Video: Heritage Event on Energy Exports

The Heritage Foundation has posted the video of last month's event on US energy exports.  The video is here and embedded below.  (I start around 53:00, if you're just desperate to watch me wave my arms around like a crazyperson.)

Enjoy!

Announcements

Although this blog has gone pretty quiet over the last few months (an understatement, I know), I've been keeping busy with plenty of (non-toddler-related) stuff, including--

This Thursday, July 24, I'll be speaking at the Heritage Foundation at an event on "Energy Exports and Free Trade."  The lineup for the event is (if I do say so myself) pretty stellar, and the subject matter couldn't be more timely.  Here's the description:

Expanding domestic energy production over the past few years has provided a welcome boost to the American economy. The federal government, however, has constrained the economic benefits by significantly limiting companies’ ability to trade energy freely around the world. Join as Congressman Cory Gardner (R-CO) leads a discussion in how open energy markets will create more opportunities for Americans, promote economic prosperity at home and abroad. 

The speakers include me, Rep. Gardner, Jamie Webster (Senior Director, Global Oil Markets, IHS), Ross Eisenberg (Vice President, Energy and Resources Policy, National Association of Manufacturers), and Heritage's Nick Loris.  You can register for the event, or watch it livestream online, here.  Hope you can join us.

This Fall, I'll be a Senior Visiting Lecturer at Duke Law School teaching a course on International Trade Law.  Unlike last semester's political science course, the syllabus for this class isn't really something worth viewing online (it's a lot of textbook stuff).  But here's the course description:

International trade and the World Trade Organization attract a lot of attention and debate. Why do almost all economists say that liberalizing trade flows is a good thing? Why do politicians – even ones who purportedly support free markets – often rail against import competition and “unfair trade”? How does trade liberalization interact with other public policy choices such as protecting the environment or promoting the economic development of poor countries? In this course, we will examine why the WTO exists, how it developed from the GATT and how it fits in the international economic order (Part I). The course will offer you an in-depth, practical knowledge of substantive WTO law drawing heavily on case law. It will address the basic principles of trade in goods and trade in services, as well as some of the more specialized WTO agreements on, for example on trade remedies (subsidies, anti-dumping and safeguards). From a more procedural side, the course will pay close attention to the unique WTO mechanism for the solution of global trade disputes, with special reference again to recent and ongoing cases (Part II). It will conclude by examining U.S. trade law – particularly the widely-used trade remedies laws – and assessing not only the practice of international trade law in the United States, but also whether these laws actually achieve their supposed policy objectives (Part III). Although this course will necessarily address key principles and theories undergirding the international trade law system, one of its driving themes will be the actual practice of this discipline in the United States and at the WTO. The course will be graded based on class participation and an open-book final exam.

Registration is open now, so if you know any Duke law students, please send them my way.

Finally, I've still been writing on non-trade policy stuff over at The Federalist.  Hope you'll scan it, as well as all the other good content over there, when you get a chance.

(Oh, and as for that toddler, she's just awesome.)

Oil & Gas Exports Event: Video and Materials (and Two Important Updates)

If you weren't lucky enough to hear me, Mark Perry and Jim Bacchus opine on the "shale revolution" and the myriad problems with current US policy on oil and gas exports, you're in luck: Cato just posted the video, which is also imbedded below.



If you'd like a closer look at Mark's or my presentation, you can download them here and here, respectively.  They remain up to date, except for two big developments that warrant mention:

• First, a few minutes after the Cato event ended, Senator Ted Cruz announced a comprehensive energy plan, one of the core planks of which is the liberalzation of both crude oil and natural gas exports.  (Boy, we were effective!)  Cruz also will be sponsoring formal legislation to implement the plan in the coming days.  Shortly thereafter, Senator Rand Paul stated his opposition to the current export restrictions.  Thus, there now is a more robust reform proposal on the table in Congress and, soon, legislation along those lines.  This is a far more ambitious approach than any before it, including that hinted by Senator Murkowski last month. Thus, it seems like Congress may be catching up to the rest of the policy and business world far more quickly than we imagined just a few short weeks ago.  Giddyup.

• Second, the non-partisan outfit Resources for the Future published an extensive new study which, echoing previous studies, finds that eliminating the current restrictions on US crude oil exports would lower - yes lower - domestic gasoline prices.  Here's the money line: "Given our projections for the change in crude oil prices and increased efficiency in refinery operations [caused by lifting the crude oil restrictions], we estimate US gasoline prices would be reduced by 2.8 to 6.9 cents per gallon."  This, of course, makes perfect sense if you understand domestic and global oil markets, current US policy (which permits unlimited exports of refined petroleum products), and, well, basic economics. (See my Cato presentation for more.)

More to come, I'm sure.

Upcoming Cato Event on Oil & Gas Exports

The Cato Institute will be hosting a great event on February 10, 2014 on oil and gas exports.  Details are below, and registration information is available at Cato's website.

Hope you can make it.


Boom to Bust? How Export Restrictions Imperil America’s Oil and Gas Bonanza

February 10, 2014 11:30AM
Hayek Auditorium

Featuring James Bacchus, Former WTO Appellate Body Jurist and Former U.S. Congressman; Scott Lincicome, Cato Institute Adjunct Scholar and International Trade Attorney; and Mark Perry, Professor of Economics, University of Michigan–Flint, and American Enterprise Institute Scholar; moderated by Daniel Ikenson, Director, Herbert A. Stiefel Center for Trade Policy Studies, Cato Institute.

