Smoke in the (Tariff) Water

Although more of a "globalisation" that "globalisation and the environment" blog post the question has to be asked - did these authors mean to title this paper after the well known British hard rock group Deep Purple's track that goes my the name "smoke on the water". The introduction to this song is prety much the first thing anyone every learns on the guitar.

If so, calling a recent World Economy paper "Smoke IN the water" represents a fundamental mistake.

However, they almost make up for it with a footnote that says "Nevertheless, the views expressed here are those of the authors and do not necessarily reflect those of Deep Purple."

Other than that it reprents a good effort although still not close to a recent paper in the AER called "Panic on the Streets of London" by Steve Machin and co-authors named after the well known Smiths track of exactly the SAME name.

Smoke in the (Tariff) Water

Liliana Foletti1, Marco Fugazza2, Alessandro Nicita2
and Marcelo Olarreaga3

1. INTRODUCTION

DURING the Great Depression, protectionism spread rapidly. By 1933,
world trade was only a third of what it was in 1929. Part of this slump had
to do with the decline in economic activity, but several studies estimate the contributionof protectionist forces somewhere between 25 and 50 per cent of the
total decline in world trade.1 The protectionist response started in the United
States with the Smoot–Hawley Tariff Act passed in June 1930, which raised
tariffs by 23 per cent according to Irwin (1998). Many countries retaliated.
According to Madsen (2001), the world average effective tariff (the ratio of the
value of import duties and import value) increased from 9 per cent in 1929 to 20
per cent by 1933, with values as high as 30 per cent in Germany and the UK

.

Man Friday post - The First Globalization Debate

Any academic paper that can link globalisation and a riveting read is good by me. Having read the first book last year sometime I admit to not putting the book in the context of globalisation and cannot recall how the book links to the gains from international trade even though I teach this stuff. I now feel that I must reread the book with this new found knowledge.

A great idea for a paper. See what I did with the title of this post?

"The First Globalization Debate"

Economic Research Initiatives at Duke (ERID) Working Paper No. 88

CRAUFURD GOODWIN, Duke University - Department of Economics

Email: GOODWIN@ECON.DUKE.EDU

Early in the 18th century, before the birth of political economy as a discipline, two of the earliest novels in the English language were published: Robinson Crusoe (1719) by writer and economic entrepreneur Daniel Defoe, and Gulliver’s Travels (1726) by the cleric and political adviser Jonathan Swift. The first was widely perceived as an entertaining adventure story, the latter as a pioneering work of science fiction. Both contain indirect comment on the foreign policy of Britain at the time. When viewed from the perspective of the modern economist, however, the works appear to be expressions of opposing positions on the desirability of a nation pursuing integration within a world economy. Crusoe demonstrated the gains from international trade and colonization and even the attendant social and political benefits. He explores the instinct to trade overseas, stages of growth, and the need for careful cost-benefit calculations. By contrast Swift warned of the complex entanglements that would arise from globalization, especially with foreign leaders who operated from theory and models rather than common sense. He makes a case for economic autarky.

.

"Glocalization"

For some strange reason I like to document new "econspeak" words and this is a modern classic (of course it is probably not new to those better read).

Luckily the source of this website explains its derivation (just in case you haven't worked it out yet).

IMO this small example explains the difference between academics in Economics departments and those in Business Schools.

Reverse Innovation: Made in China - For China [China Observer]

“Glocalization” vs. “Reverse Innovation”

Glocalization is a combination of “globalization” and “localization” and is the traditional approach adopted by multinationals. Initially for US companies “going global” meant developing products in the US and localizing them for European and Japanese markets where local consumers have similar purchasing power. Govindarajan argues that the consumer markets of emerging economies like China and India are fundamentally different from those of developed countries. He questions “How can you take a product that was originally designed for a US consumer with a median income of $50,000 and profitably adapt it for a middle-class consumer in China whose earnings are significantly less?”

.

"Mother Nature doesn't do Bailouts"

Thomas Friedman is good. His book "flat earth" is a really excellent read.

This column gets to the point. Never a truer word....

We have created a system for growth that depended on our building more and more stores to sell more and more stuff made in more and more factories in China, powered by more and more coal that would cause more and more climate change but earn China more and more dollars to buy more and more U.S. T-bills so America would have more and more money to build more and more stores and sell more and more stuff that would employ more and more Chinese ...

We can’t do this anymore.

Here is the article in full.

The Inflection Is Near? [NY Times]

Sometimes the satirical newspaper The Onion is so right on, I can’t resist quoting from it. Consider this faux article from June 2005 about America’s addiction to Chinese exports:

FENGHUA, China — Chen Hsien, an employee of Fenghua Ningbo Plastic Works Ltd., a plastics factory that manufactures lightweight household items for Western markets, expressed his disbelief Monday over the “sheer amount of [garbage] Americans will buy. Often, when we’re assigned a new order for, say, ‘salad shooters,’ I will say to myself, ‘There’s no way that anyone will ever buy these.’ ... One month later, we will receive an order for the same product, but three times the quantity. How can anyone have a need for such useless [garbage]? I hear that Americans can buy anything they want, and I believe it, judging from the things I’ve made for them,” Chen said. “And I also hear that, when they no longer want an item, they simply throw it away. So wasteful and contemptible.”


Let’s today step out of the normal boundaries of analysis of our economic crisis and ask a radical question: What if the crisis of 2008 represents something much more fundamental than a deep recession? What if it’s telling us that the whole growth model we created over the last 50 years is simply unsustainable economically and ecologically and that 2008 was when we hit the wall — when Mother Nature and the market both said: “No more.”

We have created a system for growth that depended on our building more and more stores to sell more and more stuff made in more and more factories in China, powered by more and more coal that would cause more and more climate change but earn China more and more dollars to buy more and more U.S. T-bills so America would have more and more money to build more and more stores and sell more and more stuff that would employ more and more Chinese ...

We can’t do this anymore.

“We created a way of raising standards of living that we can’t possibly pass on to our children,” said Joe Romm, a physicist and climate expert who writes the indispensable blog climateprogress.org. We have been getting rich by depleting all our natural stocks — water, hydrocarbons, forests, rivers, fish and arable land — and not by generating renewable flows.

