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December 08, 2007

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Dani Rodrik

Ricardo makes a curious argument: An FTA is good foreign policy for the U.S. Hillary opposes an FTA with Colombia. Therefore Hillary is a protectionist. This sounds like a non sequitur to me.

David Rosnick

Of course, we may also ask if by putting out a ridiculously flawed "study" of fraud in the 2004 recall referendum might be less an interesting academic exercise than an excuse to undermine the will of the people in a democracy.

Just sayin'

Peter

Hausmann conveniently ignores the unfolding scandal linking Colombian president Uribe to the paramilitaries. The perception that the government of Colombia is linked to terrorism and repression (including of labor organizers) is a major factor in the congressional opposition to a trade agreement. Knowing Hausmann's politics regarding the various Andean regimes, I am not surprised he thinks Uribe is a fighter for human rights, while Chavez and Morales are forces of evil. Nevertheless, it is disingenuous to criticize the congressional Democrats without even mentioning their arguments. Would he do this with an economist he disagrees with?

To put it very simply, Ricardo: why do you suppose the trade agreement with Peru sailed through Congress, while the Colombia agreement has stalled?

Robert A. Senser

Hausmann would be wise to check the Peru (and other) U.S. bilateral trade agreements for the generous rights acquired under it by foreign investors and intellectual property owners, including pharmaceutical companies. To use Bhagwati imagery, it's the U.S. and not just the WTO that is collecting royalties from the drug companies.

Robert A. Senser

Correction:
Hausmann would be wise to check the Peru (and other) U.S. bilateral trade agreements for the generous rights acquired under it by foreign investors and intellectual property owners, including pharmaceutical companies. To use Bhagwati imagery, it's the U.S. and not just the WTO that is collecting royalties FOR the drug companies.

david

Wow. Embarrassingly bad account of Colombia. And not a mention of labor. This kind of crap is a sign of how weak the arguments are for "free trade", but that's not enough to be happy people are writing it.

dale

David's irony quotes around "free trade" make one of the points I want to make. Why keep calling these trade regimes "free trade"?

And if Chavez is a totalitarian that word has lost its meaning.

Charlie

I have been trying hard to understand dani's nuanced trade arguments. I intend to read his book this xmas break. But until then, I am wondering how these arguments go to a unilateral dropping of protections against small countries.

He has spent a lot of time arguing that we shouldn't make other countries drop trade barriers or stop industrial subsidies, but not much time arguing why the US should keep holding onto trade barriers.

So I ask, for what reasons should US maintain tariffs on other small countries? If the argument has to do with environmental or labor standards, is that for US benefit or the small countries benefit?

the mexican

Hey Ricardo: has the failure of NAFTA for the rural poor of Mexico changed at all your faith in markets? AND Do you believe there is good terrorism and bad terrorism, good autocrats and bad autocrats, good populism and bad populism? --because Uribe and re-born Garcia are the good guys, while Chavez and Evo are evil, right?

Per Kurowski

Let me just remind you that there are some who argue that the free trade agreement with Colombia should be opposed because it is not free enough. These people believe that it is only when drugs could be freely traded formally that a country like Colombia could be freed from its current strcutural captivity.

Perhaps a Hillary Clinton would be closer to this free trade agreement than many other nominal free traders?

In my mind I can see many Colombians happily trading all the current freedoms promised to them under the current proposal for the trade freedom that could really liberate them.

But you see this will probably not happen since once again protectionism, in this occasion expressed through the criminalization of drugs, just provides so much profit opportunities, especially of course when 90% of the profits are located in the US.

Per Kurowski

If I was a small country I would consider dropping all protectionism unilaterally… you see having to do it through trade agreements just makes it so much more expensive.

Kevin Fandl

It is ironic that we have a situation in which Colombia broadly supports the push for the FTA (TLC) with the U.S. and easily passed it through their own Congress, but the U.S. has stalled it, voicing concerns about labor rights, among other issues, when in fact the agreement provides much fewer benefits to Colombia than to U.S. businesses. I did a cursory analysis of these issues in a piece on the agreement itself (http://www.accessmylibrary.com/coms2/summary_0286-32534267_ITM).

I think that the question that we need to ask is whether this FTA is going to be beneficial for economic development in Colombia without negatively affecting the U.S. (Pareto Optimum, if possible). In my opinion, Colombia and similarly situated developing countries will benefit more from multilateral negotiations where they have an opportunity to devote more technical resources to balanced negotiations. Bilateral agreements put developing countries in a defensive position in which they are often threatened with the loss of benefits (in this case the end of the ATPA) and potential political costs (the Colombian civil war support via Plan Colombia/ACI here) if they do not concede to the demnds of the other negotiating party. Good marketing and poor country-level review may convinct the developing country that it is necessary, and it may very well be in the short-run, but conceding to such demands may produce more long-term damage in terms of economic growth and development. Just my two cents.