A once-in-a-generation supply shock is transforming global energy markets, lowering crude oil and natural gas prices, and quickly making the United States the world’s largest producer of oil and gas. But energy politics threatens to short-circuit this American economic boom. Of immediate concern are federal regulations — in particular, discretionary export-licensing systems for natural gas and crude oil — that were implemented during the 1970s, an era of energy scarcity. By restricting exports and subjecting approvals to the whims of politicians, the current licensing systems distort energy prices and deter investment and employment in these promising sectors of the U.S. economy. They also irritate global trading partners, likely violate U.S. trade treaty obligations, and undermine other U.S. policy objectives. Ernest Moniz, President Obama’s energy secretary, recently stated that these export restrictions are deserving of “some new analysis and examination in the context of… an energy world that is no longer like the 1970s.” Please join us at the Cato Institute for our examination of these issues.

If you can’t make it to the Cato Institute, watch this event live online at www.cato.org/live and follow @CatoEvents on Twitter to get future event updates, live streams, and videos from the Cato Institute.

My International Trade Policy Course: Description & Syllabus

As eagerly mentioned a while ago, I'll be teaching an undergraduate course at Duke University this semester on international trade policy and politics.  For those of you who aren't lucky enough to be Duke students (or live in the area and have the ample time/energy needed to audit the course), I've posted the syllabus below after the jump with the basic course descrption and materials.  As you'll see, almost all of the materials that we'll be covering in class are available for free online, so you can poke around the links and follow along if you're so inclined.  (Or you can just complain vociferously about my obvious confirmation bias - whatever floats your boat.)

Enjoy!

American Media Finally Starting to Notice the Problems Caused by US Export Restrictions on Oil & Gas

Decades-old US laws currently prevent the free exportation of American crude oil and natural gas, thus raising a host of economic, legal and policy problems.  This is not a good thing, but it fortunately appears that the stalwart American media are starting to notice.  Unfortunately, it took them a heckuva long time to do it, as two recent news stories make clear.

First, several media outlets picked up a new National Association of Manufacturers analysis which finds that US natural gas export restrictions likely violate WTO rules.  This Reuters clip is pretty indicative of the media coverage:

A lobbying group pressing the U.S. government to speed approval of U.S. natural gas and coal export proposals released a report on Tuesday contending that long delays in the approval process may violate global trade rules.  

The National Association of Manufacturers commissioned James Bacchus, a former Democratic Congressman and World Trade Organization judge, to pen the report, which it says sends a message to the Obama administration and Congress that they should accelerate the approval process and lift regulatory barriers…  

The NAM asked Bacchus to consider whether delays by the Department of Energy in issuing licenses to export liquefied natural gas to certain countries violate obligations under World Trade Organization rules.  

In the report Bacchus concluded that both actions violate the General Agreement on Tariffs and Trade, which forbids export restrictions. "The United States has always been a strong advocate of rules that forbid export restrictions and has been forceful in challenging export restrictions imposed by other countries," said Bacchus, warning that "the tables may be turned on the United States directly in the WTO."

NAM and Bacchus are right to raise this issue (and on the legal merits), and it’s good to see the media report the problem.  However, it’s surprising that this new analysis is treated as some sort of revelation, given that a certain Cato Institute scholar first warned of the WTO and other policy problems surrounding the natural gas export system (and a similar one for crude oil) almost ten months ago:

Beyond the economic problems, both export licensing systems raise serious concerns under global trade rules. First, the U.S. export licensing regimes for natural gas and crude oil likely violate U.S. obligations under the General Agreement on Tariffs and Trade (GATT). Under GATT Article XI:1, WTO Members are generally prohibited from imposing quantitative restrictions on imports and exports. Under Article XI and related WTO jurisprudence, “discretionary” licensing systems (i.e., those in which the administering authority has the freedom to grant or deny a license) and systems in which applications are delayed for several months constitute impermissible restrictions on export quantities. On the other hand, licensing systems in which approval is automatic and relatively quick (e.g., five days) have been found to be lawful.

Based on these standards, both the U.S. natural gas and crude oil licensing systems appear to violate GATT Article XI:1. Each system provides the administering agency (DOE or BIS) with the discretion to grant or deny an export license based on subjective and nonbinding criteria (the “public interest” or “national interest” standards). Moreover, the pending export license applications have been delayed for several months (and, in a few cases, years). Both of these facts support findings of GATT violations.

Another think tank expert came to similar conclusions around the same time.  Thus, these legal concerns have been pretty common knowledge now for quite a while (and originally weren’t pushed by a “lobbying group”).  It’s really odd that they’re today being treated as novel.

Second, the Wall Street Journal reported this week that startling increases in US crude oil production, combined with onerous export restrictions, have led to a glut of domestic oil, a host of potential problems for domestic oil producers and newfound focus on the 1970s era export law:

The U.S. Gulf Coast—home to the world's largest concentration of petroleum refineries—is suddenly awash in crude oil.  So much high-quality U.S. oil is flowing into the area that the price of crude there has dropped sharply in the past few weeks and is no longer in sync with global prices.  In fact, some experts believe a U.S. oil glut is coming. "We are moving toward a significant amount of domestic oversupply of light crude," says Ed Morse, head of commodities research at Citigroup….  

And the glut on the Gulf Coast is likely to grow. In January, the southern leg of TransCanada Corp.'s Keystone pipeline is set to begin transporting 700,000 barrels a day of crude from the storage tanks of Cushing, Okla., to Port Arthur, Texas.

The ramifications could be far-reaching, including lower gasoline prices for American drivers, rising profits for refineries and growing political pressure on Congress to allow oil exports. But the glut could also hurt the very companies that helped create it: independent drillers, who have reversed years of declining U.S. energy production but face lower prices for their product….  