“You can get this burst of wealth that we have created from this rapacious behavior,” added Romm. “But it has to collapse, unless adults stand up and say, ‘This is a Ponzi scheme. We have not generated real wealth, and we are destroying a livable climate ...’ Real wealth is something you can pass on in a way that others can enjoy.”

Over a billion people today suffer from water scarcity; deforestation in the tropics destroys an area the size of Greece every year — more than 25 million acres; more than half of the world’s fisheries are over-fished or fished at their limit.

“Just as a few lonely economists warned us we were living beyond our financial means and overdrawing our financial assets, scientists are warning us that we’re living beyond our ecological means and overdrawing our natural assets,” argues Glenn Prickett, senior vice president at Conservation International. But, he cautioned, as environmentalists have pointed out: “Mother Nature doesn’t do bailouts.”

One of those who has been warning me of this for a long time is Paul Gilding, the Australian environmental business expert. He has a name for this moment — when both Mother Nature and Father Greed have hit the wall at once — “The Great Disruption.”

“We are taking a system operating past its capacity and driving it faster and harder,” he wrote me. “No matter how wonderful the system is, the laws of physics and biology still apply.” We must have growth, but we must grow in a different way. For starters, economies need to transition to the concept of net-zero, whereby buildings, cars, factories and homes are designed not only to generate as much energy as they use but to be infinitely recyclable in as many parts as possible. Let’s grow by creating flows rather than plundering more stocks.

Gilding says he’s actually an optimist. So am I. People are already using this economic slowdown to retool and reorient economies. Germany, Britain, China and the U.S. have all used stimulus bills to make huge new investments in clean power. South Korea’s new national paradigm for development is called: “Low carbon, green growth.” Who knew? People are realizing we need more than incremental changes — and we’re seeing the first stirrings of growth in smarter, more efficient, more responsible ways.

In the meantime, says Gilding, take notes: “When we look back, 2008 will be a momentous year in human history. Our children and grandchildren will ask us, ‘What was it like? What were you doing when it started to fall apart? What did you think? What did you do?’ Often in the middle of something momentous, we can’t see its significance. But for me there is no doubt: 2008 will be the marker — the year when ‘The Great Disruption’ began.”

Does trade openness improve environmental quality?

A perfect "globalisation and the environment" paper that I need to read. Another one on the ever growing list.

The results appear plausible and the methods appropriate.

Does trade openness improve environmental quality?

Shunsuke Managia, Akira Hibikic and Tetsuya Tsurumia

Received 8 February 2008.
Available online 26 June 2009.

Abstract

The literature on trade openness, economic development, and the environment is largely inconclusive about the environmental consequences of trade. This study treats trade and income as endogenous and estimates the overall impact of trade openness on environmental quality using the instrumental variables technique. We find that whether or not trade has a beneficial effect on the environment varies depending on the pollutant and the country. Trade is found to benefit the environment in OECD countries. It has detrimental effects, however, on sulfur dioxide (SO2) and carbon dioxide (CO2) emissions in non-OECD countries, although it does lower biochemical oxygen demand (BOD) emissions in these countries. We also find the impact is large in the long term, after the dynamic adjustment process, although it is small in the short term.

Keywords: Trade openness; Composition effect; Scale effect; Technique effect; Environment; Comparative advantage; Environmental regulations effect

JEL classification codes: F18; O13; L60; L50

US should pay for carbon content

The blindingly obvious come back to the recent US regulation is summarised by the headline of this blog post. This is no surprise and shows why troubled negotiations are ahead.

It comes down to the simple question of whether the consumer or producer pays for the pollution caused by the production. If American consumers did not demand the product the pollution would not exist. Then we have the fact that a lot of the production in China is produced by US owned firms.

The US regulatory framework is flawed.

U.S. Should Pay for Carbon Content of Imported Goods: Locke [PlanetArk]

SHANGHAI - To address the serious threat of global warming, Americans should be required to "pay" for the carbon content of goods they consume from countries around the world, a top U.S. official said on Friday.

"It's important that those who consume the products being made all around the world to the benefit of America -- and it's our own consumption activity that's causing the emission of greenhouse gases, then quite frankly Americans need to pay for that," Commerce Secretary Gary Locke told the American Chamber of Commerce in Shanghai.

Locke spoke to the business group after meetings this week with Chinese Premier Wen Jiabao and other officials on how the two countries could work together to reduce carbon dioxide and other greenhouse gas emissions blamed for global warming.

Unless China, the United States and other countries begin to reduce output of the heat-trapping gases, the world faces a "catastrophe" in the form of more frequent floods, droughts and rising sea levels, Locke said.

The U.S. House of Representatives has passed legislation that creates a market for companies to trade permits to emit greenhouse gases, which would be capped at a certain level and then reduced over time.

The bill also contains "carbon tariffs" that would allow the United States to slap duties on imports of carbon-intensive goods such as steel, cement, paper and glass from countries that have not taken steps to reduce their own emissions.

Locke said Chinese officials raised concern about those provisions this week.

"They feel in essence it's a tax on their carbon activity," he said.

China has recently surpassed the United States as the world's largest emitter of greenhouse gases. Its emissions come largely from production of steel, cement, aluminum, paper and chemicals, most of which are consumed in China rather than exported.

In contrast, U.S. greenhouse gas emissions come mainly from domestic consumption, such as fuels to heat and cool buildings and to power vehicles. Only about 25 percent of U.S. emissions are caused by factories.

Though U.S. President Barack Obama has expressed concern about the House "carbon tariffs," Locke said it was an open question whether he opposed them or not.

"The president has not taken a position on any particular element of the legislation," Locke said.

"It's simply premature to talk about individual pieces of the legislation without seeing it in it's totality," Locke said, noting the Senate still has to pass its version of the bill.

Once that happens and negotiations begin between the House and the Senate, the administration will weigh in more heavily on various elements of the bill, Locke said.

.

International Trade in Used Durable Goods: The Environmental Consequences of NAFTA

A catch up on some must read papers in the "globalisation and environment" arena.

The results of this paper appeal as they are exactly what I would expect although the final line of emission increases due to a second life for cars that would otherwise be scrapped is less convincing. Clearly it depends on what happens in Mexico and whether the alternative is merely to prolong the life of even more polluting cars.

