Tag Archives: trade

April 2025 in Review

Most frightening and/or depressing story: Maybe an irreversible methane tipping point is happening. This could be the scariest thing out there short of nuclear war.

Most hopeful story: 3-30-300 is a nice, simple idea. “you can see 3 trees from your window, your neighborhood has 30% tree canopy cover, and you are within 300 m of a half-hectare park.” Sure, you have to figure out some details and make some sustained effort over time to implement simple ideas. Still, not rocket science. Combined with the “15 minute city”, this is a pretty good urban planning philosophy that should be communicable.

Most interesting story, that was not particularly frightening or hopeful, or perhaps was a mixture of both: I made what I would consider a “common sense” trade policy proposal. “I generally support…free trade. But if we are going to trade freely, we need a safety net for people who are hurt. We could do this with generous unemployment benefits and retraining programs. We could help people relocate to places with jobs. We could provide much better communication and transportation infrastructure allowing them to commute regionally to places with jobs. We could educate their children so they are prepared for the jobs of tomorrow. We could institute a value added tax on our productive, growing economy and use it to provide services or cash to workers. We could invest even more in research and development to make our economy even more productive and growing. We could invest in neighboring countries to help them be more productive and growing, import cheap stuff from them, and reduce some of the migration pressure on our borders.”

https://homertree.com/blog/the-3-30-300-rule/

facts and figures on U.S. manufacturing, jobs, and trade with China

This blog post summarizes a famous paper from 2016 called The China Shock. The post points out that a number of things in paper were misunderstood by general audiences, in some cases because it was politically convenient to do so.

Now, before I get into it I will say that I have some personal perspective on this. I come from a former manufacturing town in Appalachia and many of my relatives were employed in the furniture and textile industry there at one time. By the 1990s, these factories were closing as jobs were moving to Asia, where labor costs were much lower. The economic pain and attendant social problems are very real, and I have seen them firsthand. So some communities were in fact hit very hard. The U.S. government had a “Trade Adjustment Assistance” program that was supposed to retrain people, but it was just too little, too late and not all effective. There has been major brain drain with the younger generations leaving town for better opportunities, and the people left behind are in a very destitute situation. So some groups of people, in some locations, were very badly hurt by free trade, even if there is an argument to make that the country as a whole benefitted from low-cost goods and moving to higher-value-added industries.

Anyway, the facts and figures based on this article:

  • The word “shock” in economics means something different than what it means it newspaper headlines. It means an unforeseen or outside event. It doesn’t necessarily have to be large or “shocking” in an emotional sense.
  • The original paper estimated a loss of about a million manufacturing jobs over about a decade after China joined the WTO in 2001. This should be put in the context that the number of U.S. “goods producing jobs” has held steady at about 20 million while service sector jobs have boomed by around 100 million over the past 50 years. Although another chart shows a loss of about 8 million “manufacturing jobs” over roughly this same time, so “goods producing” and “manufacturing” must have different definitions. Either way, manufacturing certainly declined in relative importance to the economy and in the absolute number of jobs represented. But outsourcing to China specifically is only part of this. (I would note however that Chinese businesses themselves are outsourcing to Southeast Asia, and I don’t know how that gets accounted for in these numbers.)
  • Despite the loss of U.S. manufacturing jobs, U.S. manufacturing output has not declined over this time period. It has stayed approximately constant since 2000, dipping during recessions and then bouncing back after each recession. The reason output can stay constant while jobs decrease is increased productivity due to automation.
  • Bottom line: The original paper concluded that competition from China explained about 12% of overall manufacturing job losses during the decade after 2001, and manufacturing job losses were about 1.5% of jobs in the overall economy. Overall job gains were greater than job losses during this period, although some individual workers, towns, and regions were more heavily impacted than others (like my relatives in Appalachia).

I generally support more or less free trade. But if we are going to trade freely, we need a safety net for people who are hurt. We could do this with generous unemployment benefits and retraining programs. We could help people relocate to places with jobs. We could provide much better communication and transportation infrastructure allowing them to commute regionally to places with jobs. We could educate their children so they are prepared for the jobs of tomorrow. We could institute a value added tax on our productive, growing economy and use it to provide services or cash to workers. We could invest even more in research and development to make our economy even more productive and growing. We could invest in neighboring countries to help them be more productive and growing, import cheap stuff from them, and reduce some of the migration pressure on our borders. We could refer to these as “common sense” policies.

ports, shipping lanes, and grand geopolitical strategy?

This article says Panama, Greenland, South Africa, and even Somalia are all important to sea-based trade and naval control of sea lanes in the event of war. I don’t doubt this, but this also feels like a grand strategy cooked up by somebody’s armchair general uncle just reading stuff on the internet and looking at Google Maps. I also found this interesting:

While the United States dominates global maritime security, there is a huge disparity in the other direction when it comes to influence over maritime trade. Unlike the PRC, which controls around 12.6 percent of global port throughput through COSCO and CMP, the United States has no state-backed firms among the world’s leading terminal operators. In terms of global port influence, the United States would likely rank behind not only the PRC but also the United Arab Emirates (DP World), France (CMA CGM/Terminal Link), and Singapore (PSA International).