"Not one person saw this coming," says Paul Sankey, an energy analyst at Deutsche Bank. He says he expects growing production to eventually push prices of West Texas Intermediate crude, the U.S. benchmark, below $80 a barrel, down from $97.38 Thursday. The industry "will start screaming" for Congress to lift the export moratorium, he says.  

Adam Bedard, a market analyst for High Sierra Energy, a subsidiary of NGL Energy Partners, agrees that pressure will rise on the federal government to loosen crude-oil export restrictions, which date back to the 1973 OPEC oil embargo. Oil storage in the Gulf region appears to be filling up, he says. "It's like someone built a superhighway where there wasn't one before."

Again, the WSJ should be commended for highlighting this important story and the serious economic and legal problems caused by US export restrictions on crude oil.  However, it’s laughable to say that “not one person saw this coming.”  Indeed, that very same Cato scholar warned of this problem back in February:

[B]y depressing domestic prices and subjecting export approval to the whims of government bureaucrats, the U.S. licensing systems retard domestic energy production, discourage investment in the oil and gas sectors, and destabilize the domestic energy market. Artificially low prices prevent producers from achieving a sustainable rate of return on the massive up-front costs required to drill and extract oil and gas, and investors lack any assurances under the discretionary licensing systems that domestic prices will not collapse when output increases.  Such concerns have led the IEA to recently warn that U.S. export restrictions put the “American oil boom” at risk. 

This modern day Nostradamus then drilled down (pun intended!) on the problem for Reuters in June:

[A] bipartisan swath of federal and state officials is pressing for new infrastructure, like the Keystone XL pipeline, to move a glut of domestic oil from the center of North America to Gulf ports. This is a crucial step, but unless Congress reforms archaic restrictions on crude oil exports, all that black gold’s going nowhere….  

[B]y curtailing exports and subjecting license approvals to the whims of bureaucrats, the current system slows domestic production, breeds economic distortions, discourages investment and destabilizes energy markets.  

U.S. oil producers, for example, lose an estimated $10 billion a year due to their inability to sell crude in foreign markets. They’ve also spent hundreds of millions of dollars building “mini-refineries” in the Midwest and Gulf region to circumvent the current restrictions and export a slightly processed, cheaper product — leaving another $1.7 billion in potential profit on the table.  

As Rube-Goldbergian as this sounds, producers have few alternatives, given that U.S. oil consumption has collapsed in recent years and building new refinery capacity is virtually impossible in many “environmentally friendly” states. These problems prompted the head of the International Energy Agency to warn recently that U.S. export restrictions put the “American oil boom” at risk….

Given these problems, it’s clear that the current crude oil export licensing system needs to go. Congressional supporters of the U.S. energy boom must lead the charge.
If advocates really want to develop our vast energy resources and expand the economy, they should craft a licensing policy that reflects the new energy landscape and the immense U.S. export potential.  They’d also be restoring some overall coherence to U.S. trade and energy policy — and avoiding potentially embarrassing trade conflicts. If they ignore these restrictions, and their many flaws, the nascent U.S. oil boom could be snuffed out.

Sounds familiar, eh?  If only there were some sort of “search engine” or something that would allow curious journalists to find such things on the internet.  Alas, maybe next year.

Sour grapes aside, these news items raise two far-more-important points.  First, it’s good to see that the media are finally, after only a year, catching on to the many unnecessary problems created by US oil and gas export restrictions.  Hopefully, they’ll keep at it (even if they continue to ignore me). 
Second, and maybe more obviously, these export restrictions – dating back, in the case of gas, to the 1930s! – are causing serious, serious problems for the United States: distorting energy markets, eliminating jobs, depressing economic growth, creating global trade frictions and undermining other, worthwhile US government policies.  They reflect a bygone era of US energy homogeneity and scarcity.

Isn’t it time that our laws – and our political leaders – caught up?

VIDEO: Me on Trade Politics, Messaging & Policy

The Cato Institute has (finally) published the third video that I recorded for them a few weeks ago on U.S. trade policy.  This one actually covers many of the same things that I discussed in yesterday's piece for The Federalist, so be sure to read that too for the total consumer experience.  Enjoy!

Some Updates

I know things have gotten a little quiet around here, but don't worry: I've managed to survive without you (haha).  In all seriousness, when not changing diapers or making bottles, I've definitely been keeping busy with several side projects, including:

• I've recorded several podcasts for the Cato Institute on various trade issues.  The first two of those are now out, and you can listen here (on subsidies) and here (on energy).  So sit back, relax, and let my sultry voice lull you into a deeper state of libertarian economic consciousness.

• Back in August, I penned an oped for IBD on how various US government trade and fiscal policies artificially inflate food prices and hurt American families.

• I've also started occasionally writing for the hot new web magazine The Federalist.  You can find my first couple articles (and all future ones) here.

• And last but not least, I'm very excited to announce that I've signed on to be a Visiting Lecturer at Duke University, and will be teaching "Institutions in International Trade Law" there in the Spring of 2014.  Once the course description is online, I'll be sure to share it here.  In the meantime, if you know any students at Duke who are looking to learn about trade law, economics and policy (and, of course, robots/monkeys/pirates), be sure to send 'em my way!

Enjoy!

(And if you'd like to get these (and many, many other) updates more quickly, be sure to follow me on Twitter or Facebook.)

The Coming Crude Calamity (Due Solely to Government)

Today Reuters published a new oped of mine on crude oil export restrictions.  The whole thing is (obviously) worth your time, but here's a taste:

The American “shale boom” is poised to revolutionize global energy markets. It could transform the nation from a longtime net oil importer into an export powerhouse. Consider that the 2012 increase in U.S. crude oil production, announced last week, was the largest not just in U.S. history but the world.