International Trade in Used Durable Goods: The Environmental Consequences of NAFTA

Lucas W. Davis
University of Michigan at Ann Arbor - Department of Economics; National Bureau of Economic Research (NBER)
Matthew E. Kahn
University of California, Los Angeles (UCLA)

December 2008

NBER Working Paper No. w14565

Abstract:
Previous studies of trade and the environment overwhelmingly focus on how trade affects where goods are produced. However, trade also affects where goods are consumed. In this paper we describe a model of trade with durable goods and non-homothetic preferences. In autarky, low-quality (used) goods are relatively inexpensive in high-income countries and free trade causes these goods to be exported to low-income countries. We then evaluate the environmental consequences of this pattern of trade using evidence from the North American Free Trade Agreement. Since trade restrictions were eliminated for used cars in 2005, over 2.5 million used cars have been exported from the United States to Mexico. Using a unique, vehicle-level dataset, we find that traded vehicles are dirtier than the stock of vehicles in the United States and cleaner than the stock in Mexico, so trade leads average vehicle emissions to decrease in both countries. Total greenhouse gas emissions increase, primarily because trade gives new life to vehicles that otherwise would have been scrapped.

JEL Classifications: F18
Working Paper Series

.

Trade and the environment in action

How does the environment impact on trade? Another article that justifies this blogs existence.

The US steel industry "would say that wouldn't they".

It is interesting to note that US steel claim that "greening" their industry adds to significantly higher production costs. Is this via pollution abatement operating costs (PAOC) and pollution abatement capital expenditure (PAVE). The distinction as all good economists would know is crucial.

The Chinese counter-argument is correct though. Hence why a political solution to climate change is a long way off.

U.S. Big Steel pushes for carbon fees on China [Reuters]

NEW YORK (Reuters) - China's steel industry should face fees on its exports into the United States if Washington adopts greenhouse gas cuts and Beijing does not, U.S. steel industry officials and advocates said.

As President Barack Obama begins to form plants to regulate greenhouse gases, U.S. steelmakers are nervous they will lose market share if rapidly developing steelmaking countries, like China and India, do not commit to similar emissions goals.

U.S. steelmakers say they have already invested far more in pollution control on pollutants like particulates and components of acid rain, sharply boosting production costs.

"Chinese steelmakers enjoy an unfair advantage in global trade due to the lack of enforcement of exceptionally weak pollution standards," Scott Paul, the executive director of the Alliance for American Manufacturing, told reporters in a teleconference.

Paul said Chinese steelmaking emits two to three times as much carbon dioxide, the main greenhouse gas, as U.S. industry does. Also, U.S. steel production has fallen during the global recession, while China's has held mostly steady.

Terry Straub, a senior vice president at U.S. Steel Corp, said the industry hopes the U.S. Congress does not rush greenhouse gas legislation without considering how the rest of the world will cut emissions.

"Let's take the time to do this right and not do it in a hasty fashion and end up with a disaster on our hands," Straub said.

He suggested leveling the playing field by putting carbon fees on imports of steel to the United States from any country that does not regulate greenhouse gas regulations.

U.S. Energy Secretary Steven Chu has said that if other countries do not impose a cost on carbon emissions once Washington does, the United States would be at a disadvantage. The tax idea on imports was just one proposal the Obama administration should evaluate, he said.

Xie Zhenhua, head of China's Climate Change and Coordinating Committee, during a visit to Washington last week rejected as protectionist the idea of tariffs on countries that do not place a price on carbon dioxide emissions.

Chinese climate officials have said countries that buy Chinese goods should be held responsible for the CO2 emitted by the factories that make them in any global plan to reduce greenhouse gases.

The debate comes as representatives from nearly 200 countries plan to meet in Copenhagen late this year in an attempt to agree a new global climate treaty. China recently surpassed the United States as the world's top emitter of planet-warming gases.

The United States never ratified the Kyoto Protocol, which runs out in 2012, in part because big developing countries like China were not required to cut emissions.

.

USA: Growth more important than the environment

Not surprisingly, following the onslaught of the recession people soon forget about the planet and care just about their own well being.

I suspect that it is not just Americans who feel this way. Most of Europe, if not the world would probably report similar figures.

The recent gallop results are no surprise but still make for interesting reading. Clean air has always been a luxury good. The link gives you the nice graphs.

Americans: Economy Takes Precedence Over Environment [gallop]

PRINCETON, NJ -- For the first time in Gallup's 25-year history of asking Americans about the trade-off between environmental protection and economic growth, a majority of Americans say economic growth should be given the priority, even if the environment suffers to some extent.

Gallup first asked Americans about this trade-off in 1984, at which time over 60% chose the environmental option. Support for the environment was particularly high in 1990-1991, and in the late 1990s and 2000, when the dot-com boom perhaps made economic growth more of a foregone conclusion.

The percentage of Americans choosing the environment slipped below 50% in 2003 and 2004, but was still higher than the percentage choosing the economy. Sentiments have moved up and down over the last several years, but this year, the percentage of Americans choosing the environment fell all the way to 42%, while the percentage choosing the economy jumped to 51%.

The reason for this shift in priorities almost certainly has to do with the current economic recession. The findings reflect many recent Gallup results showing how primary the economy is in Americans' minds, and help document the fact of life that in times of economic stress, the public can be persuaded to put off or ignore environmental concerns if need be in order to rejuvenate the economy.

.

Resources, population growth and conflict

The extent to which resources are the cause of political conflict has long been debated.

With increasing populations and decreasing natural resources exacerbated by climate change means the potential for future conflict increases every year.

Lester Brown over at Grist provides an history perspective much more eloquently than I could. Whilst I am probably on the more dismal side of the economics profession this article offers little hope for the future ;-)

When population growth and resource availability collide [Gristmill]

As land and water become scarce, competition for these vital resources intensifies within societies, particularly between the wealthy and those who are poor and dispossessed. The shrinkage of life-supporting resources per person that comes with population growth is threatening to drop the living standards of millions of people below the survival level, leading to potentially unmanageable social tensions.

Access to land is a prime source of social tension. Expanding world population has cut the grainland per person in half, from 0.23 hectares in 1950 to 0.10 hectares in 2007. One-tenth of a hectare is half of a building lot in an affluent U.S. suburb. This ongoing shrinkage of grainland per person makes it difficult for the world's farmers to feed the 70 million people added to world population each year. The shrinkage in cropland per person not only threatens livelihoods, but in largely subsistence societies, it also threatens survival itself. Tensions within communities begin to build as landholdings shrink below that needed for survival.