U.S. ports and port operations seem to be way behind the leading edge elsewhere in the world. So one thing we could do is focus on learning how to build and operate modern, highly automated, large-scale ports. This would sound like part of a sound “industrial strategy” to me. And it makes sense that we wouldn’t want China or any other country controlling trade and sea lanes to the detriment of free trade. We shouldn’t be trying to do this either. It would make sense to me to focus on international agreements to keep access to ports and shipping lanes open and fair to all countries.

April 2024

Most frightening and/or depressing story: Peter Turchin’s description of a “wealth pump” leading to stagnation and political instability seems to fit the United States pretty well at this moment. The IMF shows that global productivity has been slowing since the US-caused financial crisis in 2008. In Turchin’s model, our November election will be a struggle between elites and counter-elites who both represent the wealthy and powerful. That sounds about right, but I still say it is a struggle between competence and incompetence, and competence is a minimum thing we need to survive in a dangerous world. In early April I thought things were trending painfully slowly, but clearly, in Biden’s direction. As I write this in early May I am no longer convinced of that.

Most hopeful story: Some tweaks to U.S. trade policy might be able to significantly ease the “border crisis” and create a broad political coalition of bigots, big business, and people who buy things in stores.

Most interesting story, that was not particularly frightening or hopeful, or perhaps was a mixture of both: If the singularity is in fact near, our worries about a productivity slow down are almost over, and our new worries will be about boredom in our new lives of leisure. It doesn’t seem like a good idea to count on this happening in the very near future, and therefore stop trying to solve the problems we have at the moment. This would be one of those “nice to have” problems. If it does in fact materialize, the places to be will be the ones that manage to shut down Peter Turchin’s wealth pump and spread the newfound wealth, rather than the places where a chosen few live god-like existences while leaving the masses in squalor.

free trade vs. migration

“Free trade” seems to have gone out of fashion at the moment. But this article in The Conversation makes the point that easing trade restrictions with countries sending large numbers of migrants to the U.S. could help. And not just at the margins – the study this article says that reducing restrictions on just textiles from just six countries could potentially reduce migration to the U.S. by two-thirds. This seems like a political win-win to me – there is something in it for the anti-immigration racists, the pro-cheap-labor big business interests, and the average Joes who just want cheap stuff. This worked brilliantly when we were trying to support our Cold War allies in Japan, Korea, and Taiwan back when they were developing countries. It worked when we were trying to rebuild Western Europe. It can work again.

a ship being built

It’s fun to watch construction cameras in fast forward. This is a ship being built at Philly Shipyard Inc. (and by way, you can argue whether it is lazy to use the abbreviation for Philadelphia and whether “ship yard” should be one word or two, but this is the actual name of the company.

Youtube

I learned from this (paywalled) Philadelphia Inquirer article that U.S. shipyards are not competitive in the market for international oceangoing cargo vessels. However, there is something called the Jones Act that requires domestic trade to be done on U.S.-built and U.S.-crewed ships. So this includes trade between the U.S. mainland, Hawaii, and Guam for example. This seems a bit inefficient to me, but I can also see an argument to maintain the ability to build technology domestically with obvious military use. The shipyard also has military and government contracts which, and so sorry I just can’t resist the terrible pun, keep it afloat. I am a dad after all, and I have to keep my dad jokes at the ready.

IMD World Competitiveness Ranking

The United States fell from 3rd to 10th in the IMD World Competitiveness Ranking this year, after being 1st just a couple years ago. Asian tigers (Singapore, Hong Kong) and Scandinavia/Northern Europe (Denmark, Switzerland, Netherlands, Sweden, Norway) make up most of the top 10, when Canada and UAE making the cut, and Taiwan just edged out at #11.

For the second year in a row, the USA failed to fight back having been toppled from its number one spot last year by Singapore, and coming in at 10th (3rd in 2019). Trade wars have damaged both China and the USA’s economies, reversing their positive growth trajectories. China this year dropped to 20th position from 14th last year.

IMD

City-states tend to do well, so my quick reaction is that it might make more sense to compare Singapore and Hong Kong to, say, the New York City or Toronto metro areas rather than the U.S. and Canada as a whole.

Belt and Road

The Council on Foreign Relations has a primer on China’s Belt and Road initiative here.

Xi’s vision included creating a vast network of railways, energy pipelines, highways, and streamlined border crossings, both westward—through the mountainous former Soviet republics—and southward, to Pakistan, India, and the rest of Southeast Asia. Such a network would expand the international use of Chinese currency, the renminbi, while new infrastructure could “break the bottleneck in Asian connectivity,” according to Xi. (The Asian Development Bank estimates that the region faces a yearly infrastructure financing shortfall of nearly $800 billion.) In addition to physical infrastructure, China plans to build fifty special economic zones, modeled after the Shenzhen Special Economic Zone, which China launched in 1980 during its economic reforms under leader Deng Xiaoping.

Xi subsequently announced plans for the 21st Century Maritime Silk Road at the 2013 summit of the Association of Southeast Asian Nations (ASEAN) in Indonesia. To accommodate expanding maritime trade traffic, China would invest in port development along the Indian Ocean, from Southeast Asia all the way to East Africa.