Trade power and financial power

Source: Bank of England

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Source: Bank of England

The international trade in goods is one thing and the international flow of money is another.

I came across these two charts showing how China is at the center of world trade in goods, and the United Kingdom is at the periphery, and the UK is at the center of world banking and China is at the periphery.

Economic historian Adam Tooze said that the UK is trying to make itself China’s financial gateway to the world.  It is well positioned to do that.   The danger is that the greatest current threat to the world economy is a Chinese meltdown, he wrote, and the UK is even more exposed than the rest of the world.

LINK

Trade and Finance – Two Very Different Visions of the Twenty-First Century Economic Condition by Adam Tooze.

 

‘Fast track’ involves more than just the TPP

The significance of “fast track” goes far beyond clearing the way for quick approval of the Trans Pacific Partnership agreement.

There are other TPP-like trade agreements now under negotiation, such as the Transatlantic Trade and Investment Partnership and the Trade In Services Agreement.

The Trade Promotion Authority bill, otherwise known as “fast track,” would govern how such agreements are negotiated and voted on in the future.

In theory this could work well.  Negotiators would pursue objectives set by Congress, the leaders of Congress would be kept informed as negotiations progress and ratification of the agreement would be only a formality.   But there is no mechanism in the current fast track bill by which Congress can call the negotiators to account or demand information.

Fast track assumes good faith on the part of all concerned, and, based on the historic record, including the way the TPP has been negotiated, I think this would be a naive assumption.

LINK

Hatch Bill Would Revive Controversial 2002 Fast Track Mechanism That Faces Broad Congressional, Public Opposition by the staff of Public Citizen’s Global Trade Watch division.

What’s Wrong With Wyden-Hatch-Ryan’s Fast Track Bill – The Specifics by Gaius Publius for Down With Tyranny (via naked capitalism).  [Added 4/22/2015]

Even the USA imports energy from Russia

OilPrice reports that, despite sanctions, energy exports from Russia continue to flow not only to Europe but to the USA.

As President Obama and Secretary of State John Kerry last year lambasted Russia for supporting pro-separatist rebels in Crimea and eastern Ukraine, and accused the Kremlin of involvement in the shooting down of a Malaysian airliner, a huge coal carrier was crossing the ocean to deliver 40,000 tons of thermal coal to the Schiller Station coal-fired power plant in New Hampshire. 

Forbes broke down the reasons for the apparent contradiction nicely, stating that for the East Coast, Russian coal is “easy to get and cheaper to ship.”  An added advantage: coal from Russia emits less sulfur than US coal, making it easier to comply with environmental regulations.

Many US citizens would also be horrified to learn that a considerable amount of nuclear power produced in the United States comes from Russian uranium, none of which is yet subject to Western sanctions.  According to the US government’s National Nuclear Security Administration, about half of the fuel used in American nuclear reactors comes from dismantled Soviet warheads … …

Waging economic warfare against Russia by disrupting long-standing economic relationships is a prime example of cutting off your nose to spite your face.

LINK

Impotent Western Sanctions Fail To Disrupt Russian Energy Exports by Andrew Topf for OilPrice (hat tip to naked capitalism)

Does Earth have a trade deficit with Mars?

Cumulative trade surpluses or deficits, 1980-2008, in billions of dollars. Source: Wikipedia. Double click to enlarge.

Among the world’s rich countries, the United States has a continuing trade deficit, Germany and Japan have continuing trade deficits and the other rich countries move up and down, slightly above and slightly below the break-even point.  But the French economist Thomas Piketty, in his new book, Capital in the Twenty-First Century, pointed out that, if you add them all up, the rich countries as a group have a trade deficit.

Are the rich countries in debt to the poor countries?  No, said Piketty.   If you lump all the poor countries together, they, too, have a combined trade deficit.

In other words, the whole Earth has a trade deficit.  But according to basic economic theory, any nation’s deficit is a surplus for some other nation or group of nations.   Could this mean that Earth has an unfavorable trade balance with Mars?

No, Piketty said.  The problem is that not all the world’s trade is accounted for — in particular, the trade that winds up in hidden accounts in the world’s tax havens.  If it was known how much it is, and who owns it, we probably would realize that the world’s super-rich hold an even higher percentage of the world’s wealth than we think.