The Sahelian zone of Africa, with one of the world's fastest-growing populations, is an area of spreading conflict. In troubled Sudan, 2 million people have died and over 4 million have been displaced in the long-standing conflict of more than 20 years between the Muslim north and the Christian south. The more recent conflict in the Darfur region in western Sudan that began in 2003 illustrates the mounting tensions between two Muslim groups -- camel herders and subsistence farmers. Government troops are backing Arab militias, who are engaging in the wholesale slaughter of black Sudanese in an effort to drive them off their land, sending them into refugee camps in neighboring Chad. At least some 200,000 people have been killed in the conflict and another 250,000 have died of hunger and disease in the refugee camps.

The story of Darfur is that of the Sahel, the semiarid region of grassland and dryland farming that stretches across Africa from Senegal in the west to Somalia in the east. In the northern Sahel, grassland is turning to desert, forcing herders southward into the farming areas. Declining rainfall and overgrazing are combining to destroy the grasslands.

Well before the rainfall decline the seeds for the conflict were being sown as Sudan's population climbed from 9 million in 1950 to 39 million in 2007, more than a fourfold rise. Meanwhile, the cattle population increased from fewer than 7 million to 40 million, an increase of nearly sixfold. The number of sheep and goats together increased from fewer than 14 million to 113 million, an eightfold increase. No grasslands can survive such rapid continuous growth in livestock populations.

In Nigeria, where 148 million people are crammed into an area not much larger than Texas, overgrazing and overplowing are converting grassland and cropland into desert, putting farmers and herders in a war for survival. Unfortunately, the division between herders and farmers is also often the division between Muslims and Christians. The competition for land, amplified by religious differences and combined with a large number of frustrated young men with guns, has created a volatile and violent situation where finally, in mid-2004, the government imposed emergency rule.

Rwanda has become a classic case study in how mounting population pressure can translate into political tension, conflict, and social tragedy. James Gasana, who was Rwanda's Minister of Agriculture and Environment in 1990-92, warned in 1990 that without "profound transformations in its agriculture, [Rwanda] will not be capable of feeding adequately its population under the present growth rate." Although the country's demographers projected major future gains in population, Gasana said that he did not see how Rwanda would reach 10 million inhabitants without social disorder "unless important progress in agriculture, as well as other sectors of the economy, were achieved."

In 1950, Rwanda's population was 2.4 million. By 1993, it had tripled to 7.5 million, making it the most densely populated country in Africa. As population grew, so did the demand for firewood. By 1991, the demand was more than double the sustainable yield of local forests. As trees disappeared, straw and other crop residues were used for cooking fuel. With less organic matter in the soil, land fertility declined.

As the health of the land deteriorated, so did that of the people dependent on it. Eventually there was simply not enough food to go around. A quiet desperation developed. Like a drought-afflicted countryside, it could be ignited with a single match. That ignition came with the crash of a plane on April 6, 1994, shot down as it approached the capital Kigali, killing President Juvenal Habyarimana. The crash unleashed an organized attack by Hutus, leading to an estimated 800,000 deaths of Tutsis and moderate Hutus in 100 days.

Many other African countries, largely rural in nature, are on a demographic track similar to Rwanda's. Tanzania's population of 40 million in 2007 is projected to increase to 85 million by 2050. In the Democratic Republic of the Congo, the population is projected to triple from 63 million to 187 million.

Africa is not alone. In India, tension between Hindus and Muslims is never far below the surface. As each successive generation further subdivides already small plots, pressure on the land is intense. The pressure on water resources is even greater. With India's population projected to grow from 1.2 billion in 2007 to 1.7 billion in 2050, a collision between rising human numbers and shrinking water supplies seems inevitable. The risk is that India could face social conflicts that would dwarf those in Rwanda. The relationship between population and natural systems is a national security issue, one that can spawn conflicts along geographic, tribal, ethnic, or religious lines.

Disagreements over the allocation of water among countries that share river systems is a common source of international political conflict, especially where populations are outgrowing the flow of the river. Nowhere is this potential conflict more stark than among Egypt, Sudan, and Ethiopia in the Nile River valley. Agriculture in Egypt, where it rarely rains, is wholly dependent on water from the Nile. Egypt now gets the lion's share of the Nile's water, but its population of 75 million is projected to reach 121 million by 2050, thus greatly expanding the demand for grain and water. Sudan, whose 39 million people also depend heavily on food produced with Nile water, is expected to have 73 million by 2050. And the number of Ethiopians, in the country that controls 85 percent of the river's headwaters, is projected to expand from 83 million to 183 million.

Since there is already little water left in the Nile when it reaches the Mediterranean, if either Sudan or Ethiopia takes more water, then Egypt will get less, making it increasingly difficult to feed an additional 46 million people. Although there is an existing water rights agreement among the three countries, Ethiopia receives only a minuscule share of water. Given its aspirations for a better life, and with the Nile being one of its few natural resources, Ethiopia will undoubtedly want to take more.

In the Aral Sea basin in Central Asia, there is an uneasy arrangement among five countries over the sharing of the two rivers, the Amu Darya and the Syr Darya, that drain into the sea. The demand for water in Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan already exceeds the flow of the two rivers by 25 percent. Turkmenistan, which is upstream on the Amu Darya, is planning to develop another half-million hectares of irrigated agriculture. Racked by insurgencies, the region lacks the cooperation needed to manage its scarce water resources. Geographer Sarah O'Hara of the University of Nottingham who studies the region's water problems, says, "We talk about the developing world and the developed world, but this is the deteriorating world."

-----

The Smart Globalist

Interesting new blog aggregation and news site.

Globalization Central - News and Views From Outside the Box

The Smart Globalist is an online magazine that covers economics, finance, public policy and international relations. Our aim is to educate and inform public opinion across a range of issues related to globalization - from international trade and investment to the financial markets, foreign policy and global development.

The Smart Globalist publishes a diverse array of contributors hailing from academia, print journalism, finance and the public policy community. Our original editorial content includes both short, timely commentary on the latest news and current events, as well as longer analytic pieces exploring the complex issues surrounding international trade, investment and foreign policy. We hope that our coverage and analysis of these issues will eventually lead to practical, pragmatic solutions to the challenges and opportunities presented by globalization.