To help this transformation, a bipartisan swath of federal and state officials is pressing for new infrastructure, like the Keystone XL pipeline, to move a glut of domestic oil from the center of North America to Gulf ports. This is a crucial step, but unless Congress reforms archaic restrictions on crude oil exports, all that black gold’s going nowhere....

[B]y curtailing exports and subjecting license approvals to the whims of bureaucrats, the current system slows domestic production, breeds economic distortions, discourages investment and destabilizes energy markets.

U.S. oil producers, for example, lose an estimated $10 billion a year due to their inability to sell crude in foreign markets. They’ve also spent hundreds of millions of dollars building “mini-refineries” in the Midwest and Gulf region to circumvent the current restrictions and export a slightly processed, cheaper product — leaving another $1.7 billion in potential profit on the table.

As Rube-Goldbergian as this sounds, producers have few alternatives, given that U.S. oil consumption has collapsed in recent years and building new refinery capacity is virtually impossible in many “environmentally friendly” states. These problems prompted the head of the International Energy Agency to warn recently that U.S. export restrictions put the “American oil boom” at risk.

Like I said, be sure to read the whole thing, but before you click over to Reuters, let me pick up on some of the points above for a second.  The Wall Street Journal just this week wrote a fantastic piece explaining the impending calamity facing US oil and gas producers - and the US energy market more broadly - if we don't reform the current ban on crude exports (emphasis mine):

New pipelines are beginning to carry a glut of domestic crude from the middle of the country to Texas' Gulf Coast, boosting the fortunes of the area's big refineries and further fueling a decline in oil imports.

Magellan Midstream Partners' Longhorn pipeline began shipping oil from West Texas to Houston in April—the first of at least seven pipeline projects that could send as much as two million barrels a day from oil-saturated choke points in Oklahoma and the interior of Texas to the largest concentration of refineries in the country. But domestic oil production is at such a high level that the Gulf Coast refineries won't be able to process all of the crude....

Refiners on the Texas Gulf Coast, which process about a quarter of U.S. gasoline, are poised to be the beneficiaries of the new pipelines. They have been largely stuck paying for more-expensive imported crude, or paying extra transport costs to have the cheaper, stranded U.S. crude brought in on rail cars, which are generally more costly than pipelines. Valero Energy Corp., Phillips 66 and Marathon Petroleum Corp., as well as Exxon Mobil Corp., which runs a major refinery in Baytown, Texas, all stand to gain....

However, Texas refiners won't be able to take full advantage of the influx of U.S. oil, most of which is of the variety known as light sweet. That is because many of those refineries were modified years ago to also deal with heavier crudes from Mexico, Venezuela and Saudi Arabia, preventing significant portions of their plants from refining light crude.

"It's rare to find a refinery down there that can take the majority of its crude" from the U.S. supply of light, sweet oil, said Cowen Securities analyst Sam Margolin.

Some industry experts think the pipelines will simply ease the oil glut in Cushing and create one in the Houston area as U.S. crude pours into the area faster than refiners can process it.

Trying to sell the crude abroad instead won't provide refiners a relief valve: U.S. law prohibits most crude exports, although refined products can be shipped overseas.

In short, we're producing tons of oil (and related jobs) and have the seemingly-infinite potential to produce even more.  New pipelines will be able move this oil from places like North Dakota, Oklahoma and Texas to Gulf-state and other refineries, but for various reasons we simply won't have the domestic refining capacity to handle all of it.  When we hit the point at which production officially outstrips refinery capacity, we'll have only two choices: lift the current, decades-old export ban or leave the excess oil in the ground (and sacrifice the jobs and growth associated with such activity).

So given the glacial pace of natural gas export license approvals (under a much more permissive legal system, by the way), the general proclivities of the current occupant of the White House, and the complete dysfunction of our beloved Congress what do you think's gonna happen here?

Yeah, I'm not holding my breath either.

License to Drill: The Case for Modernizing America’s Crude Oil and Natural Gas Export Licensing Systems

That's the pun-tastic name of my new briefer for the Cato Institute.  Here's introduction:

Revolutionary extraction technologies have helped increase the supply of fossil fuels in the United States, driving down prices, spurring economic activity, and potentially reversing the longtime status of the United States as a net energy importer to a significant exporter. Impeding that transition are outdated federal regulations—in particular discretionary export licensing systems for natural gas and crude oil—that restrict exports, distort domestic energy prices, deter investment, and encourage graft. They also subvert some of the Obama administration stated policy objectives and could run afoul of U.S. international trade obligations.

Despite the potential economic windfall, opposition to exporting natural gas and crude oil has materialized among certain domestic consuming industries and environmental groups, causing the administration to delay any approvals on pending export-license applications. But there are compelling reasons to approve those applications and to overhaul our disjointed, anachronistic, export license systems to properly reflect the new energy landscape. This paper describes those reasons and provides a basic roadmap for reform.

The full paper is available on Cato's website here.  Probably my favorite part is the section on the inconsistency between the Obama administration's use - intentional or otherwise - of archaic licensing systems to restrict oil and gas exports and various other White House policies:

First, the restrictive export licensing systems undermine the National Export Initiative (NEI) and its goal of doubling U.S. exports between 2009 and 2014. Second, the administration’s reticence with respect to fossil fuel exports stands in stark contrast to its full-throated advocacy of other energy exports, particularly renewables like bio fuels and solar panels. Indeed, the September 2010 White House report setting forth the NEI’s priority recommendations calls for increased government support for renewable and nuclear energy exports—but never mentions oil or natural gas. A November 2012 follow-up report lauds the U.S. government’s efforts to achieve these objectives, yet continues to ignore American fossil fuels, despite the massive increases in production and export potential that occurred between 2010 and 2012. Furthermore, increased fossil-fuel exports could actually spur domestic production of renewable energy through higher oil and gas prices. According to the EIA, the role of renewables in electricity generation would be “greater in a higher-gas-price environment.”

