New Economist

New book: U.S. Trade Strategy: Free Versus Fair

Daniel Drezner is off to the annual APSA meeting, but alerts readers to his just-released Council on Foreign Relations book, U.S. Trade Strategy: Free Versus Fair. Here is the overview:

Trade is an issue of growing importance that lies at the intersection of two of the biggest concerns facing the American people: the economy and foreign policy. Today, trade policy affects more issues on the U.S. political agenda than ever before; at the same time, the decisions Washington makes have a great impact on the United States and the world.

This book, in the form of a memorandum to the president, suggests two distinct approaches that the United States could take on trade policy. The first approach—“Free Trade”—argues that American prosperity and security are best served by aggressively seeking to lower trade barriers, even if it means that some industries lose out. The second approach—“Fair Trade”—contends that the economic benefits of freer trade are overstated and that the U.S. government should slow or even halt efforts to lower trade barriers in order to promote goals such as community stability and income security. The policy options in this book are accompanied by four white papers that examine the major issues in the trade debate and explore the relevant challenges in greater detail.

You can download the whole book (PDF) - but be warned, it's a whopping 5.4Mb.

Converting PDF to Excel

If you, like me, are annoyed by those statistical agencies and organisations who publish much of their data in PDFs rather than Excel, you'll be excited  by this application. Andrew Gelman writes:

Hadar Kadar writes of a program called PDF2XL that converts pdf files of tabular data to Excel files:

PDF2XL is regularly priced at $95, but our initial academic install base (UC Irvine, ASU, WSU and others) and their success, led us to believe strongly in its applicability to any research or academic setting. That is why we are introducing PDF2XL to the academic community by giving a free one-year license of PDF2XL to all academic users for the academic year 2006-2007.

I know nothing about this but am forwarding this in case it might be useful to others.  Tian appears to have tried it, and it seems to work.

 

Blogger's summertime blues

When stepping away means a drop in traffic, bloggers struggle with what to do about vacation. Elizabeth Holmes discusses the problem in today's Wall Street Journal: No Day at the Beach

In the height of summer-holiday season, bloggers face the inevitable question: to blog on break or put the blog on a break? Fearing a decline in readership, some writers opt not to take vacations. Others keep posting while on location, to the chagrin of their families. Those brave enough to detach themselves from their keyboards for a few days must choose between leaving the site dormant or having someone blog-sit.

To be sure, most bloggers don't agonize over this decision. Of the 12 million bloggers on the Internet, only about 13% post daily, according to the Pew Internet and American Life Project. Even fewer -- 10% -- spend 10 or more hours a week on their blogs.

Yet for the sliver of people whose livelihood depends on the blog -- whether they are conservative, liberal or don't care -- stepping away from the keyboard can be difficult. Unlike other jobs, where co-workers can fill in for an absent employee, blogs are usually a one-person show. A blogger's personality carries the site. When the host isn't there, readers tend to stray. August is a slow time for all blogs, but having an absent host makes the problem worse. Lose enough readers, and advertisers are sure to join the exodus.

UK to curb new EU migrants

The front page of today's Guardian features a story by Patrick Wintour, reporting that Ministers want to impose a specific skills test on Bulgarian and Romanian workers: Permit scheme to cut flow of east Europeans

Ministers are planning to introduce a work permit system for Bulgarians and Romanians that will require them to prove they can fill specific skill shortages, a senior government figure has told the Guardian. Relatively few potential job applicants from the two countries are likely to meet the expected criteria in a move designed to take pressure off the government over immigration.

"We have a strong record on accepting migrants from Europe, but sometimes politics has to override the economics and that is what is going to happen in this case," said one cabinet minister closely involved in the talks.

To what extent this would stem the expected influx to the UK is uncertain. If Romania and Bulgaria join the European Union in 2007 then their citizens will automatically have the right to reside in the UK or any other EU members state. They will also have the right to take up self employment.

But many of those who might want to work overseas have already left. There are an estimated 2 million Romanians working abroad already - mostly in Italy and Spain, and mostly illegally. There is clearly some risk that overly restrictive regulations might prompt displacement from legal (and tax paying) employment into the black economy.

Reflections on America

Stein Ringen reviews Claus Offe's new book in the latest Times Literary Supplement: The American seen. The book, Reflections on America: Tocqueville, Weber and Adorno in the United States, is published by Polity Press. These remarks caught my eye:

Tocqueville’s, Weber’s and Adorno’s reflections abound with questions that have lost none of their relevance. What is the destiny of freedom and is it better protected in the American or the European social model? Are we excessive in our demand for equality, and if so what follows? The state is both necessary for and dangerous to freedom; how do we find the balance? Is culture, now a huge sector of economic growth, an industry of manipulation? Is there a social architecture between the individual and the state or was Margaret Thatcher right that there is no such thing as society?

