about trade agreements today we are talking about regulations that can affect productivity, investment levels, prices, and other important economic factors. But trade agreements can also ensure that more people have access to more resources such as credit, education, safe food, and healthcare as well as greater opportunities. While Mr McCain sees trade agreements as a means of increasing the nation’s riches, Mr Obama sees trade agreements as tools that can both empower individuals and help our trade partners improve governance.

1 On McCain see this.
2 Direct sources include on Obama’s trade stance see here, and here.
3 For an analytical overview see Susan Ariel Aaronson, “On Righting Trade: Human Rights, Trade and the 2008 Election,” World Policy Journal ,Vol. XXIV, No. 4. Winter 2007/08, pp. 19-28; and Bruce Stokes, “Trading Jibes,” National Journal, July 24, 2008, pp. 36-40.
4 See McCain’s web site on trade.
5 Barack Obama, “Strengthening Our common Security by Investing in our Common Humanity.”
6 On press coverage conveying the simplistic free trade/fair trade or free trade/protectionist dialectic, see here, here and here.
7 On U.S. public opinion on trade, see Ben Muse, “What did Americans thinks about trade in 2007?” The Custom House Blog, 1 January 2008; Mark Champion, “Fewer Americans Favor Free Trade, Study Finds,” Wall Street Journal Online, December 5, 2007; also here. For context see this.

Comments

[hari]

BO is of course not trained in trade policy matters. So he must rely on his advisors - all seeking to muddle the water in the direction of protectionism (vote winner!).

This piece is realistic assessment of BOs global pespective; namely, US can't cut itself off from gains, so far, of export drive - which leads us to principle of trade reciprocity and trade development.

There is no way, I can think of, US can afford to retreat to fortress Ameerica. If it does, it inevitably will signal the decline and fall of a hegemonic global power.

[pgl]

"BO is of course not trained in trade policy matters. So he must rely on his advisors" - the same can be said about McCain, but wait, most of his economic advisors aren't even trained in economics.

Since this says something nice about Obama, I'm sure that AB troll Aaron is dying to fire off some of his Rovian spin here. Mark - here's hoping this jerk (as sensible AB reader Donna has labeled him) cannot. I wish my blog would cut him off as he is now cowardly attacking you over at Angrybear.

[Lafayette]

The litmus test of trade expansion, called Doha, recently failed in Geneva. Why?

Because America would not give up its agricultural subsidies without compensation from third-world countries in terms of industrial goods. But, let's face it, this was not the only reason. An international trade agreement today is not as easy as it was for, say, the Uruguay round in the early 1980s. But, that round did kick-start a significant rise in World Trade.

Whatever the reason for Doha's failure, it was nothing new and almost the same reason the Doha round was not concluded last time around. Will this change under McCain? I doubt it.

Would it change under Obama? Maybe, but who knows? Talk is cheap, negotiations are not -- they actually cost money in terms of trade concessions.

[save_the_rustbelt]

Obama may lose Ohio and Michigan, in which case he loses the presidency.

According to EPI the two states have lost 180000 manufacturing jobs since 2000 JUST because of the China trade deficit. The governors tell us that for every manufacturing job lost, four other jobs are lost or degraded.

If Obama is going to be pro-trade he must address the damage and the impact on inequality.

Many of those "Democratic special interests" are lined up at food banks in Michigan, and the food banks are running out of food.

Improving labor and environmental standards for the Chinese doesn't do much for Americans losing everything they have.

This is going to get ugly.

[ken melvin]

STR - Michigan and Ohio seem to have more than their share of dumb asses.

[bakho]

You cannot represent Chicago and a farm export state like IL and not be in favor of trade.

The press presents issues as dualistic. Either people support "free trade" whatever that is or oppose "free trade". Bush supported steel tariffs, inadequately supported Doha, and placed the "free trade" label on several bilateral agreements. "Healthy skies" does not reduce air pollution and "free trade" for Bush means trade deals with boxes of plums for his cronies.