Third, the use of export restrictions to benefit downstream industries contradicts longstanding U.S. policy with respect to export restraints and illegal subsidies. The Commerce Department repeatedly has imposed anti-subsidy duties on imports to countervail subsidies resulting from foreign export restrictions on upstream inputs. The administration’s embrace of similar restrictions would not only be hypocritical, but would also expose U.S. exports of energy-intensive products (e.g., fertilizer) to “copycat” duties in key foreign markets.

Fourth, the U.S. government has long opposed restrictive and opaque export licensing systems in WTO negotiations and dispute settlement. For example, in China—Raw Materials (DS394), the U.S. government challenged China’s “non-automatic” export licensing systems for various raw materials as impermissible restrictions on exportation in violation of GATT Article XI. In March 2009, the United States and several other countries submitted a proposal to the WTO Negotiating Group on Market Access calling for increased disciplines on Members’ use of export licensing. The current U.S. export licensing regulations for oil and gas contradict these positions and undermine laudable efforts to rein in such restrictions globally.

Be sure to read the whole thing. And I'd be remiss not to note some of the other recent work on this topic:

• Heritage's Nicolas Loris on the economic benefits of natural gas exports and empowering states to control their own energy policy.

• The Peterson Institute's comments urging DOE approval of pending natural gas export license applications.

Enjoy!

The Next Chapter...

Apologies for the long silence after my new year's post, but I've been traveling and waiting for some things to get settled before writing here again.  Now that they are, it's with much excitement that I can announce that I've officially become an Adjunct Scholar for the Cato Institute.  As a former Cato intern-turned-research-assistant-turned-co-author-turned-author, this probably seems like the next logical step, but a quick look at Cato's roster of adjuncts reveals just how far out of my depth I really am here. (Shhh, don't tell them!)  Seriously, to be listed on the same web page as some of my intellectual idols is a pretty awesome honor, and I hope I can live up to the designation in the coming months and years.

So what does this mean for me and the ol' blog, you ask?  Good question. Well, as an "official" adjunct, I'll be blogging at Cato's blog on the issues on which I've written for them over the last few years - for example, trade rhetoric and politics, subsidies and trade remedies.  I'll also continue to write the occasional policy paper for them (and actually have a short one in the works right now), and will speak on these and related issues when invited to do so.  As always, all of this work will be done in a personal capacity and not on behalf of my employer.  See giant disclaimer to the right --->.

Given this new opportunity, my full-time job and the birth of my first child in only a few short weeks(!), this blog will become a little quieter for the foreseeable future - basically a place for the occasional posting of quick links, random musings (including, yes, monkeys/robots/pirates) and long-form stuff that's not really appropriate for Cato's blog because it's too long/legalistic, too profane or just not in my area of expertise.  I'll also cross-post things from Cato's blog when I write there.  None of this will happen too often - maybe once or twice a week, max - so unless you enjoy swinging by here just for fun, I'd recommend subscribing via email or an RSS feed in order to save yourself a few clicks.  Subscription information is below my giant head on the left side of this page, if you're interested.

And, if you just can't bear to be without me for such long periods, you can - after seeking psychological help, of course - always follow or visit me on Twitter, where I'll be tweeting a pretty-frequent (mainly before/after business hours, of course) stream of interesting links and 140-character thoughts.  In fact, many of those tweets will be a preview of longer stuff that ends up in a future blog post or paper.

So, that's about it for now.  For those of you who were kind enough to mention your hope for my swift return to regular blogging, I'm sorry to disappoint.  Hopefully you and the rest of the folks out there will enjoy the next chapter in my fun little side project.  There's certainly more to come - just in a slightly different, more respectable (ha), and less frequent format.


p.s. Here's a recent radio interview that I did for American Radio Journal on my October 2012 Cato paper.  (After January 23, you can download it in the ARJ archives.)

Happy New Year (and Some Updates)

Happy New Year!  I hope you and yours had a happy holiday season and are looking forward to a great 2013.  As for me, I have really enjoyed my time away from the ol' blog (sorry, it's true), but I will definitely start blogging again in some capacity.  Not quite yet, however - there are some exciting things in the works, but they haven't quite been finalized yet.  In the meantime, I'll be posting a few random things here over the next couple weeks, and will then provide a complete update once I'm able.  For tonight, here are a couple reminders that, for better or worse, US subsidy and anti-subsidy policy in 2013 is already shaping up to be a lot like it was in 2012 (thus keeping my Cato paper relevant!):

• On December 28, 2012, the US shrimp industry filed a new petition seeking a countervailing (anti-subsidy) duties on frozen warmwater shrimp from pretty much every major shrimp exporter on the planet (i.e., China, Ecuador, India, Indonesia, Malaysia, Thailand, and Vietnam).  Even though there are already anti-dumping duty orders on shrimp from China, Ecuador, India, Thailand and Vietnam, this promises to be a pretty huge case - according to the US International Trade Commission, US consumers purchased more than $4.8 billion worth of these imports in 2011, most of which came from the countries targeted by the new CVD petition.  Sorry, American shrimp lovers!