One of the benefits of a global tax on capital would be to bring this hidden wealth to light, he said.  Even if you don’t accept the idea of a tax on capital, there is a need for international cooperation on financial reporting and prevention of tax evasion.  World trade treaties, instead of protecting international corporations from national governments, should provide for sharing information on wealth, and for boycotting jurisdictions that don’t meet international standards for reporting.

Free to choose in Bangladesh

More than 375 garment workers died last week in Bangladesh as the roof of their building collapsed.  The response of Slate’s Matthew Yglesias was that people in Bangladesh ought to be free to work under unsafe conditions if that is their choice.

Bangladesh is a lot poorer than the United States, and there are very good reasons for Bangladeshi people to make different choices in this regard than Americans.  That’s true whether you’re talking about an individual calculus or a collective calculus.  Safety rules that are appropriate for the United States would be unnecessarily immiserating in much poorer Bangladesh.  Rules that are appropriate in Bangladesh would be far too flimsy for the richer and more risk-averse United States.  Split the difference and you’ll get rules that are appropriate for nobody.  The current system of letting different countries have different rules is working fine.

via MoneyBox.

Notice the rhetorical two-step.  Yglesias switches back and forth between something obviously true but meaningless, namely that Bangladesh and the United States don’t need to have the exact same safety rules, and something outrageous but false, that the deaths of the workers in Bangladesh are the result of them making different choices than U.S. workers.

“Different choices.”  American retailers make choices as to which low-wage foreign supplier they’ll go to garments.  Bangladeshi manufacturers make choices as to whether or not to repair roofs so they won’t collapse.  Bangladeshi workers also were offered a choice.

Some workers had reportedly noticed a crack in the building’s edifice shortly before the incident, but their warnings went ignored.  Some were told to report to work anyway or risk losing a month’s wages.  With minimum pay set below $40 per month (about the retail price of a typical sweater they might produce), workers could ill afford to be concerned about their safety, and so they followed orders and reported to what would be for many their last day of work.

via Working In These Times.

Workers in the United States worked under the same conditions 100 to 150 years ago.  The same arguments about freedom of choice were made to to justify the status quo.   Unionized workers were killed in battles with company police, state militias and federal troops.  Wages and safety standards were raised not by the magic of the market, but by collective bargaining by unions and by the federal laws and regulations established in the Progressive, New Deal and Great Society eras.

If you follow my blog, you might wonder how my concern with worker safety fits in with my new-found interest in anarchism.  How can someone who wants a world without government call for better enforcement of worker safety laws?

Actually, I’m not a strict anarchist, just sort of anarchish.  My understanding is that in an anarchist world, the Bangladeshi garment factories would be controlled by syndicates of workers, and they would determine their own safety rules.   And they probably would manufacture for local customers rather than for a global supply network run by people who didn’t know or care about local conditions.

Another solution would be to replace the World Trade Organization with another international organization that would allow sanctions against countries that denied workers the right to bargain collectively or that refused to enforce minimum standards for worker safety and health.

In These Times magazine reported that Bangladeshi and international trade unionists have proposed a surcharge of 10 cents a garment on Bangladeshi exports to improve the country’s manufacturing infrastructure.  Such a surcharge wouldn’t put any company at a competitive disadvantage because they’d all pay.  It wouldn’t be a burden on Bangladesh because foreigners would pay the surcharge.  It would be too small to appreciably affect sales of individual garments, but the magazine said it would raise an estimated $600 million a year, enough to considerably improve conditions.

Click on International factory safety for Matt Yglesias’s complete post, and Some further thoughts on Bangladesh for his reply to criticism.

Click on Would it not be easier for Matt Yglesias to dissolve the Bangladeshi people and elect another? for comment on the Crooked Timber web log.

Click on No, Matt Yglesias, Bangladeshi Workers Did Not Choose to be Crushed to Death for comment in In These Times magazine.

These treaties empower corporations, not people

The video tells how “free trade” agreements set up international tribunals to which corporations can appeal to override national laws, regulations and court decisions that protect workers, consumers and the environment.  It tells of how Chevron polluted a large area of Ecuador, how the local people after a long struggle won an award for damages or how Chevron overturned those damages.

