Trade Diversion

Fred Bergsten says:

“China has intervened massively in the foreign exchange markets for at least five years, buying at least $1 billion every day to keep the dollar strong and its own renminbi weak… This is by far the largest protectionist measure adopted by any country since the Second World War — and probably in all of history.”

All of history? What about periods of autarky?

Tariffs on intermediate inputs vs final goods:

Today I received some tax saving wisdom from a taxi driver in Ukraine. He told me that people who import cars to Ukraine sometimes cut the car in two separate pieces and carry it through the customs this way. By doing this, they save a fortune on import tax. A car carried in two pieces is seen as spare parts and therefore is taxed at a much lower rate than a normal car.

When in Ukraine, the car is welded back into one piece. After that, it’s usually sold locally at a good price. I looked through forums and apparently this is a common practise in developing countries, particularly in post-Soviet states such as Ukraine.

Via MR.

Ralph Ossa:

I propose a flexible framework for the quantitative analysis of unilateral and multilateral trade policy. It is based on a multi-country multi-industry general equilibrium model of international trade featuring inter-industry trade as in Ricardo (1817), intra-industry trade as in Krugman (1980), and special interest politics as in Grossman and Helpman (1994). By combining these elements, it takes a unified view of trade policy which nests traditional, new trade, and political economy motives for protection. Specifically, it features import tariffs which serve to manipulate the terms-of-trade, shift profits away from other countries, and channel profits towards politically influential industries…

With regard to multilateral trade policy, I find that the world trade war tariffs vary widely across industries, countries, and trading partners and average 63 percent. This is roughly in line with the noncooperative tariffs observed following the Smoot-Hawley Tariff Act of 1930. They would substantially decrease real income in all countries with the average loss amounting to 4.1 percent. I also find that tariff changes which correspond to the GATT/WTO principle of reciprocity can be characterized by a simple formula which is easy to implement in practice. While this formula identifies a number of industries in which there is still scope for future reciprocal trade negotiations, it also suggests that the overall gains from such negotiations would be quite small…

I believe that this is the first quantitative framework which nests traditional, new trade, and political economy motives for protection. I also believe that this is the first study which provides estimates of optimal and noncooperative tariffs at the industry level for the major players in recent GATT/WTO negotiations…

My application focuses on 7 regions and 26 manufacturing industries in the year 2005. The regions are Brazil, China, the EU, India, Japan, the US, and a residual Rest of the World and are chosen to comprise the main players in recent GATT/WTO negotiations.

WSJ:

President Barack Obama and Mexican President Felipe Calderon reached a deal resolving a longstanding dispute over cross-border trucking that has subjected the U.S. to billions of dollars in punitive tariffs.

The plan, unveiled at a news conference by the two presidents, will allow for half of those tariffs to be lifted immediately. It will establish a reciprocal, phased-in pilot program that allows Mexican trucks to operate inside the U.S. provided they comply with a series of safety and driver-skills and language tests monitored by the U.S. Department of Transportation.

Chinese furniture producers made direct payments to a group of 20 US furniture makers (about $13 million over the last four years) in exchange for those companies not listing them as exporters to be reviewed by the Commerce Department for antidumping charges.

The WSJ story, via Simon Lester, who got it from Doug Jacobson.

A recent court ruling that led to the repeal of an import prohibition on agricultural products may not be covered at the IELP Blog, because it’s a purely domestic matter:

The city of Lake Elmo [in Minnesota] imposed the protectionist law in 2008, requiring that all agricultural produce sold on Lake Elmo’s farms must actually be grown in Lake Elmo. This would have significantly damaged the Bergmanns, and others like them, who grow produce elsewhere and sell it from their Lake Elmo farm. Judge Noel’s opinion recommended that a preliminary injunction be issued preventing the law from being enforced while the Institute for Justice lawsuit is litigated. The City Council’s change in the law now makes a preliminary injunction unnecessary.