The "fair trade" label is an attempt by people who support trade but don't like the Bush deals to distill their position. This attempts to change the argument from pro-trade V anti-trade (is ANYONE anti-trade?) and focus on the all important details of who wins and compensation for the losers.

Based on the Bush "free trade" agreements, I would define "free trade" as complex trade agreements that mostly ignore labor and environmental issues and give lip service but not relief to trade losers. Fair trade are complex trade agreements that include some provisions to protect labor and the environment and pay more attention to trade losers.

[hari]

Look!

The only reason why US is not technically in a recession - right now - is because of export trade with rest of the world.

Kapito or non-kapito?

[save_the_rustbelt]

Ken:

Well, those "dumb asses" built much of the industrial base and wealth of the country, and they get to vote in November.

And the dumb asses are not happy.

[2slugbaits]

Lafayette,

Because America would not give up its agricultural subsidies without compensation from third-world countries in terms of industrial goods. But, let's face it, this was not the only reason. An international trade agreement today is not as easy as it was for, say, the Uruguay round in the early 1980s.

One of my in-laws is deputy director for monetary affairs and over the last year he was practically commuting between Dulles and Geneva. Racking up the frequent flyer points bigtime. He did his graduate work under Jagdish Bhagwati, so by temperment he is inclined towards free trade. But towards the end of Doha even he was about fed up with having to sit back and listen to endless tirades against the US from a bunch of backward countries run by tinhorn dictators who ran their countries as private fiefdoms. From the US perspective the marginal benefits of further trade liberalization are pretty small. The countries that have the most to gain, and who really need it the most, bear a large share of the blame for the collapse of Doha. That's not to say that they didn't have a good point about US agricultural subsidies, but it does raise serious questions as to how serious a lot of those developing countries really were about free trade. What's likely to happen now is increased reliance upon sub-sub-suboptimal solutions like bilateral trade agreements.

I don't know whether Obama is as much of a free trader as McCain or not. Neither man strikes me as being free trade enough for my tastes, but in any event it is clear enough that either of them are more inclined towards free trade than are their respective parties in Congress. Protectionism seems to have a lot of bipartisan support.

[me]

Ken,

BO said that those of us that were displaced are bitter and should get over it.

Uh, Ken, I am bitter and I have not gotten over it. There have been no jobs to get over it with and BO isn't saying anything but platitudes of "hope".

I agree with what STR said.

[Real Person from the Real World]

Thanks to 2slugbaits. very interesting post. I would also like to point out to readers, that today's (Sunday Aug 3) NY Times has an article about the price of gas crimping the global supply chain. If the gas price remains high, a lot of things will change in global trade. US exports will not be as appealing, nor will fancy US products sold in the US, but made from part imported from 20 other countries.

[chriss1519]

"Well, those "dumb asses" built much of the industrial base and wealth of the country, and they get to vote in November.

And the dumb asses are not happy."

It's too bad they don't have a viable candidate through which to express their anger.

[jim]

Maybe those dumbasses need to relocate to regions of the country where jobs are more plentiful.

[hari]

You're a grumpy lot of nay sayers - not recognizing US comparative advantage in technology and IT and service sector.

Doha breakdown was caused by US Trade Reps instructions from Congressional leaders to not trade their agri-subsidies. Basta!

EU/Mandelson said US killed it because she couldn't accept the overall agreement already made with reps of Third World -namely, China, India and Brazil. She went out and gave the BS to the press before discussing it with OECD block. This was a *development* Round - specially for African continent.

BO will deal with the realpolitik of globalization; there's no choice but to facilitate further expansion of incremental move towards liberalization - sector by sector.

[wjd123]

save the rustbelt,

Is Obama running ads in Michigan and Ohio with McCain saying he's the biggist free trader you'll ever meet? I hope so.

[Dickeylee]

Looks like Jim is pro-Grapes of Wrath. Maybe during the Bush depression he'll get his wish.

says...