Similar international tribunals would be set up under the proposed Trans-Pacific Partnership Agreement and under a new agreement the Obama administration is negotiating with the European Union.  Huffington Post reporters say the proposed US-EU agreement calls for mechanisms of “investor-state dispute resolution,” which would allow a company to appeal a regulation or law to an international tribunal.   The tribunal would be given authority to impose economic sanctions against the United States or any other country that refused to repeal the objectionable law or regulation.

Let’s assume for the sake of argument that this international tribunal would be impartial, and not stacked in favor of corporations.  It still would be a bad idea because it would be one-sided.   The proposed agreement creates now corporate rights, but it does nothing to protect the rights of workers, consumers and citizens.

International trade agreements are not inherently bad.  They could be used to raise rather than lower international standards.  I can imagine a treaty to sanction nations that export products that are hazardous to human health and safety, or that gain a competitive advantage by violating agreed-upon labor and environmental standards.  But under the proposed US-EU treaty and Trans-Pacific Partnership Agreement, the reverse would be true.  Sanctions would be applied against nations for protecting consumers, workers and the environment.

Trans-Pacific Partnership: NAFTA on steroids

This map shows how the TPP would link other trade blocs

During the 2008 Presidential campaign, candidates Barack Obama and Hillary Clinton pledged to renegotiate the North American Free Trade Agreement so as to remove provisions that limited the ability of national governments to legislate for protection of workers, consumers and the environment.

Not only have Obama and Clinton not done this, they have signed on to negotiations begun in the last days of the George W. Bush administration to create a new agreement, the Trans-Pacific Partnership, with all the objectionable features of NAFTA raised to a new order of magnitude.  The talks being being conducted in secret, with doors closed to Congress but 600 corporate representatives taking part as advisers.  Fortunately some information has been leaked.  Lori Wallach wrote a good summary of what’s at stake for the Nation magazine back in July.

Think of the TPP as a stealthy delivery mechanism for policies that could not survive public scrutiny.  Indeed, only two of the twenty-six chapters of this corporate Trojan horse cover traditional trade matters.  The rest embody the most florid dreams of the 1 percent—grandiose new rights and privileges for corporations and permanent constraints on government regulation.  They include new investor safeguards to ease job offshoring and assert control over natural resources, and severely limit the regulation of financial services, land use, food safety, natural resources, energy, tobacco, healthcare and more.

The stakes are extremely high, because the TPP may well be the last “trade” agreement Washington negotiates.  This is because if it’s completed, the TPP would remain open for any other country to join.  In May US Trade Representative Ron Kirk said he “would love nothing more” than to have China join.  In June Mexico and Canada entered the process, creating a NAFTA on steroids, with most of Asia to boot.

Countries would be obliged to conform all their domestic laws and regulations to the TPP’s rules—in effect, a corporate coup d’état.  The proposed pact would limit even how governments can spend their tax dollars.  Buy America and other Buy Local procurement preferences that invest in the US economy would be banned, and “sweat-free,” human rights or environmental conditions on government contracts could be challenged.  If the TPP comes to fruition, its retrograde rules could be altered only if all countries agreed, regardless of domestic election outcomes or changes in public opinion.  And unlike much domestic legislation, the TPP would have no expiration date.

Failure to conform domestic laws to the rules would subject countries to lawsuits before TPP tribunals empowered to authorize trade sanctions against member countries.  The leaked investment chapter also shows that the TPP would expand the parallel legal system included in NAFTA.  Called Investor-State Dispute Resolution, it empowers corporations to sue governments—outside their domestic court systems—over any action the corporations believe undermines their expected future profits or rights under the pact.  Three-person international tribunals of attorneys from the private sector would hear these cases.  The lawyers rotate between serving as “judges”—empowered to order governments to pay corporations unlimited amounts in fines—and representing the corporations that use this system to raid government treasuries.  The NAFTA version of this scheme has forced governments to pay more than $350 million to corporations after suits against toxic bans, land-use policies, forestry rules and more.

TPP negotiators representing the United States, Australia, New Zealand, Chile, Peru, Singapore, Malaysia, Vietnam and Brunei are now meeting in Leesburg, Va., through Sunday (tomorrow).  Representatives of Canada and Mexico will join the talks when they resume in December.