• As I warned in October, the fiscal cliff deal - which raised taxes on those evil American "millionaires" (aka people making more than $250,000 (exemption caps) or $400,000 (rate hikes) per year) - also included a bevvy of new subsidies for green energy producers.  This includes a one-year extension of the wind production tax credit (cost: $12 billion) and the retroactive application (for 2012) and extension (for 2013) of a tax subsidy for biodiesel.  As you may recall, US biodiesel is currently the subject of countervailing duty (anti-subsidy) orders in Australia, Peru and the EU.  The Joint Committee on Taxation estimates that the fiscal cliff bill will dole out $18.1 billion in new energy subsidies over the next 10 years (almost all of which are of the "green" variety), and $4.7 billion in 2013 alone. Impressive work, K Street.  (The Farm Bill - which includes a ton of agriculture subsidies, including those pesky, WTO-inconsistent ones for cotton - also was extended as part of the fiscal cliff deal.  Of course it was.) 

And, once again, my paper on the total mess that is US subsidy and anti-subsidy policy - perfectly encapsulated by the two events above - is still available here.

In other news, I finally uploaded video my October 2012 talk on "China Myths and Realities" for the National Committee on US China Relations' "China Town Hall".  It's below in two parts.  Enjoy!

And do stay tuned.  More to come....

Countervailing Calamity: Cato Event Video

The Cato Institute today posted the archived video of Tuesday's event for my new paper on the global subsidy problem and why the United States' subsidy and anti-subsidy (CVD) policies prevent it from leading any needed reform efforts.  I had a blast doing the event and really enjoyed the discussion among the other speakers and guests.  I hope you enjoy it too.

You can download the video at Cato's website or watch it below.  Thanks again to Tim Carney and John Magnus for joining me (and to Dan Ikenson for hosting the event).

More TV and Comment on Today's China Solar Panels Announcement

Today, the Department of Commerce announced its final determinations in the antidumping and countervailing duty investigations of solar panels from China. (DOC's factsheet is here.)  Final AD duties went down a little from the prelimnary phase, and CVDs went up a good bit.  Meanwile, DOC declined to dramatically expand the scope of the AD/CVD orders to include panels made from third-country inputs.  None of these results is particularly surprising, although I'm quite sure that the significant increase in CVD rates (i.e., the magnitude of the Chinese solar subsidies found to exist) will not sit well with Beijing.  Meanwhile, I imagine that sinophobic politicians in both parties will be tickled pink with a new talking point.

I don't have time to parse the details of DOC's announcement tonight, but my general comments from Sunday still hold: this is one giant mess that will breed a lot of collateral damage and litigation. 

Oh, goody.

Also, the good folks at Fox Business had me back on today for an extended interview regarding the solar panels decision.  As you'll notice, the discussion echoes the findings and conclusions of my new Cato Institute paper on the global subsidy epidemic and the problems with US subsidy and anti-subsidy policies.  Enjoy:

Me on Fox Business Previewing Tomorrow's Big Solar Panels Decision (UPDATED)

Fox Business had me on today to preview tomorrow's big Commerce Department announcement re: its final determinations in the AD/CVD investigations of Chinese solar panel imports.  I tried to embed the video here but can't seem to do it.  But you can still watch the video here.  Enjoy.

UPDATE: Here's another clip from yesterday with some different analysis:

More commentary on tomorrow's solar announcement, and green subsidies more broadly, is available here.

Without Further Ado...

I imagine that many of my regular readers are by now sick of hearing about my new Cato Institute Paper, "Countervailing Calamity: How to Stop the Global Subsidies Race."  Nevertheless, it is officially out today, and the full text is now available to read or download at Cato's website.

I expect detailed, annotated comments from you all by no later than tomorrow evening.  Enjoy!

Reminder: Cato Event Tomorrow (Tues) on US Subsidy Policy and My New Paper

Yes, I know I've been relentlessly (and shamelessly) flogging my new paper over the last couple weeks, but you may have forgotten that I'll be speaking on it at 4p tomorrow (Tuesday, October 9) at the Cato Institute in Washington, DC.  I'll be joined by the Washington Examiner's Tim Carney (who writes constantly about the perils of US subsidies) and trade lawyer John Magnus (who has ample experience in the intersection between international trade law and subsidies).  The event description on Cato's website focuses on the former issue (because, let's face it, it's a much sexier topic), but Magnus' addition ensures that there will also be plenty of substantive discussion about the benefits and failings of global anti-subsidy rules and US anti-subsidy (countervailing duty) policy.

You can register for the event here, and they also allow walk-ins if your schedule just happens to open up at the last minute.  The event promises to be a lively discussion (I even made a powerpoint!), and, hey, free drinks afterwards. 

For those of you not in the DC area, the Cato event page will also have a link to the live feed, so you can watch online (or later). 

I look forward to seeing you there.

Countervailing Calamity: Preview

As readers of this blog know, the Cato Institute will be publishing a new paper of mine on the global subsidy epidemic and how the United States could lead international reform efforts but only if we get our own subsidy (and anti-subsidy) house in order.  That paper, "Countervailing Calamity: How to Stop the Global Subsidies Race," should be officially out in a week or so, but in the meantime I'll be previewing certain themes (it's a long paper) here, as I did the other day when President Obama announced the new U.S. WTO case against Chinese auto subsidies.  Before I get into those weeds again, however, I'd like to set the table (and get you really excited) by reprinting the introduction here:

When the Department of Energy announced the bankruptcy of federal loan recipient Solyndra, the agency was quick to blame Chinese subsidies, rather than U.S. policy, for the failure. “Solar panel manufacturing is a growing international market,” the DOE press release read, “with increasingly intense competition from Chinese manufacturers who are supported in many cases by interest-free government financing that is much more generous than what the U.S. provides.” In one sense, the Department had a point: Chinese and other subsidies distort global markets, strain public budgets, breed cronyism, and undermine public support for free trade and free markets. What the Department downplayed, however, were the literally hundreds of state and federal subsidies—totaling billions of taxpayer dollars—that are available to U.S. producers and consumers of alternative or “green” energy products such as solar panels, wind towers, or biofuels. The Chinese government, on the other hand, was quick to note the hypocrisy.

