- New Peterson Institute study: imports don't put downward pressure on wages. The authors conclusions: " This analysis suggests that the fears of rising US wage inequality from developing-country imports in recent years are unwarranted. While conventional trade theory makes such expectations plausible our investigation reveals they are far off the mark.... US industries competing with developing country imports are not particularly intensive in unskilled labor. Moreover, the relative effective prices of the US industries that are unskilled labor–intensive have actually increased rather than decreased since the early 1990s. Changes in effective US prices from whatever cause have not mandated changes in relative wages. Neither have changes that can be ascribed to import prices mandated increases in wage inequality.... The goods exported by developing countries are highly imperfect substitutes for those produced by developed countries. This means that for the most part, unskilled US workers are not competing head to head with their counterparts in developing countries. It also suggests that methodological approaches to the question of trade and wages that measure the net factor content of trade or that assume that imports and domestic products and/or tasks are close substitutes rest on extremely shaky grounds." (h/t Alec Van Gelder)
- US manufacturers: Obama's National Export Initiative is "misguided" because it's economically illiterate. Money passage:
David Speer, chief executive of Illinois Tool Works, a large diversified manufacturer widely seen as a bellwether for the sector, noted that most big industrial companies have spread their manufacturing operations around the world, making the focus on exports a poor reflection of the health of the sector.Gee, now where have we heard that before?
The export drive “is very misdirected”, Mr Speer said in an interview with the Financial Times. “You often hear the politicians say: ‘those are US jobs that went overseas, they should be here.’ Well, most of the jobs go overseas for rational reasons – that’s where the growing market is.”
“We’re not going to be any better off by saying: ‘we’re going to ship our product to China from the US’,” Mr Speer said.
“We can’t do it. It won’t work. We won’t be able to compete – for lots of reasons, the smallest of which is the wage rates. It’s logistics, it’s the duties, it’s the closeness to the customer end-market that you can’t service remotely.”
The ITW chief’s comments reflect a view expressed in private by many industrial companies that the export drive is unfeasible and gives the false impression that lost manufacturing jobs in the US will be replaced.
- WSJ (subscription): Changes in China's currency won't change trade surplus because bigger, systemic changes are needed. Cato's Dan Ikenson adds more here. (And, yes, all of this also sounds vaguely familiar.)
- WTO releases its Annual Report. The new publication has lots of good info on the WTO's history and recent activities.
- AEI's Claude Barfield: Here's the real "big news" about the President's big weekend announcement re: the US-Korea FTA. "Finally, for Washington inside baseballers, it is interesting that the planning and announcement of this decision was carried out by the National Security Council (NSC). This will undoubtedly feed the speculation that the White House staff really directs key U.S. trade policy decisions and that Michael Froman, the NSC Deputy Director for International Economics, is really the “go-to” guy, rather than U.S. Trade Representative Ron Kirk."
- Mark Perry: Colombia's economy is dominating because of its commitment to free markets and free trade. Too bad the President didn't make an FTA announcement about them last weekend too, huh?
- Sen. Jim DeMint (R-SC): The current system for requesting miscellaneous tariff suspensions is awful; my legislation will fix it. Me: it also would end an ongoing spat between some US manufacturers and anti-earmark Republicans in Congress.
- The UK: here's a simple reminder of why Americans should fight tooth-and-nail against a VAT. (And, yes, that's twenty - two-zero - percent tax on top of everything else.)