The Smart Globalist also aggregates content from some of the best blogs and media outlets on the internet. By syndicating content from established and emerging bloggers, The Smart Globalist hopes to draw attention to important perspectives often missing from the mainstream media, while taking advantage of the new ways of organizing and distributing information afforded by new technologies.

Our editorial staff reviews all of the syndicated content appearing on the site to ensure that it is timely, relevant, insightful and of interest to our readers. We publish the headline, a brief lede, and any image that comes embedded in the RSS feed, and provide a link to the original content. We never change or edit any of the syndicated content itself, we do not archive any syndicated content for more than two weeks, and we do not allow our readers to comment on this material. We encourage you to visit the websites of the original authors of this material and leave comments there, where the authors can respond, either by clicking through the links available with each post, or else by perusing our blogroll. We believe that this constitutes 'fair use' of the syndicated materials.

In short, we hope to fulfill a public service by helping everyone to form thoughtful, well-informed, reality based opinions and perspectives on global economic and political issues.

The Smart Globalist is run on a not-for-profit basis by the Economic Strategy Institute, a non partisan, non-profit public policy research organization based in Washington DC. The website is funded in part through a generous grant from the Alfred P. Sloan Foundation.

.

KOF index of globalization

A useful index of globalisation.

KOF Index of Globalization

This link gives information on where to get the data and how it is constructed.

Watching UK's newsnight is rather frustrating when they talk about "de-globalisation".

Globalisation is slowing but not reversing. Barriers to trade remain low and are still falling.

Falling trade does not mean globalisation has reversed.

.

Rethinking Globalisation Blog

Given the recent and ongoing financial crisis it is probably a good time to think carefully about how we got here and where we are likely to end up.

To this end, the inbox today informed me of a newly launched blog:

Rethinking Globalisation is a new blog from Global Trade Watch.


As you can see, they will be covering many of the same issues that I touch on in this blog but from more of a trade perspective.

It will be interesting to chart the blogs progress. Spelling "globalisation" with an "s" is a good start although this will cost them in terms of google hits.

This is a space for people to discuss issues and ideas about globalisation, global trade and global justice. To discuss and debate how the global economic system is affecting people and the environment. And to think about how more ecologically-sustainable, democratic and people-centred economic systems might be possible.

We’ll try to post new material every few days - please visit us regularly and please join the discussion by leaving your views in the comments section.

Finally, if you have any great ideas for this blog, please feel free to email us at info@tradewatch.org.au

.

Wal-Mart and environmental spillovers

There is a recent literature to which I have contributed looking at the idea of "environmental spillovers". This is the idea that the environments of developing countries can benefit from foreign multinationals due to spillovers of knowledge and technology.

These include customer to supplier, supplier to customer or supplier to supplier.

Here is a link to our paper.

In Search of Environmental Spillovers

Facundo Albornoz
University of Birmingham
Matthew A. Cole
University of Birmingham - Department of Economics
Robert J.R. Elliott
University of Birmingham - Department of Economics
Marco Ercolani
University of Birmingham - Department of Economics

15/4/2008

Abstract:
There is an extensive literature that examines the relationship between foreign direct investment (FDI) and the productivity and competitiveness of domestic firms. Using estimation techniques from the productivity spillover literature, this paper tests for the presence of environmental spillovers from foreign firms. On the basis that foreign owned firms may encourage firms in their extended supply chain to improve their environment related management practices, evidence for the existence of environmental spillovers should be easier to find than productivity spillovers where firms naturally attempt to minimize intra-industry knowledge leakage. In this paper we show that first, foreign owned firms are more likely to implement environmental management systems (EMS) and second, that the presence of foreign owned firms in those sectors that a firm supplies can encourage good environmental practice. This is especially true if a firm is foreign, has high absorptive capacity, and operates in the presence of formal and informal networks.

Keywords: Multinationals, Environment, Firm Characteristics, Spillovers

JEL Classifications: D21, Q20, Q56
Working Paper Series

The anecdotal evidence has always been visible as this story about Wal-mart demonstrates. Finding whether such stories have any real economic impact is another ball game entirely. It is clear that suppliers to Wal-Mart to not like it - why would they if costs increase. The key is whether Wal-Mart are offering any help to improve such as advice or advisors.

Wal-Mart in China standards driven [FT]

Wal-Mart (NYSE:WMT) , the world's biggest retailer, on Wednesday told its Chinese suppliers to meet strict environmental and social standards or risk losing its business.

"Meeting social and environmental standards is not optional," Lee Scott, Wal-Mart's chief executive, told a gathering of more than 1,000 suppliers in Beijing.

"A company that cheats on overtime and on the age of its labour, that dumps its scraps and its chemicals in our rivers, that does not pay its taxes or honour its contracts - will ultimately cheat on the quality of its products."

Wal-Mart has been pursuing a drive to improve its reputation on environmental and social issues over the past three years, in response to growing criticism in the US over issues including labour conditions in its supplier factories.

The directive, which will be codified in a Wal-Mart suppliers' agreement, comes at a difficult time for China-based manufacturers, caught between rising production costs and the effect of the global financial crisis on consumer demand in their largest overseas markets.

The requirements include a clear demonstration of compliance with Chinese environmental laws, a 20 per cent improvement in energy efficiency at the company's 200 largest China suppliers, and disclosure of the names and addresses of every factory involved in the production process. The company will require a 25 per cent rise in the efficiency of energy-intensive products, such as flat-screen TVs, by 2011.

Mr Scott said the retailer also wanted to move away from the short-term focus that has characterised its relationships with Asian suppliers.

"We have traditionally purchased in a very transactional manner," said Mr Scott. "We need deeper, longer-term relationships with suppliers so it is not based on the last penny."

Some suppliers grumbled about the conditions spelled out by Wal-Mart, which has a reputation for driving hard bargains. It is estimated that each year the company sells about $30bn-worth of China-made goods, giving it enormous negotiating power over suppliers. "It's going to make things a lot worse," said one manufacturer at the meeting, who asked not to be identified. Others were more relaxed. "If they don't like it, they are not going to be doing business with Wal-Mart," said one US-based Wal-Mart supplier who sources components from China.