If anything, the European–American comparison seems to me to have become more relevant. Europe has put behind it the transition to democracy that Tocqueville correctly saw would be difficult, and is now an equal partner with America in the great drama of liberty. Europe has not been “Americanized” except superficially, and is competing with America with a distinct social model.

EU to start a shoe war with China and Vietnam?

I warned of this back in February (see From 'bra wars' to 'shoe wars') and now it seems increasingly likely: a 'shoe war' with China and Vietnam. Clearly, the European Commisison has learned nothing from last year's bra wars debacle. Helena Spongenberg of the EU Observer website reports Brussels pushes ahead on China shoe tariffs:

The European Commission has pushed for new measures against leather shoes from China and Vietnam despite member states' representatives having rejected two previous proposals this summer.

A proposal by trade commissioner Peter Mandelson to levy a 16.5 percent duty on 'leather upper' shoes entering the EU market from China and 10 percent duty on those from Vietnam was adopted by the commission on Wednesday (30 August).

The proposal has now been put forward to the bloc's 25 trade ministers who have one month to decide on the issue before temporary duties expire.

The commission said the plan was an effort to combine the different economic interests while also respecting the evidence from a 15-month long commission investigation showing that Chinese and Vietnamese shoes received unfair subsidies from their governments.

European footwear production has shrunk by 30 percent since 2001, alongside the rise in imports dumped on the EU market below the real cost of production, according to a commission statement.

"Our job is to tackle unfair competition where it exists. We have found this in these two cases and that is why we have taken the measures that we have proposed," commission spokesman Peter Power told journalists in Brussels. "It is now up to the member states to take their responsibility to decide," Mr Power said, adding that the "case is complex and highly sensitive."

...When member states next month meet to decide on the proposal, at least 13 of them must back the plan or abstain from voting for it to come into effect when the provisional duties end on 6 October.

...EU member states are divided between northern European countries, which at an early stage moved their shoe factories to Asia and are now importing them, and southern European countries that still have an active shoe industry.

The commission warned that member states rejecting Wednesday's proposal "could in theory be challenged in court to legally defend their position."

Temporary tariffs expire in October, and EU members now have a month to decide whether to back the new move.

US offshoring boosts blue collar wages

Gene Grossman and Esteban Rossi-Hansberg from Princeton University gave an interesting paper to the Jackson Hole symposium. It argued that outsourcing has increased productivity and real wages for low-skilled US workers since 1997: The Rise of Offshoring: It's Not Wine for Cloth Anymore (PDF).

See also the debate at Greg Mankiw's post: Another one for the "I told you so" file

UPDATE: Brad Setser comments on the paper in his post Wages, Walmart and the debate about the Global Economy:

I have only skimmed the Grossman paper.  But it hardly paints a wonderful picture of that state of working America. Real wages of the least skilled manufacturing workers increased by 3.7% since 1997, while total factor productivity is up by 11.8%. Real wage growth for low skilled blue-collar manufacturing workers has been flat 1998 (Figure 5, p. 24) -- most of the 3.7% growth came in 1997.  Real wage growth for average blue-collar workers has been flat since 2002 (Figure 6, p. 25).

Why aren’t wages rising in line with total factor productivity? Because the price of the goods produced by low-skilled workers is falling. Grossman and his co-author’s don’t claim that things are good, only that without the higher productivity from offshoring, things would be worse:

“Real wage growth for low-skilled workers in the US has been far from exceptional (and some might say “far from acceptable”), the experience has not been as bad as one might have expected based on the sharp improvement in the United States terms of trade.”

Not as bad as might be expected isn’t exactly an upbeat account, at least in my book -- even if cheap imported goods are good for those in sectors insulated from global competition.

The myth of central banks and inflation

Have central bankers truly slain the hydra of inflation? Kenneth Rogoff doesn't think so. He warns that "life cannot always be this good for a central bank" in his Financial Times piece, The myth of central banks and inflation:

So the question is: what happens if the winds of globalisation turn? What if a combination of economic and political problems leads to a sharp slowdown in China? What if security checks in the wake of a terrorist attack lead to a sustained pause in the expansion of global trade? What if a slowdown in trend growth exacerbates the fiscal problems that most countries are already going to face as their populations age? Or, more immediately, what if there is a disorderly unwinding of the oversized US current account deficit? Having built up public expectations about their ability to deliver high growth and low inflation simultaneously, central bankers might have a hard time explaining what went wrong.