A few months after the Solyndra news—but before the announced failures of a few other subsidized U.S. solar firms such as Abound Solar and First Solar—the U.S. government initiated antidumping and anti-subsidy (or “countervailing duty”) investigations of Chinese solar panel producers. The legality of these cases is not in doubt. But as American solar manufacturers and their political friends shifted the blame for their failures to subsidized Chinese imports, they failed to mention that U.S. environmental goods exporters increasingly have been subject to similar investigations abroad, while U.S. green subsidies and U.S. countervailing duty procedures have come under increasing scrutiny—and indictment—at the World Trade Organization (WTO). Meanwhile, solar panel consumers around the world suffer the ill effects of the litigation and policy uncertainty surrounding trade in green goods.

Such problems are not isolated to Solyndra, or even to green subsidies. Since the financial crisis of 2008, the United States and many other nations established or expanded taxpayer subsidies for favored industries such as agriculture, alternative energy, and automobiles—subsidies which have since been found to harm just about everyone except the subsidy recipients and, of course, their political patrons. These policies have led to increased anti-subsidy litigation at the WTO and the imposition of more anti-subsidy measures via national countervailing duty cases.

In an ideal world of free-market statesmen, national and multilateral rules permitting remedial tariffs on subsidized imports would be unwelcome, if not unnecessary. Elected officials would resist the temptation to subsidize private commercial activity. They would welcome, rather than punish, subsidized imports from countries where governments chose to impoverish their citizens, distort their economies, and empty their public coffers for the benefit of foreigners’ consumption. And, on the rare occasion when trade-distorting subsidies did persist, they would be eliminated through nonconfrontational negotiations.

Unfortunately, we do not live in an ideal world. Instead, most politicians in the United States and abroad—heavily influenced by well-organized producer lobbies—eagerly subsidize their preferred industries and view subsidized imports as an excuse to further funnel public resources to private ends. The result is a global subsidies race between governments to “invest” in favored industries to enhance the nation’s “global competitiveness.” The casualties from this free-for-all are numerous, and diplomatic attempts at a ceasefire have proven ineffective. What should be done? Ignoring the problem—an attractive option to free-market advocates under many circumstances—would encourage more subsidies from abroad, more subsidies in response at home, and more protectionist actions that penalize U.S. consumers and consuming industries.

Anti-subsidy disciplines—such as those permitted under WTO agreements and codified under U.S. countervailing duty (CVD) law—could help. As the existence of the rule of law deters illegal activities, anti-subsidy rules and countervailing duty laws reduce the incentives to subsidize in the first place.

But the CVD law and its application are rife with problems. The Commerce Department has too much discretion administering the law, which exposes subsidy determinations to subjective and opaque decisionmaking, resulting too frequently in the imposition of duties significantly in excess of the value of subsidies allegedly being remedied. The CVD law is punitive instead of remedial, making victims of U.S. consumers and consuming industries, aggravating U.S. trading partners, and exposing U.S. businesses to retaliation against their exports and intellectual property.

The combination of metastasizing U.S. subsidy programs and growing foreign markets has exposed more U.S. exports to anti-subsidy litigation at the WTO and punitive countervailing duties at foreign borders. As growth in emerging economies continues and U.S. producers turn to those markets for sales revenues, more CVD cases are likely to be brought against U.S. exports. And once such measures are in place, they are difficult—if not impossible—to remove.

U.S. policymakers should recognize their strong interest in reforming U.S. subsidy programs and ensuring that other countries do the same. However, the only way that America can lead such a worthwhile endeavor is to overhaul its current approach to domestic and foreign subsidies. By curtailing targeted federal subsidies to favored industries and reforming its current CVD procedures, the U.S. government can begin to arrest and reverse the damage caused by the past few years of rampant government subsidization of industries worldwide. This paper provides the roadmap.

Pretty exciting, eh?  The paper then goes on to document (i) the global subsidy explosion and comcomitant increase in anti-subsidy litigation; (ii) why global anti-subsidy rules can help curtail the subsidy arms race; (iii) the billions in US subsidies given annually to preferred industries and workers and growing number of anti-subsidy cases against those companies' exports; (iv) the various policy and methodological problems surrounding the United States' current application of the CVD law (including fun things like the CVD/NME mess); and (v) suggested reforms to US subsidy and anti-subsidy policy that would finally put Washington in prime position to lead the global subsidy reform effort.

Stay tuned here for more snippets of the paper and you can find them all under the new "Countervailing Calamity" blog label.  Feedback, as always, is welcome. 

Enjoy!

[UPDATE: I can't believe I forgot to mention that Cato will be hosting a event for my new paper - with me, Tim Carney and John Magnus (and free food and drink to follow) - on October 9th in DC.  Hope you can make it.]

Upcoming Event on Global Subsidies (and Free Food & Drink!) [UPDATED]

The Cato Institute will be hosting me and the Washington Examiner's excellent Tim Carney to talk about my new paper and the ridiculously awful state of US and global subsidy policy.  Event details are below, and you can register here.  Look forward to seeing you there!

Countervailing Calamity: How to Stop the Global Subsidies Race

POLICY FORUM
Tuesday, October 9, 2012
4:00 PM (Reception To Follow)

Featuring Tim Carney, Washington Examiner; Scott Lincicome, White and Case, LLP; and John Magnus, TradeWins LLC; moderated by Dan Ikenson, Cato Institute.