Kevin Fandl
Adjunct Professor of Law
American University

Ricardo Hausmann

Dani: I am not saying that I understand what motivates Hillary’s position on Colombia. I do not know if it is protectionism or pandering to the AFL-CIO on an issue that is relatively low on other people’s radar screen. But I do say that it cannot be anything like the kind of welfare calculation you have in mind. Hillary likes to quote Paul Samuelson who argues that it is possible for free trade to lower the incomes of the lesser skilled workers in the rich country. But this is a particularly bad argument to use in the case of Colombia. It is unclear which products would displace US employment: oil, coal, coffee, flowers, garments, cement? Secondly, why vote in favor of giving preferential access through the Andean Trade Promotion and Drug Eradication Act while voting against a free trade agreement that gives relatively more access to US firms into the Colombian market? Third, does it make sense to affect complex bilateral relations through a generalized standstill on trade agreements? Would that not have to be discussed in the context of the potential damage to the bilateral relationships that affect each country? Does it make sense to use the standstill in cases like Panama, South Korea and Colombia after governments have invested significant political capital over several years in order to negotiate an agreement? Or should the standstill be applied only on new negotiations?

Peter, David: The argument about the murder of trade union leaders is truly disingenuous. The sad story is that there have been too many murders in Colombia: judges, journalists, politicians, actors, trade union leaders. The murder of trade union leaders has not been either recent or associated with the government and has not been one sided. It is a tragedy, but it has not been caused, justified or condoned by Colombian legal institutions and any elected government the country has had in the past 20 years.

The paramilitary issue is also a complex one. While the majority of Colombians live in large cities, there are ample regions of the country with scant state presence where people are forced to choose between rather unpalatable alternatives, not unlike Petreaus’s predicament in Iraq today. The point is that politicians that cooperated with the paramilitary are in prison. More importantly, why vote to give billions of dollars to the Colombian military if they are in the business of killing trade union leaders?

David Rosnik: I take it that you try to disqualify me as a person instead of dealing with my arguments. If anybody is interested in reading it, they will find it here: http://ksghome.harvard.edu/~rhausma/new/blackswan03.pdf and http://ksghome.harvard.edu/~rhausma/new/CarterResponse.pdf

Dale: There are many reasons why I think that Chavez has a totalitarian agenda. Just read the constitutional reforms he tried to impose on Venezuela and that the student movement was able to stop. If you want to read documentation of why I think the word is appropriate you can ceck my wife’s book: http://www.anajuliajatar.com/apartheid/index.html

terence

Ricardo:

The ‘student movement’ was able to stop Chavez’s - admitted undesirable - constitutional programme because it was put to an *open referendum to be ratified*. That hardly sounds totalitarian to me.

You write: “The murder of trade union leaders has not been either recent or associated with the government and has not been one sided. It is a tragedy, but it has not been caused, justified or condoned by Colombian legal institutions and any elected government the country has had in the past 20 years.”

*This is simply untrue*

1. Unionist murders are not a product of the distant past. As is illustrated by Harold Meyerson in the Washington Post:

“In 2004, according to the International Confederation of Free Trade Unions, which produces an annual tally of people killed because of their union activities, 145 unionists around the world were murdered. Of these, 99 were killed in Colombia. Colombia's labor college, the Escuela Nacional Sindical (ENS), came up with a slightly lower count: 94. Either way, that's about two-thirds of the entire planet's casualty count. And the 2004 death count was a bit on the light side by Colombian standards. In 2002 the number of murdered Colombian unionists, according to the ENS, was 184; in 2003 it was 91. Last year the figure dropped to a mere 70, but in the first three months of this year, it surged to 29.”

2. The murder of trade unionsists has been one-sided – from the right. Harold Meyerson again:
“According to an ENS study, however, the killers of unionists -- in those instances when the police have been able to identify the killers -- tend overwhelmingly to come from the paramilitaries, private armies in the service of drug lords, large landowners and the occasional factory.”

3. The murder of trade unionists has been tacitly condoned by Columbian governments and legal institutions. Once again, from Meyerson:

“One reason for this epidemic of homicides is that killing a unionist is a punishment-free crime. Of the roughly 3,000 murders of unionists between 1986 and 2002, according to a study being released tomorrow by the AFL-CIO's Solidarity Center, only 376 were even investigated by the government, and the number of guilty verdicts returned in those cases totaled five. For the statistically minded among you, that's a conviction rate of one-sixth of 1 percent. Kill a unionist in Colombia and you have about as much chance of doing time as you do of being hit by lightning.”

http://www.washingtonpost.com/wp-dyn/content/article/2006/06/13/AR2006061301497.html

Finally, what ever else it may be Columbia is hardly the front line of the War on Terror. The FARC are most certainly odious but they are hardly Islamists.

I’m sorry Ricardo, I have read and enjoyed much of your work, but your portrayal of Venezuela as some sort of totalitarian country as opposed to Columbia where the current rulers are hard done by defenders of human rights is simply wrong.

I write this as someone who is not a fan of Chavez and even willing to believe that a trade deal with Columbia could be a good thing. But also as someone who sees little sense whatsoever in what you have written above.