Speaking of the old "Rovian" spin with a progressive twist.

IMO, the article is corrupted in the first few sentences by the standard framing in which the trade mess that created the collapsing debt bubble is obviously intrinsically good. It's obvious to anyone, except the "protectionists". No justification required.

The argument should be about the wisdom and costs of foolishly continuing down the current path, which is anything but inherently good. Grandpa McCain is mindlessly spewing the rhetoric of the plutocratic republican money base. Once again the academics are promoting their half baked trade models, lending support for the republican agenda. The search for validation has now elevated altruism as an overriding economic driver.

Ohio cast the final votes for BUSH II.

[2slugbaits]

Hari,

I'll grant you that the US position of agri subsidies and intellectual property rights is untenable and certainly didn't help things in Geneva. But I don't think that is enough to explain the collapse. Afterall, if the US was the only country standing in the way, then the other countries could have gone ahead and negotiated a broad trade agreement without the US. There is nothing that prevents developing countries from negotiating with the rest of the OECD excepting the US. That wouldn't have been a perfect agreement, but it would have been better than no agreement if they really wanted an agreement. The fact is that all of the parties were too quick to say "no" and didn't really look at second best strategies.

[Lafayette]

BigAggie

2s: The fact is that all of the parties were too quick to say "no" and didn't really look at second best strategies.

It is entirely possible that the third-world wanted to give lead-head a black eye before he leaves office and will convince Lamy (of the WTO) to have another go at it in a year or two.

It's hard to tell, but the US is in NO POSITION to negotiate "on good faith" an international trade agreement. There is still too much residual hostility for it to be successful.

American farming, which is HIGHLY intensive, is ruining the American landscape. Cattle are penned by the hundreds of thousands and force-fed both meal and hormones throughout the day and night. (Non-ambulatory animals eat more than ambulatory animals - like "couch potatoes".)

We are not talking about "the little house on the prairie" farming. This is BigAggie that is getting the subsidies, which they do not need but are hooked on.

[Lafayette]

The Economist on the Doha collapse:

So near and yet so far

Jul 31st 2008
From The Economist print edition
Trade ministers have come too close to a deal to let the Doha round die

IN MANY examinations, 90% is an excellent score, deserving a prize and a handshake from the headmaster. In Geneva this week, only full marks would do, and the world’s trade ministers failed. No matter that they came closer to a deal than anyone should have expected (see article). No matter that they stuck at it for nine days and several nights, in the longest ministerial meeting in the history of the World Trade Organisation (WTO). No matter, too, that this time they parted in stunned disbelief, heads shaking, rather than in acrimony, recrimination and spite, as at Cancún in 2003. They managed “convergence” on 18 of the 20 topics set before them by Pascal Lamy, the WTO’s director-general, but they stumbled on the 19th, a device for protecting farmers in developing countries against surges in imports. They never reached the 20th, cotton. Failed.

You can construct a plausible argument that the collapse of yet another set of talks on the Doha round, which is now coming up to seven years old, is of little importance. While the world’s trade ministers have alternated between talking and not talking to one another about Doha, the world’s businesspeople have carried on regardless: the growth of global commerce has outstripped the hitherto healthy pace of global GDP. Developing countries in particular have continued to open up to imports and foreign investment. You might say that not much was on offer in Geneva anyway: one study put the eventual benefits at maybe $70 billion, a drop in the ocean of the world’s GDP. Global stockmarkets, with so much else on their minds, either didn’t notice or didn’t care. On July 29th, the day the talks broke up, the S&P 500 index rose by 2.3%.

Plausible, but wrong. For a start, the lowish estimates of the economic benefits of the round miss out two things. One is the value of the unpredictable dynamic benefits of more open markets. Access to more customers allows exporters to exploit economies of scale. Competition encourages not only specialisation, the classic result of more open trade, but also increased productivity. The other is what you might call the “option value” of the Doha round. The WTO inhabits a sort of parallel universe in which countries negotiate not on what tariffs and subsidies will actually be, but on maximum (or “bound”) rates and amounts. Although many countries have cut tariffs and farm subsidies—if only, in the latter case, because of rising food prices—too few have turned these cuts into commitments. Tighter binding would cramp their ability to turn back to protection. It would have made up the bulk of a Doha deal.
Do you care about the beans or the beings?