The Cato Institute
1000 Massachusetts Avenue, NW
Washington, DC 20001

You've heard of Solyndra, Government Motors, and the tens of billions of dollars transferred annually from U.S. taxpayers to America's wealthy agribusinesses—including the occasional farmer living in Manhattan. Worldwide, government subsidies to chosen industries and favored companies are out of control, bankrupting treasuries, breeding cronyism, misdirecting and deterring private investment, distorting market signals, and undermining support for capitalism and free trade. Always demanding more, domestic subsidy recipients cite foreign subsidies as grounds for yet more largesse, and the cycle continues. How will this global subsidies race end? "Very badly," according to experts who argue that policymakers must find a way to rein in this economically and politically corrosive process.

UPDATE: Trade lawyer John Magnus has just been added to the speaker list for the event. Now the event promises to be even more entertaining (as if that were even possible).

Chutzpah Alert: Huge Fan of Auto Subsidies Attacks Chinese Auto Subsides

I'm traveling right now and don't have much time to get in the weeds regarding President Obama's announcement today that the US has filed a WTO dispute against China for the latter's subsidization of its domestic automobile and auto parts producers.  Fortunately, the audacity of such a move is presciently covered in my forthcoming Cato paper on the failures of US subsidy and anti-subsidy policy.  Given ample news reports on rampant Chinese subsidization, the U.S. might just have a good legal case against China here, but its political case is abysmal for at least two reasons.

First, we just so happen to subsidize the heck out of our own auto industry - something that President "GM/Chrysler Shareholder" Obama certainly knows.  From the paper:

The United States also has a long, bipartisan history of subsidizing the domestic auto industry. Most notably, the 2008–09 bailouts of General Motors and Chrysler are projected to cost U.S. taxpayers over $25 billion in direct losses (at current stock prices), another $20-plus billion in indirect losses (e.g., preferential tax treatment for carryforward of next operating losses), and many experts predict that GM is once again headed for bankruptcy. The bailouts, however, are only the latest example federal support for Detroit. For example, the Clinton administration in 1993 provided U.S. automakers with $1.2 billion over eight years to develop hybrid cars as part of its Partnership for a New Generation of Vehicles. The Bush administration’s follow-up initiative, FreedomCar, focused on hydrogen-powered cars and cost taxpayers about $2 billion.

The federal government has also doled out extensive consumer subsidies for the purchase of certain vehicles. For example, the 2009 “Cash for Clunkers” program provided government rebates of up to $4,500 for car buyers who traded in their current vehicles for new, more fuel-efficient upgrades, at a total program cost of about $2.8 billion. The Energy Policy Act of 2005 (P.L. 109-58) established tax credits for the purchase of new alternative fuel and advanced technology vehicles. Tax credits under this program, expanded by the Emergency Economic Stabilization Act (EESA, P.L. 110-343), are as high as $7,500 for light-duty vehicles and $15,000 for heavy-duty vehicles. GM’s Chevy Volt qualifies for the maximum $7,500 tax credit—which the Congressional Research Service has said is “critical to GM marketing plans for the Volt,” given the car’s high selling price. The Joint Committee on Taxation estimates that these vehicle subsidies cost $500 million between 2004 and 2008, $1.3 billion from 2009 to 2013 (est.) and another $1 billion in 2014–2015. Many other state programs provide similar consumer subsidies. 

Second, US auto subsidies - and the bailouts in particular - have actually exposed US exports to anti-subsidy (countervailing) duties in... wait for it... China.  Back to the paper:

In December 2011, the Chinese government imposed anti-dumping and countervailing duties on U.S. automobile imports. CVDs on imports of Chrysler and GM cars and SUVs were set at 6.2% and 12.9%, respectively, while all other investigated U.S. automakers received 0.0%. Among the U.S. subsidy programs alleged in the CVD petition were various elements of the 2009 auto bailouts (including the Automotive Industry Financing Program), the Advanced Technology Vehicles Manufacturing Loan Program, the Cash for Clunkers program, and several federal and Michigan state tax incentives for U.S. automobile manufacturers and consumers. China’s final determination found that Chrysler and GM—but not U.S.-based competitors like Ford, Honda, BMW and Mercedes—had received countervailable subsidies in the form of the auto bailouts (via grants, loans, and capital injections). Of particular note was China’s determination that the two companies were uncreditworthy at the time of receiving U.S. government loans at already-low rates. On July 5, the United States announced a WTO challenge to various procedural and methodological aspects of China AD/CVD determinations on U.S. automobile imports. However, the United States has not disputed the basis for the Chinese CVD measures—that is, China’s assessment that the auto bailout constitutes a countervailable subsidy.

In 2011, American automobile producers exported more than $3 billion of the targeted cars and SUVs to China, but U.S. exports of Chrysler and GM automobiles will remain at a significant price disadvantage until these countervailing duties are removed. Although both companies can avoid the duties by selling cars in China that are produced outside of the United States, these duties—imposed due to the auto bailouts—have ensured that their American-based workforce will not reap the benefits of exporting to the largest car market in the world. Such exports also remain vulnerable to similar CVD actions in other key markets.

Now President Obama wants to complain about Chinese automobile subsidies?  Really?

Like I said, chutzpah.

Meanwhile, China announced today its third WTO challenge to US application of its own anti-subsidy (countervailing duty) law.  The details of the new dispute aren't out yet, but I'll be sure to come back to them in a few days.

Regardless, today's events are further proof that, while global subsidy reform is an absolute necessity these days, the United States - and the Obama administration in particular - is in no place to lead the charge.