Recovery, Orange Juice, and Cotton

Global trade sees fastest rise for five years: Well, here’s some moderately hopeful news.

Global trade rose at its fastest rate in more than five years in July, suggesting the economic recovery is feeding through into commerce.

An index compiled by the Bureau for Economic Policy Analysis, a Dutch research institute, showed the volume of world trade rising 3.5 per cent in July after a revised increase of 1.6 per cent in June.

The numbers suggest the fall in trade over the past year, steeper than during the 1930s, was mainly caused by lack of demand rather than a breakdown in the trading system.

Brazil-US Relations and the WTO: Minor new updates from Friday on ongoing trade disputes with Brazil. A panel’s been established to look into Brazil’s latest complaints about U.S. antidumping duties on Brazilian orange juice. It’s another zeroing case, which sort of just bores me to tears, so here’s something more interesting: How Brazil Became the Saudi Arabia of Orange Juide.

The fall out from cotton subsidies case is going to be much more fun, thanks to the possibility of Brazil engaging in IP cross-retaliation against the United States. The cotton war has been going on forever, but recently Brazil won a key victory. However, the WTO decision didn’t much clarify things in the way of hard numbers:

While Brazil had sought $2.5 billion in annual retaliatory trade sanctions, the US, after delaying compliance with a WTO ruling decision that found it had violated trade rules, had claimed that a figure of $20-30 million would meet the case. Last fortnight’s ruling does specify annual sanctions that can be imposed by Brazil but the ruling allows wide differences of interpretation as a result of which the two sides have come up with their own estimates of what the sanctions should cost.

Brazil says that it is entitled to about $800 million in sanctions, including $340 million of cross-retaliation against IPR or services. The US, for its part, believes the sanctions should amount to no more than $300 million, and that any retaliation on the patents front is unlikely in the near future.

I’m not even going to try to talk about the IP cross-retaliation aspect — that’s more Michael’s gig — but Brazil is now asking the U.S. to cough up information on exactly how much subsidizing its been doing, and I’m more interested in seeing how or if the U.S. is complying with the request. All I’ve seen so far is that in response to Brazil’s requests for numbers on cotton subsidies for 2009 (from first link),

Washington did not address the question in its statement at the closed-doors meeting, but said it would be open to discussing a possible out-of-court settlement with Brazil.

What sort of powers or diplomatic strategies does Brazil have to force the U.S. to give up the info? I think I might spend some time looking that up tomorrow, but for now I don’t really have a clue.


The Celebrities-for-Aid Program

Over at Aid Watch:

I’m going to propose a theory of international trade between Africa and celebrities. Africa exports stereotypical images of misery in return for celebrities’ advocacy for more Africa funds. The theory of trade says that trade only happens when both parties gain. Celebrities gain some combination of altruistic satisfaction, a good PR image, and a boost for their acting or singing career. Africa gains aid funds.

Unfortunately for Bono, foreign aid no longer provides an easy way to distinguish yourself among the crowd of C-listers. For a star out there looking for a cause, maybe its time to pull a Bob Barker and go back to promoting spay/neuter clinics instead?

The current celebrity advocacy market indeed seems to have abundant supply. At least that was the impression I got from a web site announcing an Oscar-like Awards show for Celebrity Humanitarians. The celebrities being honored including some that I’d never heard of, like Brett Ratner. Even after I looked him up on the Internet, I still can’t remember what he is not famous for. So with the upcoming Noble Humanitarian Awards at which Brett is a headliner, the celebrities are barely trading above the price of used books at this point.

So maybe celebrity advocacy has finally saturated the market, and we could now give advocacy back to people who know something about their causes.


p.s. Happy ODST day!

A “Tired” Argument…

Yuk yuk. Oh god, that one was really bad. Okay, I promise, there will be no more puns in the future.

But I’ve only just come across this article, “Obama can help free trade with tariffs,” and it’s managed to sufficiently irritate me enough that I can’t let it pass by without comment. We know now that Obama did, in fact, agree to the 35% increase in tariffs on Chinese tires. It was a poor decision, and I have my fingers crossed that this was an ugly unicorn of a decision that won’t be seen again.

But Prestowitz’s article is full of WTF.

The orthodox free-trade view of most pundits holds that if Mr Obama accepts the recommendation he will fail the free-trade test. In fact, the truth is just the opposite. Not to accept the tariff recommendation would be a severe blow to open trade and globalisation as well as to America’s future economic health.

The phrase “extraordinary claims call for extraordinary proof” comes to mind, but Prestowitz sure doesn’t deliver it. On why not imposing barriers to trade is not desirable, he writes:

This kind of trade is not win-win. Rather it is a classic zero-sum game. It is well-known to game theorists that in such situations a tit-for-tat response is the optimal strategy.

Horsedroppings. The ‘optimal strategy’ in any given trade situation is going to depend on what sort of strategy the other 190-odd players on the world market are going with. I seriously doubt that there’s any game theorist anywhere that has declared “in a classic zero sum game, always go with tit-for-tat.” (And for that matter, he’s not even come close to actually showing this is a “classic zero sum game” in the first place!)

But even if Prestowitz were right about the above, game theory alone is completely inadequate for making the sort of decision Obama just made. There are going to be serious political and diplomatic repercussions from the imposition of the tire tariff, and the last thing the U.S. wants to be doing right now is to be setting a precedent for the rest of the world that hard economic times justifies the enactment of short sighted and petty trade restrictions.


Update: An economist responds to Prestowitz’s argument.