Negotiations for the Trans-Pacific Partnership began in 2005 among New Zealand, Vietnam and Chile, and Brunei joined in a few months later.  It seems odd that these four particular countries would find common cause.  I think it is likely that the Trans Pacific Partnership represents a corporate plan being pushed in many countries, and these four were the first to sign on.

President George W. Bush brought the United States into the TPP negotiations in mid-2008, and the other negotiating partners joined soon after.  My main objection to the TPP is not to the specifics of what is being discussed.  Reasonable people can differ as to how far copyright and drug patents should extend.  My objection is that these issues would be removed from the democratic process and given over to a body representing corporations with a vested interest.

Trade representative Ron Kirk said the reason for keeping secret the texts of the negotiating positions and the draft agreements is that revealing such information led to the defeat of the Free Trade Agreement of the Americas.  From the democratic perspective, that is precisely the information ought to be revealed.  As Lori Wallach said:

The goal was to complete the TPP this year. Thankfully, opposition by some countries to the most extreme corporate demands has slowed negotiations.  Australia has announced it will not submit to the parallel corporate court system, and it and New Zealand have rejected a US proposal to allow pharmaceutical companies to challenge their government medicine formularies’ pricing decisions, which have managed to keep their drug costs much lower than in the United States. Every country has rejected the US proposal to extend drug patent monopolies.  This text was leaked, allowing government health officials and activists in all the countries to fight back.  Many countries have also rejected a US proposal that would forbid countries from using capital controls, taxes or other macro-prudential measures to limit the destructive power of financial speculators.

However, we face a race against time—much of the TPP text has been agreed on. Will the banksters, Big Pharma, Big Oil, agribusiness, tobacco multinationals and the other usual suspects get away with this massive assault on democracy?  Will the public wake up to this threat and fight back, demanding either a fair deal or no deal?  The Doha Round of WTO expansion, the FTAA and other corporate attacks via “trade” agreements were successfully derailed when citizens around the world took action to hold their governments accountable. Certainly in an election year, we are well poised to turn around the TPP as well.

And, no, I don’t think Mitt Romney would be any better on the Trans-Pacific Partnership than Barack Obama is.  We Americans must look for redress to Congress and our constitutional system of checks and balances.

Click on NAFTA on Steroids for Lori Wallach’s complete article.

Click on Public Citizen Press Room for a report on the leaked provisions of the Trans-Pacific Partnership agreement.

Fun fact: Netherlands a top agricultural exporter

Double click map to enlarge

I was surprised to learn that the Netherlands is one of the world’s top exporters of agricultural products, behind the United States and France.  In some years, the Netherlands, one of the world’s smallest countries, has been ahead of France.  I also was surprised that France, the Netherlands, Germany and the United Kingdom are larger agricultural exporters than Canada and Australia.  Land area isn’t everything.

The Netherlands’ success was cited by Ha-Joon Chang in a debate with Jagdash Baghwati in The Economist over the importance of manufacturing.

Take the case of the Netherlands. Unbeknown to most people, it is world’s third largest agricultural exporter, despite having little land (it has the world’s fifth highest population density).  This has been possible because the Dutch have “industrialized” agriculture by, for example, deploying hydroponic agriculture (growing plants in water) that uses computer-controlled feeding of high-quality chemicals—something that would not have been possible if the Netherlands did not have some of the world’s most advanced chemical and electronics industries.

In contrast, despite being the world’s second most high-tech exporter (measured by the share of high-tech products in manufactured exports), the Philippines has only $2,000 per person income because it makes those products with other people’s technologies.

via Economist Debates.

But don’t jump to the conclusion, as some apparently have, that the world can easily feed itself using Dutch methods.   The Dutch export a lot of tulip bulbs, but not bulk foods such as wheat, rice or soybeans.

According to Wikipedia, the Dutch account for two-thirds of the world’s exports of fresh-cut plants, flowers and bulbs, a quarter of the world’s exports of tomatoes, a third of world exports of chilis and cucumbers, and 1/15th of world exports of apples.   In other words, its success in agricultural products is based on the high economic value of its crops rather than the size of its crops.

Click on Netherlands: Agriculture for the Wikipedia article.

Click on The Netherlands Agricultural Trade for a web site on the Dutch agricultural economy.

Hat tip to Marginal Revolution.