.

Disease and Global Warming - "the deadly dozen"

There is considerable debate about the effect of global warming on the spread of diseases. Try to remember that there is a close relationship between poverty and disease as well as between disease and climate.

That point aside it is always of interest to a dismal scientist to consider alternative ways that we can die. Here are the 12 deadliest.

The Deadly Dozen: 12 Diseases Global Warming Incubates [The Daily Green]

1. Avian influenza

Like human influenza, avian influenza viruses occur naturally in wild birds, though often with no dire consequences.

The virus is shed by infected birds via secretions and feces. Poultry may contract the virus from other domestic birds or wild birds. A highly pathogenic strain of the disease-H5N1-is currently a major concern for the world's governments and health organizations, specifically because it has proven deadly to domestic and wild birds, as well as humans, and has the potential to evolve into a strain that can spread from human to human. Current data indicate that the movement of H5N1 from region to region is largely driven by the trade in poultry, but changes in climate such as severe winter storms and droughts can disrupt normal movements of wild birds and can bring both wild and domestic bird populations into greater contact at remaining water sources.


2. Babesiosis

Babesia species are examples of tick-borne diseases that affect domestic animals and wildlife, and Babesiosis is an emerging disease in humans. In some instances, Babesia may not always cause severe problems by themselves but when infections are severe due to large numbers of ticks, the host becomes more susceptible to other infectious diseases. This has been seen in large die-offs of lions in East Africa due to canine distemper. Climate factors fostered heavy infestations of ticks on wild buffalo and subsequent spill-over infection of lions. The lions then became more susceptible to infections with the distemper virus. In Europe and North America, the disease is becoming more common in humans, also linked with tick distributions. Diseases that have previously been thought to have limited impact, such as babesiosis, must be watched closely in a changing climate to assess how environmental conditions may tip the scale and cause more significant impacts on ecosystems, animals, and people.


3. Cholera

Cholera is a water-borne diarrheal disease affecting humans mainly in the developing world. It is caused by a bacterium, Vibrio cholerae, which survives in small organisms in contaminated water sources and may also be present in raw shellfish such as oysters. Once contracted, cholera quickly becomes deadly. It is highly temperature dependent, and increases in water temperature are directly correlated with occurrence of the disease. Rising global temperatures due to climate change are expected to increase incidence of this disease.


4. Ebola

Ebola hemorrhagic fever virus and its closely related cousin-the Marburg fever virus-easily kill humans, gorillas, and chimpanzees, and there is currently no known cure. Scientists continue to work on finding the source of the disease and to develop vaccines for protection. There is significant evidence that outbreaks of both diseases are related to unusual variations in rainfall/dry season patterns. As climate change disrupts and exaggerates seasonal patterns, we may expect to see outbreaks of these deadly diseases occurring in new locations and with more frequency. WCS's work on Ebola in Central Africa has been supported by the US Fish and Wildlife Service.


5. Intestinal and external parasites

Parasites are widespread throughout terrestrial and aquatic environments. As temperatures and precipitation levels shift, survival of parasites in the environment will increase in many places, infecting an increasing number of humans and animals. Many species of parasites are zoonotic, spread between wildlife and humans. The nematode, Baylisascaris procyonis, is spread by the common raccoon and is deadly to many other species of wildlife and humans. A close relative, Baylisascaris schroederi, causes death in its natural host-the critically endangered giant panda. Monitoring of parasite species and loads in wildlife and livestock help us identify transmission of these infections between domestic and wild animals and humans.


6. Lyme disease

This disease is caused by a bacterium and is transmitted to humans through tick bites. Tick distributions will shift as a result of climate change, bringing Lyme disease into new regions to infect more animals and people. Although effects of the disease on wildlife have not been documented, human-induced changes in the environment and on population patterns of species such as white-tailed deer that can carry infective ticks greatly affect the distribution of this disease. Monitoring of tick distributions will be necessary to assess the impacts of climate change on this disease.


7. Plague

Plague, Yersinia pestis - one of the oldest infectious diseases known-still causes significant death rates in wildlife, domestic animals, and humans in certain locations. Plague is spread by rodents and their fleas. Alterations in temperatures and rainfall are expected to change the distribution of rodent populations around the globe, which would impact the range of rodent-born diseases such as plague.


8. "Red tides"

Harmful algal blooms off global coasts create toxins that are deadly to both humans and wildlife. These occurrences-commonly called "red tides" - cause mass fish kills, marine mammal strandings, penguin and seabird mortality, and human illness and death from brevetoxins, domoic acid, and saxitoxins (the cause of "paralytic shellfish poisoning"). Similar events in freshwater are caused by a species of Cyanobacteria and have resulted in animal die-offs in Africa. Altered temperatures or food-web dynamics resulting from climate change will have unpredictable impacts on the occurrences of this worldwide phenomenon. Effects of harmful algal blooms on sea life are often the first indicators that such an event is taking place.


9. Rift Valley Fever

Rift Valley fever virus (RVFV) is an emerging zoonotic disease of significant public health, food security, and overall economic importance, particularly in Africa and the Middle East. In infected livestock such as cattle, sheep, goats and camels, abortions and high death rates are common. In people (who can get the virus from butchering infected animals), the disease can be fatal. Given the role of mosquitoes in transmission of the virus, changes in climate continue to be associated with concerns over the spread of RVFV.


10. Sleeping sickness

Also known as trypanosomiasis, this disease affects people and animals. It is caused by the protozoa Trypanosoma brucei, and transmitted by the tsetse fly. The disease is endemic in certain regions of Sub-Saharan Africa, affecting 36 countries, with estimates of 300,000 new cases every year and more than 40,000 human deaths each year in eastern Africa. Domestic cattle are a major source of the disease, but wildlife can be infected and maintain the disease in an area. Direct and indirect effects (such as human land-use patterns) of climate change on tsetse fly distributions could play a role in the distribution of this deadly disease.


11. Tuberculosis

As humans have moved cattle around the world, bovine tuberculosis has also spread. It now has a global distribution and is especially problematic in Africa, where it was introduced by European livestock in the 1800s. The disease infects vital wildlife populations, such as buffalo and lions in Kruger National Park in South Africa, where tourism is an integral part of local economies. The disease also infects humans in southern Africa through the consumption of un-pasteurized milk. Human forms of tuberculosis can also infect wild animals. Climate change impacts on water availability due to drought are likely to increase the contact of wildlife and livestock at limited water sources, resulting in increased transmission of the disease between livestock and wildlife and livestock and humans.