Marco

Reading some of the comments written so far, one can see how this trade debate falls easy prey to politicization. However, although I could try to controvert some of these comments in my position as a Colombian, I just wanted to point out a bigger picture issue that Professor Hausmann’s posting has raised: the camouflaged –and often partial- use of theory by policymakers to support their political agendas.

I made the same point last week in a presentation I did on a paper by John Romalis on the effects of NAFTA on welfare for Professor Rodrik’s trade class. Quite often these types of paper’s conclusions are used by –what I’ve called- pseudo-policymakers (or should I say pseudo-economists) to support their undercover agenda. In the Romalis case, the paper could be used by protectionists to argue that NAFTA didn’t bring about welfare increases.

What is the alternative? I don’t know. But certainly economists have to be vigilant about policymakers when they appear to be using the formers’ arguments. Otherwise, economic theory –instead of shedding light to the discussion- can risk coming out heavily distorted and discredited.

David Rosnick

Ricardo--

You were the one posting about motivations. I'm pointing out you're certainly vulnerable on the same.

And yes, I have *personally* addressed your "fraud" arguments already.

http://www.cepr.net/documents/publications/venezuela_2004_09.pdf

You failed to present a theory that holds water. And your math is cute, but essentially meaningless.

corvad

this is just to support, strongly, David Rosnik's comments and response to Ricardo Hausmann. Hausmann, can you really not tell the difference between Chavez and totalitarianism? What does someone have to do to earn the moniker of democracy supporter, hold elections over and over again and the first time one loses, accept the results and congratulate the opposition? fyi, Chavez unfortunate attempt to eliminate term limits was still within the context of democratic review. Was FDR a totalitarian for running, and winning, 4 times?

corvad

and thank you terence as well.

terence

"Was FDR a totalitarian for running, and winning, 4 times?"

Here in New Zealand, I might add, we have no term limits whatsoever and - last I checked (just looked out the window) - have not yet lapsed into Orwellian existence.

For what it's worth I'm glad Chavez's attempt to remove term limits was defeated and uncomfortable with his authoritarian streak. But I also think it important to criticse him only for the misdeeds he has has committed and not imagined transgressions.

David Rosnick, this is probably the only chance I will get to say this to you, so: I thought your Desa paper on 25 Years of Diminished Progress (with Dean Baker and Mark Weisbrot) was great. Thank you!

Gallagher

Ricardo your article in Science is spot but your stance on Colombia is problematic. You say that "The question is not whether the free trade agreement is good or bad for Colombia: that is the sovereign decision of Colombia and should not form part of Hillary’s decision."

Why should there NOT be a debate on the utility of FTAs in developing countries by US candidates? If you look at any study on the impacts of an FTA on the US economy they are miniscule. All the deals on the table will bring less than 1/10th of one percent one time gains to the US. NAFTA, the biggest FTA we have, only brought 0.8 percent. So, no deal beyond DOHA matters for us that much. It is our stated goal of "Competitive Liberalization" to pick off small countries who can't say no so we can surround the countries that matter in the WTO.

So, what else is there to talk about regarding the impacts but the other side of the coin? A good candidate should do this because of 1) a genuine interest in economic development; 2) an interest in making sure countries grow so they can buy our products.

The reasons why FTAs are not great are long. Start with the 2005 World Bank Global Economic PRospects--the costs of IPRs are high, there is no independent and statistically significant relationship between signing an FTA and attracting FDI, investment rules choke, the list goes on--and that's just the center-right perspective! The Bhagwati/Panagarya's of the world argue that its bad economics in a pure sense because of trade diversion and the left echoes the World Bank and adds human rights and labor concerns.

Finally, is it really Colombia's sovereign decision? The assymetric bargaining power in an FTA with the US is striking--A 13 trillion dollar economy negotiating with an economy not much bigger than Rhode Island's. That, in addition to the geopolitical/ not-trade issues involved gave Colombia and other very little wiggle room.

Doesn't your Science article imply that nations will need some real policy space to jump into other "product spaces". If you looked at the text of any FTAs such paths would be a fat chance.

Per Kurowski

Terence holds “I also think it important to criticse [chavez] only for the misdeeds he has has committed and not imagined transgressions.”

Absolutely! There is more than enough of that to go around, like for a starter spreading hate and distributing 100.000 Kalashnikovs to his militia. Also, selling gasoline domestically for 8 cents a gallon and not covering even distribution costs and thereby taking about 10% of GDP away from the poorest and given it to those who sit in the car lanes, could also be classified as a quite curious socialist experiment… even for the 21st Century.

My Venezuela is a world war one battlefield. Two deeply dug in trenches with about a quarter of the Venezuelans each, another quarter of the citizens running exposed in no mans land, and the final quarter of its people wandering around bomb shocked and oblivious to all in the neighboring woods.

I pray to God we will become a nation again.

Divisionism is the true weapon of mass-destruction! And it also behooves you not to forget that!

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