This WSJ article claims that free trade, in the form of the end of the MFA (the Multifiber Arrangement that has governed textile quotas for the last thirty years, which limited China to minimal textile exports), will hurt many countries such as Bangladesh. This is because China is so much more efficient than Bangladesh that once the limits on China's exports are removed, everyone will choose to buy from China. Experts predict that Bangladesh will lose half of its 1.8 million textile jobs, and the 15 million support jobs are likely to decline significantly as well. This has severe implications for stability:
The prospect of soaring unemployment is particularly worrisome to Bangladesh, a mostly Muslim nation of 140 million where lawlessness and Islamic conservatism are fast gaining ground. The country's vulnerability spotlights a debate gathering steam since the global trade talks in Cancun, Mexico, broke down in September: With heightened concern about poverty fueling sympathy for extremism, can the world afford unfettered free trade if it works to erode stability in marginalized states?
This sounds like a grave situation as a result of the 'unfettered' free trade that the anti-capitalism/anti-globalization folks are always complaining about. But then, a bit further down in the article, we find out...
...the U.S. maintains stiff duties on garments imported from Bangladesh. The reasons include protecting U.S. garment producers and pressuring governments to improve working conditions or favor American companies competing for contracts.
Last year, Bangladesh paid about the same amount of duty on its $2.4 billion of garment exports to the U.S. - about $330 million - as France paid on all of its $24 billion in exports to the U.S. Despite those tariffs, Bangladesh still ranks among the most-favored nations in terms of quotas while its exports remain competitive thanks to low wages.
The WTO generally urges its richer members to give duty-free and quota-free access to products originating in poorer countries such as Bangladesh. The U.S. has resisted lifting duties for Bangladesh, which has focused its lobbying efforts on changing that policy as the expiration of the MFA nears.
That's funny - I thought that free trade meant no quotas *or* tariffs. I expect better than this from the WSJ. Yes, we should do everything possible to enable Bangladesh to compete. This should start with the removal of the massive tariffs that we impose on their goods, not by implementing new or perpetuating current restrictions on imports from other countries.
Getting stuck in the Houston airport has given me yet another opportunity to appreciate my favorite thing about IAH - the carts that drive people from one gate to another don't have any sort of horn or beeping noise. Instead, the driver is constantly repeating "Excuse the Cart Please" as loudly or as quietly as he or she desires. I noticed today that they actually have a sticker on the cart with that phrase. I guess so that they'll remember what to say.
Last weekend, I discovered that in the Ottawa airport, every passenger is required to take every piece of electronics out of their bag, jacket, whatever. I remembered to take out the iPod and the phone, but forgot about the Palm and the camera. As I rolled my eyes, the friendly US government employee informed me that "since September 11, they do this everywhere." One of the unique pleasures of flying these days is listening to the TSA staff in every airport claim that their policies are in fact those of the nation. This guy didn't seem interested in my observation that none of the other 20 or so US airports nor any of the international airports from which I have flown to the US post-9/11 had a similar policy.
At SFO, meanwhile, I was recently surprised at the level of professionalism and knowledge of the security staff (they recommended that I take off my shoes, I said they didn't have any metal, and then, although they would not require me to take them off, as soon as I went through the metal detector, they immediately put me in the full search line - I objected ("if you want me to wear 37 pieces of flare, just set the minimum to 37") and they started quoting the web site telling me where to go to find the policy they were enforcing). I later discovered that in fact, SFO is one of two 'pilot programs' where airport security is actually outsourced. What a crazy idea...
Congress finally got around to passing an Energy Bill this week. It didn't address the problems that led to the blackout over the summer though, because that would have meant changes to the existing industry structure, and we all know how much incumbents, especially regulated monopoly incumbents, like changes.
There was an interesting WSJ article last week on the topic. It contained a few gems of logical reasoning:
FERC opponents in the South fear open markets would result in power being exported out of the region, which currently has a huge overcapacity in electricity generation. Draining off the surplus, they say, would lead to higher prices for local consumers. Moreover, the South has invested in power generation, transmission lines and gas-exploration infrastructure that other regions shun, in order to keep its costs low, according to coalition members from the region.
Now, it may be true that 'surpluses', to the extent that they can even existing in a normal market, result in lower prices. In the context of a regulated monopoly though, this makes no sense. Typically the electricity rates are set by dividing the utility's costs by the expected demand. So, if the demand for electricity is 10 units, and that costs the utility $10 to produce, the price would be $1/unit. But what if the utility is underutilized? In that case, consumers are paying for infrastructure that isn't being used. So if demand doubled to 20 units (by exporting the surplus energy elswhere, for example), the utility's costs would only rise to somewhere between $11 and $15. Hey, look at that - the per unit cost, now between $1.10 and $1.50 has fallen.
The only way that rates would rise for consumers would be if taxpayers are in fact footing the bill for the underutilized infrastructure. This is true in most of Europe (independent, in fact, of capacity utilization). People pay very little for the electricity they use, but taxpayers provide extensive subsidies to the state owned electricity firms. This situation is just as bad if not worse than the situation outlined above, because underpricing electricity will distort the market in favor of increased energy use - businesses that could not operate profitably due to their excessive energy requirements will suddenly become profitable, at the taxpayer's expense. Given the environmental problems with energy use, this is unambigiously bad.
Since the South refuses to export it's excess energy, this means that more plants will have to be built elsewhere in the country. Building a power plant is certainly not good for the environment, and building a plant when there's an existing plant that could just as easily supply the necesary electricity clearly makes no sense. But that's politics.