Also on offer were benefits that are easier to visualise. Some cuts in bound tariffs would have bitten into actual rates. There would have been much less “tariff escalation”—a nasty practice, by which higher tariffs are levied on successive stages of production. Raw coffee beans may be tariff-free, but roasted beans incur a higher levy, and so on as they are ground, decaffeinated and so forth. Move up the value chain, and you pay. Some developing countries—in Latin America, especially Brazil, and in Africa too—are seething that a deal slipped away.

Given all this, the inability of ministers to agree, having come so close, seems unfathomable. Belief is all the more beggared when you look at the wider world. The global economy is slowing, possibly horribly: under such conditions, protectionism thrives. It would be silly to say that the sky is about to fall in: too much has been agreed in the past, and too many countries and businesses value an open trading system, to suppose that the 2010s will be a rerun of the 1930s. But trade has too few friends these days—notably in America’s Congress and the Elysée Palace. Ministers picked a poor time to fail.

The ultimate cause of failure only deepens the sense of puzzlement. When talks started, the likeliest deal-breaker seemed to be the ceiling on American farm subsidies, which is far higher than America actually spends. In the end, the deal fell over protection not for America’s farmers but for those of the developing world: a “special safeguard mechanism”, to kick in when imports surged. America wanted the trigger set high; India, joined by China, wanted it low. Both developing countries, it is said, also wanted to be able to jack tariffs up above existing ceilings, not merely those set in a Doha deal. After 60 hours of talk by Mr Lamy’s count, there was deadlock; and that was that. Meanwhile, believe it or not, food is pricier than ever.
India’s mountain, America’s molehill

You could call this “a collective failure”, as some ministers did. You could also be more specific. India’s willingness to open its economy in reality is in lamentable contrast to its inability to commit itself at the WTO. Its stubbornness is explained by the ferocity of India’s politics on this subject and the desperate, even suicidal, poverty of many of its farmers. But it and China must have known that they were asking too much.

America has some answering to do, too. It seems to have misread the big story: in the WTO, rich countries no longer call the shots, as they did in its predecessor, the General Agreement on Tariffs and Trade. China and India, infuriating though they may be, are as powerful as America and the EU. The United States also fumbled with the details. It might have tied up a deal on cotton, and left the Chinese and Indians isolated on safeguards. And the ultimate stumbling-block, though a mountain to India, was surely a molehill to a country of America’s wealth. America has 1m farmers, India over 200m.

In the WTO, there is a saying: nothing is agreed until everything is agreed. But all the effort of nine days—or seven years—should not be lost. Mr Lamy should publish what has been agreed so far. Ideally, the ministers would then meditate over the summer on what they have lost—and he could then ask for a final push. That, alas, seems a vain hope. With American elections looming, India heading for the polls by next May and a new European Commission due late next year, it may be 2010 before much can be done. There is a risk that by then, as Peter Mandelson, the EU’s trade commissioner, once put it, “the caravans [will] have moved on in different directions”. The world will have to wait for a Doha deal, if it ever gets one. After coming so close, it should not have had to.

[wjd123]

Bad economist, bad; or, how to get an economists' goat.

Remember Bush's steel tariffs. For a refresher course go here:

http://en.wikipedia.org/wiki/Steel_tariffs

They were the best economic decision Bush ever made. Politically, they probably also helped him carry West Vagina in the 2004 election. But politics aside, in 2002 practically every economist in the nation was claiming that the steel tariffs were bad for the economy and a mistake.