12. Yellow fever

Found in the tropical regions of Africa and parts of Central and South America, this virus is carried by mosquitoes, which will spread into new areas as changes in temperatures and precipitation levels permit. One type of the virus-jungle yellow fever-can be spread from primates to humans and vice-versa via mosquitoes that feed on both hosts. Recent outbreaks in Brazil and Argentina have had devastating impacts on wild primate populations. In some countries in South America, monitoring of wild primates has resulted in early detection of disease activity and allowed vaccination programs to be rapidly implemented to protect humans.

.

Climate Change Shrinks Africa

Nice little climate change scare story with "experts" predicting that the coast of Africa will soon have to be redrawn as sea levels rise. This is merely another example of the poorest countries (who contributed least to the pollution in the first place) experiencing the largest amount of pain.

In the first paragraph I particularly like the term "brutally redrawn". This gives the impression of a some rather aggressive pen on map behaviour.

West Africa's coastline redrawn by climate change: experts [Yahoo]

Rising sea levels caused by climate change will brutally redraw a 4,000-kilometre (2500-mile) stretch of west African coastline from Senegal to Cameroon by century's end, experts were told AFP Friday.

../

Among the cities worst hit would be the Gambian capital Banjul and Lagos, Nigeria's economic capital and home to 15 million. Some parts of Lagos lie below sea-level today and it is already subject to frequent flooding.

The Niger delta's income-generating oil fields are especially vulnerable, Cramer said.

Clearly the economists have been called in and come out with the old adage "too expensive" therfore you are doomed.

Another serious threat is salty sea water intrusion into fertile agricultural land.

"This will make the ground water undrinkable and unsuitable for agricultural purposes. The result will be food and water insecurity," said George Awudi, Ghana Programme Coordinator for Friends of the Earth.

Environmental experts offer different solutions, but all agree on the futility -- and prohibitive cost -- of erecting massive sea barriers.

"The sensible option is moving to higher ground, which is a tough option especially for Nigeria as it means giving up its economic centres in Lagos and its oil installations in the Delta," Cramer said.

.

Trade talk failure impacts climate change

A classic "globalisation and the environment" story - the failure of trade talks does show how difficult it is to get global agreement on anything even if all countires agree on something.

Developing countries are right to feel hard done by and this is likely to sap any good wil they may have had towards a climate change agreement.

This statement is telling:

"The collapse of the WTO talks is another sign of the decline of Western power," said a European Union official involved in policy planning.

Perhaps it is lucky that the climate change skeptics are so convinced none of this matters others the outlook would be rather depressing.

Trade Failure Clouds Climate Talks and Beyond [PlanetArk]

GENEVA - The collapse of world trade talks deals such a blow to international negotiations that the prospect of agreeing effective solutions to global warming or the spread of nuclear weapons seems more remote than ever.

"If we cannot even manage trade, how should we then find ourselves in a position to manage new challenges like climate change?" said European agriculture chief Mariann Fischer Boel after talks at the World Trade Organisation (WTO) in Geneva fell apart on Tuesday. "It is a failure with wider consequences than we have ever seen before."

Countries aim to agree a successor by the end of next year to the Kyoto Protocol on climate change, a 1997 treaty which commits developed countries to limit greenhouse gas emissions and which expires in 2012.

Like trade pacts, climate agreements have to be reached by consensus -- something that has proven impossible among the 153 WTO members.

The Geneva failure augurs badly for United Nations climate negotiations in Copenhagen in late 2009, and for faltering global efforts to halt nuclear proliferation, highlighted by the dispute over Iran's atomic programme, analysts said.

"It will greatly undermine trust in multilateral goodwill," said Mark Halle of the International Institute for Sustainable Development. "Nobody thinks we can get a climate deal without overcoming the deep mistrust in the developing world."

The fact that the WTO's "Doha development round", touted as a way to help poorer countries get more from world trade, foundered on a dispute between the United States and and big emerging economies has hit hopes for a post-Kyoto deal.

"It will be extremely difficult (for developing countries) to rebuild their confidence in the multilateral system about the desire of the rich to do anything," Halle said.


BALANCE OF POWER

The rise of the big developing economies, Brazil, China and India, since the Doha round began in 2001, will also change the dynamic in climate talks, said Bruce Stokes, a fellow at the German Marshall Fund of the United States.

"Certainly India in particular will be a key player in Copenhagen," he said.

"China's last minute objections to a Doha deal underscore their leverage, that will of course be even greater," he added.

Under Kyoto, only developed countries have greenhouse gas limits, but at Copenhagen, developing nations with the fastest growing output of carbon dioxide blamed for global warming are under pressure to brake their own emissions.

India in particular is resisting any negotiated binding curb, and its firm line in Geneva -- where a dispute with the United States on protecting its farmers felled the trade talks -- suggests it may show little flexibility on climate change.

Persuading developing countries to accept emissions curbs is seen as vital to bringing Washington, which turned its back on Kyoto under President George W. Bush, back into a rules-based global climate pact.

Coincidentally, India is one of the emerging world's nuclear powers, which built an atomic arsenal in defiance of US-led efforts to halt the spread of weapons of mass destruction.

For some policymakers, failure in Geneva was a symptom of a major change in the global order, which is likely to be just as evident in climate talks.

"The collapse of the WTO talks is another sign of the decline of Western power," said a European Union official involved in policy planning. "It's no longer enough for the United States and the Europeans to agree on the objective in order to achieve the desired outcome."

The reluctance of emerging countries to accept curbs on greenhouse gases is another sign of the changing world order, which the EU official put down in part to opposition to the 2003 US invasion of Iraq and a perception that Washington remains bogged down and unable to prevail in either Iraq or Afghanistan.

He pointed to this month's veto by Russia and China of a UN resolution to impose sanctions on Zimbabwe, and to persistent difficulty in persuading them to back tougher measures against Iran and Sudan, as signs of this power shift.

For the EU's trade negotiator, haggard and bitterly disappointed after nine days of ultimately fruitless talks, the failure in Geneva was a blow for those who hope the world can find consensus to solve global problems that affect everyone.

