In the last week there have been only two really important stories. One, the Iraq elections, has received a little attention in the media and more in the blogosphere. The other has received almost no attention in the blogosphere and just a little in the professional news media. The latest meeting in the Doha round of the WTO trade negotations held in Hong Kong this week has ended just shy of collapse:
HONG KONG (AP) – World Trade Organization negotiators approved an agreement Sunday requiring wealthy nations to end farm export subsidies by 2013, a support system that poor nations say puts them at a competitive disadvantage.
The agreement, which also calls for modest reductions in other trade barriers, brings a binding treaty to further open up global trade one step closer.
All 149 WTO member nations and territories, from tiny Sierra Leone to the 25-nation European Union, endorsed the agreement after six days of hard talks that were accompanied by daily protests and occasional clashes between riot police and demonstrators outside.
But the deal fell far short of the ambitious deal that WTO negotiators had originally hoped to reach in Hong Kong: Agreeing on formulas for cutting farm and industrial tariffs and subsidies.
Toward that end, the accord set April 30 as a new deadline for working out the other cuts, which are required if the WTO is to formulate a new global trade treaty by the end of next year. No decision was made on a location and date for the next ministerial meeting.
The WTO delegates and the article go on to put lipstick on the pig but, essentially, all that this session of meetings has accomplished is an agreeement to kick the can down the road a little and meet again later at an unspecified location and date.
There were two main topics on the agenda: elimination of agricultural subsidies by the developed nations and intellectual property and nobody wants to give an inch on either subject.
The developing nations of the world see the elimination of agricultural subsidies by the developed nations as key to to pulling their people out of poverty. The representatives of these nations are deeply skeptical about the sincerity of the developed nations. Here’s how Jamaican columnist Dianne Abbott puts it:
Hypocrisy piles on hypocrisy in the WTO trade negotiations. For while the EU and America love to come events like the WTO talks in Hong Kong and lecture poor countries on the importance of free markets and how they have to open up their economies to Western products, the truth is that genuinely free markets do not exist.
In America the government pours billions of dollars into subsidising agriculture (America has doubled agricultural subsidies over the past decade), the coal industry, nuclear power and oil and gas firms. In the EU they also spend billions on agricultural subsidies. And most of this money does not even go to farmers but to food processors and manufacturers like Tate and Lyle and Nestle.
The purported concession by the United States to end cotton subsidies is a hollow promise: there’s little prospect that the proposal will make its way through Congress so it’s about as good as no concession at all. And the main interest of the United States in trade reform, creating robust international intellectual property law, isn’t on the radar at all.
And the EU has shown no inclination to budge on the subject of agricultural subsidies at all. This reflects the political realities within the Union: French farmers wield enormous power in French politics and France’s determination to retain the subsidy system could have repercussions on the future viability of the Union.
Not all agricultural subsidies take the form of direct cash payments: the systems of sugar quotas in place in the United States and the EU and the Cuban trade embargo are both subsidies to domestic producers as surely as a direct cash payment. These indirect subsidies have enormous staying power with powerful domestic political constituencies.
The developing nations and developed nations are just as far apart (if not more so) on the subject of intellectual property. I’ve written about his before pretty extensively. Many of the developing nations view intellectual property law as it applies to living organisms as a plot by the developed nations to defraud them out of their environmental heritage. And, of course, many non-Western nations e.g. China simply lack the basic institutions to implement and enforce a robust intellectual property regime. Without such institutions agreements aren’t worth the paper they’re printed on.
“Free trade” is clearly a Humpty-Dumpty expression and means exactly what we say it does, no more no less.
Well, so what? (I hear somebody say) The so what is that the United States is already behaving as though our major trading partners have robust intellectual property regimes or have the ability and intent to implement them in the near future. We’re removing the various subsidies we’ve had in place on manufactured goods and staking our economic future on services and intellectual property.
The catch in this is that our two fastest-growing major trading partners (China and India) are just abandoning a formal system of autarky, have an export-based growth strategy, and have shown little or no inclination to purchase services from us or honor the intellectual property rights of U. S. companies.
All of the foregoing leads me to Thomas Friedman’s appearance on the Don Imus program last Thursday touting his latest book on globalization, The World Is Flat. In this appearance Mr. Friedman gave his prescription for what young Americans should do to prepare for the world in which they will find themselves: cultivate a love of learning and a demonstrated ability to master new technologies and fields.
Now I happen to believe that a love of learning is an important factor in having a worthwhile life all of your life but the sad reality is that a love of learning and a demonstrated ability to master new technologies and fields is a ticket to Nowheresville. Employers in the United States are not complaining that American workers don’t have the ability to learn. They’re complaining that Americans don’t already have the specialized skills that they’re seeking and it’s manifest that employers don’t have the inclination (or possibly the time) to train American workers in these skills. Every year we import tens or hundreds of thousands of engineers and healthcare workers who, I have no doubt, have a love of learning and a demonstrated ability to master new technologies and fields but, more importantly to the prospective employers, they have the credentials to start working in highly specialized fields now.
Further, the evidence of the last five or so years suggests that the only industries in which wages are actually growing and there’s a reasonable amount of job security are government and its handmaiden industries, e.g. education and healthcare.
So my advice is somewhat different than Mr. Friedman’s. Love learning, yes. Learn to master new technologies and fields, yes. But above all get a credential in a field that has the ability to protect itself from competition.
That doesn’t sound a great deal like free trade but it’s the world we’re actually living in.
UPDATE: Tyler Cowen reminds us of his skepticism on the effectiveness of elminating agricultural subsidies as a means of reducing poverty in developing nations.
PGL of Angry Bear appears to be more sanguine than I am about the likelihood of reform in agricultural subsidies actually taking place.
Actually – I have my doubts that it will pass as well. My point was simply that the CNN story that this would solve African poverty is simply put – stupid.
I’d say that that you’re about right but that the industry doesn’t have to have protection from outsourcing. No industry has that, including my own (I’m a network administrator).
Start making money, try to climb up the greasy pole in your own field and make sure you have an exit strategy in something countercyclical if your industry is “targeted” by somebody else’s economics ministry as an area they wouldn’t mind subsidizing and dominating at the cost of holding back the entire economy of that nation.
The truth is that we’re pretty much peaking in terms of the great wave of new workers coming online to the PRC. It’s about as bad as it’s ever going to get. Wage inflation internal to the PRC demonstrates that.
Ten years from now, it’s not going to be as bad for workers here because the number of workers coming online globally is going to drop as the PRC greys at a frightening rate. Individual countries coming into the global economy will never match the twin peaks of India and the PRC because no other configuration of nations comes close to 2.3 billion people all coming at once and depressing labor wages by increasing supply.
Actually, TM Lutas, my gripe is the various economic distortions being caused by protecting some workers. I believe that, if the protections were removed, most salaries in this country would fall. As it is the government is picking winners and losers and the patent unfairness of this bugs me.
The industry I worked in when I got married 33 years ago (minus 2 days) no longer exists. The industry I work in now didn’t exist back then. I originally got hired into it based on general computer skills, but the various companies I have worked for have indeed helped me develop skills, and my most recent contract payed twice what I entered the field at six years ago, plus some nifty perks.