Well, they were wrong. Steel demand picked up and those 30 bankrupt American steel mills were around to meet it. Today when oil is $120 a barrel and transportation cost are high those mills are flooded with orders. Trains filled with coal and iron ore are moving throughout the country. Union members are making good wages to spend in local communities. God is in his heaven and all is right with the world because Bush didn't listen to what economist thought.

At that time Greenspan was testifying before congress that since steel only represented 2% of the American economy it was expendable to free trade. Economists with their "all things being equal" thinking were blinded from the change-a-coming.

No wonder Hillary in 2008 wouldn't bow before their pronouncements. In 2002 Bush was right about tariffs and economist were wrong. In 2008, with the tariffs long gone Bush is still right. Those bankrupt steel mills just keep giving and giving.

[save_the_rustbelt]

"Maybe those dumbasses need to relocate to regions of the country where jobs are more plentiful."

The illegal aliens beat them to it.

Someday, when the southwest runs out of water, the jobs and people may come back.

[save_the_rustbelt]

Is Obama running ads in Michigan and Ohio with McCain saying he's the biggist free trader you'll ever meet? I hope so.

As far as I can tell Obama is just running his generic ads.

If you listen closely he promises nothing to the rustbelt, except renegotiating NAFTA, which is nonsense anyway.

[hari]

Brazil's President spoke with GWB on breakdown of Doha. Pres. Lula gave a press brief yesterday that he wants the Round completed as early as next Sept - next month! - Bush agreed. Hopefully, Bush agreed to not challenge the Indian and Chinese position on trade prefernces to protect domestic farmers - in the event of commodity price rises.

PS. The Banana deal is *hanging* (also) specially for Ecuador. Whereas this deadlock allows EU prefrences to ACP group to continue to enforce in European markets, Latin America will not be able to accept it specially after WTO tribunal ruled against EU earlier.

[ACP = African, Caribbean and Pacific states linked to EU under Cotonu Agreement/Lome Convention formerly].

[bakho]

wjd, the Steel tariffs may have kept a few dinosaurs afloat but they were terrible for the auto parts business. Faced with access to cheaper steel for parts mfg abroad, US parts mfg switched from production to middle man. Cheap foreign steel and expensive US steel made cheaper to import many foreign made parts than the cost of mfg the same part in the US. Why do you think Delphi collapsed?

Bush gets little thanks from the steel workers:

Senator Sherrod Brown of Ohio was elected to office in 2006 in a campaign focused on opposition to the trade treaties that have devastated manufacturing jobs in that state. He now has joined with other Senators, unions, family farm groups, religious and public interest groups to put forth the TRADE Act. The act calls for a halt on all new trade accords until the US Comptroller General undertakes a comprehensive assessment of the benefits and the costs of our current agreements, looking at who has benefited — here and abroad — and who has suffered. The Act then calls for developing a strategy that insures that the benefits of trade are widely shared, that we pursue a policy designed to benefit working people and Main Street, and not simply Wall Street. Barack Obama has laid out elements of an alternative strategy that may form the basis of a new course.
McCain’s response to this is like an Inquisition priest discovering free thinking in the pews. Doctrine is sacrosanct. Questioning it is dishonorable. He calls upon Americans to sustain the course we have been on, like lemmings marching stolidly to the sea.
He pretends this is an American tradition, claiming that “every time the United States has become protectionist… we’ve paid a very heavy price” But this ignores the entire history of this country’s rise — with sharp eyed mercantilist trade policies behind tariff walls — to a world economic power with a broad middle class. “Yankee traders” were famed for cutting a tough, practical deal, not for sacrificing their interests for ideological principles.
Nor is McCain such an innocent. He says we mustn’t “politicize” trade accords, but trade accords are already heavily politicized. Every trade agreement — particularly NAFTA — features fierce lobbying over every clause. McCain knows this because his entire campaign is staffed from top to bottom by corporate lobbyists, many of whom have earned a hefty buck lobbying to influence and pass trade accords. If McCain is elected, their clients know that they are in line to be first to the trough.
Saint John doesn’t sully his rhetoric with these unseemly realities. He seems to want to make trade policy a centerpiece of his election campaign, and doing so will surely help him raise some dough. Barack Obama should take him up on it. Let McCain stump the business elites of Mexico City, Bogota and Ottawa. Obama can join Sherrod Brown championing the concerns of working people in Zanesville and Flint and Pittsburgh. Let voters decide which candidate has his priorities right.