"We have missed a chance to seal the first global pact of a reshaped world order," said Peter Mandelson. "We would all have been winners from a Doha deal. Without one we all lose."

Death of Globalisation consensus: Rodik

After my environmental related post on the death of globalisation it appears that the economist Dani Rodik is weighing in suggesting that mainstream economists everywhere have seen the light (or dark) when it comes to globalisation.

My bold.

The death of the globalization consensus [Dani Rodik blog]

There was a time when global elites could comfort themselves with the thought that opposition to the world trading regime consisted of violent anarchists, self-serving protectionists, trade unionists, and ignorant, if idealistic youth. Meanwhile, they regarded themselves as the true progressives, because they understood that safeguarding and advancing globalization was the best remedy against poverty and insecurity.

But that self-assured attitude has all but disappeared, replaced by doubts, questions, and scepticism. Gone also are the violent street protests and mass movements against globalisation. What makes news nowadays is the growing list of mainstream economists who are questioning globalisation's supposedly unmitigated virtues.

My only point, or the only one I have the will to write, is that even the most fervent globalisation supporter never considered the virtues to be "unmitigated". Far from it.

This issue however gets to the heart of the why this blog was born. Is globalisation good or bad for the environment? The jury is still out.

.

Gloabalization Death Watch

Stories about the end of globalization are always worth reading. Grist write a useful piece. I look forward to part II.

I am afraid Grist are a little off the mark here.

Globalization death watch, Part I [Grist]

Globalization was built on cheap oil. As that era draws to a close, so will the current phase of global integration, whether Thomas Friedman, Wal-Mart, and all those involved in intercontinental trade like it or not.

The current transportation infrastructure is based on cars, trucks, airplanes, and cargo ships, which together consume about 70 percent of the gasoline used in the United States. While the greatest focus has been on cars, trucking and airline companies are facing collapse.

The International Air Transport Association just published a new report in which they call the situation of many airlines "desperate."

Globalisation and Offshoring

By way of explanation of my blogging absence I present a press release on last week's "offshoring" conference at the University of Nottingham featuring none other than Alan Blinder (Princeton) and Elhanan Helpman (Harvard) (who gave the World Economy lecture the evening before on a related topic).

It was interesting to see Alan Blinder present his controversial hypothesis on the potential adjustment costs associated with this "second industrial revolution". However, his analysis seemed to simply repeat what Thomas Friedman wrote about in the "World in flat" a number of years ago and that I read in early 2006. That is not to say he is wrong and it is good that someone is pushing this angle if for no other reason that for academics to take this issue seriously (or not so seriously).

---------------------------

Sending jobs abroad creates thousands more jobs in the UK

The growing trend for British firms to send jobs overseas has actually helped boost employment in the UK, creating thousands of jobs according to new research.

Economists at the Globalisation and Economic Policy Centre (GEP) at the University of Nottingham say their research contradicts common perceptions that British firms are exporting jobs overseas to India and China simply to cut costs, leaving many here unemployed.

GEP economists analysed data from more than 66,000 UK firms over a period from 1996 to 2005. The results of the study - the largest ever carried out into the offshoring” phenomenon – showed that far from increasing unemployment in the UK, the policy had resulted in the creation of 100,000 extra jobs and an increase of £10bn in company turnover.

GEP Centre Director, Professor David Greenaway said: “People fear their jobs are being exported to countries like India and China where labour is cheaper, but the picture is far more complex than that and much more positive. “It would seem that firms that offshore part of their production process or service provision overseas become more efficient. This boosts productivity and turnover and as a result these firms grow and end up employing more people at home, not fewer.”

But Professor Greenaway said there were losers from the offshoring phenomenon. He said: “Offshoring does lead to increased job turnover and a change in the skill mix in a firm. The winners are those who have the skills required by firms that are offshoring and growing; the losers are those who cannot adapt.

“The lesson for policymakers is that offshoring is to be embraced, not feared, but that we need to continually invest in upgrading the skills of British workers to increase their adaptability and help smooth the transition from one job to another.”
The research also exploded another offshoring myth. Report co-author, Dr Richard Kneller said: “The common perception of offshoring is that its largely low paid call centre jobs being exported to lower wage economies like China and India, but that’s not the case.

“If you think of manufacturing and the production of parts, then it is skilled work. If you look at car manufacturing, Ford may make engines at Dagenham but gear boxes in Spain; if you think of Airbus – Britain makes the wings and engines, France the bodies. Most offshoring is actually to similarly developed European nations and the US, where the language skills are better.”

And he said Britain is also a major beneficiary of offshoring. “In the services sector Britain has a reputation for areas like finance and creative media and overseas firms will offshore work in this area to UK firms.”

The GEP research findings are to be presented at a major conference on offshoring to be held at the University of Nottingham later this month, which is expected to attract some of the world’s leading economists and experts on the subject as well as senior figures from the policymaking community.

Notes to editors:
This research is presented in a 120 page report: The Economic Impact of Offshoring. A useful 6 page summary has been prepared for the Offshoring Conference (details below) - pdf copies can be emailed on request.

GEP Conference on Offshoring 20th and 21st June.

To be held at the University of Nottingham. The programme starts with a
‘Policy Forum’. Speakers include:

• Alan Blinder, Princeton
• Heather Booth di Giovanni, UK Trade and Investment (Department for
Business, Enterprise and Regulatory Reform [BERR])
• Alex Hijzen, OECD
• Jonathan Portes, Department for Work and Pensions
• James Watson, Department for Business, Enterprise and Regulatory Reform (BERR)

Speakers from the academic community include:

• Mary Amiti, New York Federal Reserve Bank;
• Giorgio Barba Navaretti, Milan;
• Claudia Buch, Tübingen;
• Karolina Eckholm, Stockholm;
• Peter Egger, University of Munich;
• Joseph Francois and Julia Wörz, Vienna Institute for International Economic Studies;
• Ingo Geishecker, Goettingen;
• Liza Jabbour, GEP, University of Nottingham;
• Eiichi Tomiura, Yokohama National University;
• Alex Hijzen / Richard Upward / Peter Wright, GEP, Nottingham;
• Holger Görg / David Greenaway / Richard Kneller, GEP, Nottingham.