Perhaps central banks will get lucky and not have to face any severe problems for another couple of decades but, unfortunately, that is not likely. Thus, there is some urgency in the need for central banks to take greater pains to avoid taking too much credit for upside performance.

Already today, central banks face steeply higher oil prices combined with a pause in falling import prices from developing Asia. But the current conjuncture is just a small test compared with what might happen if globalisation hits a really large bump in the road. Then, at least in a few big countries, inflation will end up being far higher than policymakers or market participants now seem to think possible. Market convictions that inflation is forever dead will be shattered.

Rogoff's article also cites his new Jackson Hole paper on the Impact of Globalization on Monetary Policy (PDF)

Moloney baloney

Latest to join the happiness debate is counselling psychologist Paul Moloney, who argued in yesterday's Guardian that Unhappiness is inevitable. He wants you to feel the psychic pain, not seek to cure it through therapy:

Recent months have seen the science and politics of "happiness" endorsed by commentators of all persuasions. Richard Layard - a consultant to the government - called for a huge increase in the number of publicly funded psychological therapists. These therapists, he suggests, would help to combat the personal and social malaise that seems to be afflicting us at record levels, and their cost will be more than recovered by savings in benefit payments to depressed individuals who will be encouraged to return to work.

...The preoccupation with "happiness" may be convenient for a government keen to appear caring while seeking to avoid social expenditure. In this context, the commandment to "be happy" amounts to a form of insidious social control, in which we are encouraged to look inwards (and to blame ourselves) for the causes of our troubles.

Far from being an undesirable trait, the ability to feel and give voice to psychic pain may turn out to be an essential asset: one of the few clear signals that all is not well with our world. We need to develop a greater ability to help people articulate their distress and make this the first step to making their world a more tolerable place. This is a political task: the superficial nostrums of the kind favoured by Layard and New Labour can only be a distraction.

Considering he is a psychologist rather than a pill pusher psychiatrist, this does rather beg the question as to what Mr Moloney actually does in his sessions at the Shropshire Primary Care Trust. As an active member of the 'critical psychology' movement, Moloney says he believes that:

...personal distress may have more to do with the properties of a malign world than of the sufferer's internal psychology

In his Guardian article, he is more specific:

These issues are nowhere more sharply revealed than in the world of work. During the past 20 years, coercive control - in the form of stringent targets, performance appraisal, increased monitoring and surveillance in the workplace - has been matched by a culture of long hours and contractual and financial insecurity, even for middle-class professionals. For many, the prospects of falling into chronic debt or poverty are more threatening than ever, especially for the 20% of British citizens who live on or below the poverty line.

So work and poverty make us sick? Well, there is little doubt that endogenous depression is triggered by major life events, which may include losing one's job. But surely it's a stretch to suggest that capitalism causes mental illness...

Second, his contention that cognitive behavioural therapy (CBT) is a waste of time belies a substantial body of evidence that it is quite effective at tackling depression and other common mental health problems. Not to treat serious medical conditions like depression with appropriate and effective care seems irresponsible.

Third, how on earth can proposals for a massive expansion in mental health care services be dubbed "seeking to avoid social expenditure"? Richard Layard and others are clearly advocating additional health spending - though they argue it will be pay for itself in the long run.

Fourth, Moloney suggests that "coercive control" and long hours in the workplace are a major cause of mental health problems. My reading of the evidence is that neither deskilling/work intensification nor job satisfaction have changed much in the past decade - so how can deskilling be the culprit?

Stumbling and Mumbling appears to disagree. In his post Happiness and control, Chris writes:

The activities that make us happiest, he says, are those where we can identify with our task - which the self-employed can do better than alientated workers - get unambiguous and immediate feedback, and stop worrying about what others think. Activities like playing sport or a musical instrument are great for happiness. Such "flow" came, or comes, from traditional craft work. But it's disappeared from the deskilled workplace.

Chris advocates "the abolition of workplace hierarchies". While no one likes bureaucracy, and both greater employee autonomy and team-based working are associated with higher levels of job satisfaction, it seems a tad drastic to abolish management in order to try and improve mental health.

Moreover, most businesses based on the 'lean production' model (widespread in the UK) rely on supervision and work monitoring to keep production costs under control and remain competitive. How happy would workers be if we were to send their employer to the wall?

Jackson Hole 2006

The Kansas City Fed has posted papers from its 2006 economic policy symposium, held last week in Jackson Hole, Wyoming: The New Economic Geography - Effects and Policy Implications.