http://blog.usw.org/2008/07/10/mccain-for-free-trade-no-ifs-ands-or-buts-about-it/

[bakho]

"US imports of steel rose to 2.8 million tonnes in April, 16% up on March, and 4.6% up on April 2007. Imports of semi-finished steel, mostly slabs, jumped by 65% to 674 thousand tonnes, with imports of hot rolled coil up by 39% to 346 thousand tonnes. Welded tube imports actually fell slightly to 434 thousand tonnes. The semis mostly came from 5 countries: Canada, Mexico, Brazil, Ukraine and Russia. Canada was also the largest supplier of hot rolled coil with South Korea and the Netherlands in second and third place."

Whether it is good for the US as a whole or not, steelworkers don't like 5% of production (and jobs) going to foreign imports (mostly Canada and Mexico, which is why NAFTA gets blamed).

It is not entirely correct to attribute the current US steel climate to the expired steel tariffs. The weak dollar is starting to put a damper on Chinese steel exports.

A report issued in May 2008 by the Canadian International Bank of Commerce World Markets, "Will Soaring Transport Costs Reverse Globalization?" further explains why the Russians shrewdly invested at a time when steel production is making a comeback in North America:

"We are already starting to see some change in capital-intensive manufacturing whose products carry a high ratio of freight costs to final selling prices. Take the steel sector for example. With little over an hour and a half of labor time embodied in the production of a ton of steel, and relatively high freight costs, the global cost curve of the steel sector is changing rapidly. Given that most parts of China (and Asia in general) are short on iron ore, getting the raw materials to the steel mill (mainly from Australia and Brazil) adds an additional and growing cost not typically incurred by US steel producers. Add to it the $90 freight cost of shipping a ton of hot-rolled steel sheet from China to the US, and the transport component is large enough to turn the global steel cost curve on its head.
"Even at today’s oil prices, rising transport costs have already more than offset China’s otherwise slim cost advantage, giving US steel a competitive advantage in its own market for the first time in over a decade. The rapidly changing economics of steel is already reflected in the trade statistics. China’s steel exports to the US are now falling by more than 20% on a year-over- year basis—the worst performance in almost a decade. While many might attribute this decline to the slowdown in the US economy, it is noteworthy that US domestic steel production has risen by almost 10% during the same period."

In addition to preserving some manufacturing jobs in the U.S. and Canada, the authors of the study also envision higher fuel prices creating a new opening for renewed foreign investment in Mexico. Most of this investment will come from Mexico's NAFTA main partners, the U.S. and Canada, but look for European and perhaps even Russian firms to get in on the action:

"While there remains a strong imperative in the world economy to arbitrage wage costs, the arbitrage willincreasingly take place within the constraints imposed by soaring transport costs. Instead of finding cheap labor half-way around the world, the key will be to find the cheapest labor force within reasonable shipping distance to your market."
"In that type of world, look for Mexico’s maquiladora plants to get another chance at bat when it comes to supplying the North American market. In a world where oil will soon cost over $200 per barrel, Mexico’s proximity to the rest of North America gives its costs a huge advantage. It seems that American importers are starting to do the math. Compare, for example, how relative transport costs have recently changed between the Pacific Rim and Mexico. In 2000 American importers paid 90% more to ship goods from East Asia to the US East Coast, today they pay 150% more, and when oil prices reach $200 per barrel,they will pay three times the amount it costs to ship the same container from Mexico (Chart 8)."

"To put things in perspective, today’s extra shipping cost from East Asia is the equivalent of imposing a 9% tariff on East Asian goods entering the US. And at oil prices of $200, the tariff-equivalent rate will rise to 15%. While the pace of shipments from China to the US is slowing—mainly among freight-intensive goods, even non-energy Mexican exports to the US are still rising at a healthy annual rate of more than 7%. And interestingly, the goods that have seen the fastest growth are the ones that, on average, are more freight-intensive and directly compete with China, such as furniture, iron and steel,rubber and paper products"

"In a world of triple-digit oil prices, distance costs money. And while trade liberalization and technology may have flattened the world, rising transport prices will once again make it rounder."

[Lafayette]

Wishful thinking

wjd: In 2002 Bush was right about tariffs and economist were wrong. In 2008, with the tariffs long gone Bush is still right. Those bankrupt steel mills just keep giving and giving.

Nice, syrupy enthusiasm.

How about a dash of reality (from here):
North America. Prices have been in decline for some time due to high inventories, weak auto demand, and slow building industry. Early forecasts for a significant pick-up late in 2007 have been scrapped despite the fact that service center inventories are back in balance and there have been low imports into the U.S. Market insiders say fourth-quarter prices are flat to down as mills are struggling in their efforts at a fourth-quarter price hike. Supply-driven price hikes tend to be unpopular anyway. Distributors say underlying demand remains weak so stocks are adequate and they are postponing inventory restocking until early 2008. But even that may not happen since "consumer spending in 2008 is likely to be the lowest since 1981, causing a weakening of such key industrial steel-using markets as automotive, housing and appliances," according to Deborah Allen Hewitt, president of Rutledge Research economic research firm in Williamsburg, Va. "It's likely that 2008 will show slower real economic growth than 2007," she says, agreeing with low (2.2% of so) growth forecasts for the U.S. economy in 2008.

wjd: they probably also helped him carry West Vagina.

Indulging in a bit of wishful thinking, are we ... ? ;^)

[wjd123]

bakho,

Did you see this article in the New York Times entitled "Shipping Costs Start to Crimp Globalization."

The cost of shipping a 40-foot container from Shanghai to the United States has risen to $8,000, compared with $3,000 early in the decade, according to a recent study of transportation costs. Big container ships, the pack mules of the 21st-century economy, have shaved their top speed by nearly 20 percent to save on fuel costs, substantially slowing shipping times.

The study, published in May by the Canadian investment bank CIBC World Markets, calculates that the recent surge in shipping costs is on average the equivalent of a 9 percent tariff on trade. “The cost of moving goods, not the cost of tariffs, is the largest barrier to global trade today,” the report concluded, and as a result “has effectively offset all the trade liberalization efforts of the last three decades.”

http://www.nytimes.com/2008/08/03/business/worldbusiness/03global.html?partner=rssyahoo&emc=rss

[ken melvin]

9%? Hell that's more than it cost to make it.

[wjd123]

Lafayette,

How embarassing. My apologies to the good citizens of West Virginia and Virginia for that matter.

I hope it was just a type-o and nothing I'll have to see Sigmund about.

[lonesome moderate]

me says...
Ken,

BO said that those of us that were displaced are bitter and should get over it.

Obama never said they need to "get over it" or anything remotely like that.

[Lafayette]

wjd: I hope it was just a type-o and nothing I'll have to see Sigmund about

Frankly, I had a good laugh ... but I did wonder what you were getting at. (Oops, bad word-parsing, that! Hmmman, maybe I should see Siggy as well ... ;^)

[Lafayette]

LM: Obama never said they need to "get over it" or anything remotely like that.

'Tis the beginning of the Presidential Election Season. We are going to see some awful attempts at character assassination -- especially when/if they (the Republicans) cannot get a real hold on BO in any other way.

Meaning the likes of this: No "love child" somewhere in Chicago? No hidden activity as a fundamentalist-Muslim? No embarrassing political donations from al Qaieda? No mistress hiding in the closet? (Damn! This guy is UN-AMERICAN! ;^)

It is part and parcel of the "dumbing down of America". In an election year, it works. The only surprise is that Karl Rove did not patent the tactic.

[Lafayette]

wjd (Article): The study, published in May by the Canadian investment bank CIBC World Markets, calculates that the recent surge in shipping costs is on average the equivalent of a 9 percent tariff on trade.

Damn fine stuff!

Haven't some (unenlightened) on this forum been shouting for protectionist trade tariffs?

God was listening ...

[me]

"Obama never said they need to "get over it" or anything remotely like that."

yeah, sorry, he didn't saay that to the bitter displaced workers, he said it to the Clinton women supporters. And if as you say, he didn't say those things, then why is it he is behind among those groups. Unlike lafayette's comment ""dumbing down of America". " it looks like they are wising up.

[Lafayette]

Kinda stupid

me: Unlike lafayette's comment ""dumbing down of America". " it looks like they are wising up.

Oh, you think this campaign is smartening up, do you?

I received from a stateside correspondent an article supposedly written by Maureen Dowd and published by the NYT. It was about how Obama had received millions of payments by “unknown accounts” abroad (in Iran, Saudi Arabica, etc.)

A copy of that bunk column is here and can be found elsewhere on the internet.

When I checked the NYT site, I found no such article under her name. And, this report pops up recently from the site, Townhall, here

I maintain that if some people, who knows who they are, are descending to this sort of character assassination, it is quite in keeping with the slanderous media habits of American political campaigns. Meaning this: Anything goes to diminish an opponent … because it works.

And, if it works, it is because people believe the cockamamie stories that some parts of the media willingly convey. To believe it, ya gotta be kinda stupid yourself.

[me]

"And, if it works, it is because people believe the cockamamie stories that some parts of the media willingly convey. To believe it, ya gotta be kinda stupid yourself."

WTF are you talking about????????

Democrats are leading double digits in the polls for Congress. So because they are not buying the empty suit, who didn't even win the popular vote in the primary, and was pushed by the media, who did a hatchet job on Clinton, you call me stupid. Look in the mirror.

[John Markesan]

The critical issue is being missed in all these stories and all these comments. (Forgive me if that sounds arrogant; I don't mean it that way. I'm talking about a profound and serious conceptual hole.)

The critical issue is that ALL economic regimes seek to concentrate and control the flow of wealth, while socializing costs.

What we are living through is what progressive economists have warned about for decades: the time when all those externalized costs would come home to roost, probably in a flock of killer pterosaurs.

Economic policy often consists of tinkering with one piece of the machine or another, to get it to keep spitting out wealth and externalizing costs. At some point the machine just breaks down.

So long was we have a GDP that measures things like consumption and ecosystem destruction as benefits, we can expect sickening and frightening results, and we can expect that the systems we use to generate what we consider "wealth" to be more and more fragile and prone to cascading failure.

There have been many suggestions for rethinking how we account and construct balance sheets for a progressive economics. They have never been allowed to see the light of day, because they challenge the perspectives and interests of those who get such vast power under the present system.

May you live in interesting times, everyone.

John

[John Markesan]

Sorry, hit the post rather than preview button.

I wanted to add that all this kerfuffle should give some traction to ideas of relocalizing economies. It is much harder to do that analysis, and building, than to indulge in rhetorical wanking. Such as being flip and hostile about Rust Belt people thrown into unemployment and bitterness. Or being gaga with hope over the latest candidate peddled like an antidepressant drug.

As always, the real and enduring answers will come locally. I only wish the media covered more of that sort of thing--not the commodified, cosmeticized kind of Hope, but the kind people are doing for themselves.

John

[Lafayette]

me: WTF are you talking about????????

I'm talking about media character assassination as a national game during presidential elections.

It's not about you, it's not about the Democrat party.

You obviously think the sun shines out of your hindquarters.

[Lafayette]

John: May you live in interesting times, everyone.

But we are.

Things haven't got this interesting politically since ... uh, McCarthy.