Trade Diversion

The Midwest International Trade Meetings’ call for papers has been posted. The deadline is March 16. The conference is in May at Indiana University.

A few thousand economists will descend upon downtown Chicago this weekend for three days of job-market interviews, research presentations, and other forms of fun at the American Economic Association’s annual meetings. The preliminary program listing is online.

I’ll be attending; please do say hello if you spot me. It was a pleasure to meet a couple of Trade Diversion readers last year in Denver.

The AEA meetings are a massive affair; if you search the program, you’ll find 17 sessions on international trade (JEL code F1) occupying a mere nine time slots. You might also catch me at sessions on F3, F4, P5, or R1. But listing all those would make this post far too long. See you in Chicago!

• Jan 06, 2012 10:15 am, Hyatt Regency, Regency D
  New Directions in Trade Policy (F1)
• Jan 06, 2012 10:15 am, Hyatt Regency, Columbian
  Offshoring Theories and Evidence (F1)
• Jan 06, 2012 10:15 am, Hyatt Regency, Regency D
  New Directions in Trade Policy (F1)
• Jan 06, 2012 12:30 pm, Hyatt Regency, Stetson Suite FG
  International Trade and Finance (F1)
• Jan 06, 2012 2:30 pm, Hyatt Regency, Stetson Suite FG
  Round Table on Trade and Development (F1)
• Jan 07, 2012 8:00 am, Hyatt Regency, Columbus CD
  Correct Measurement of International Financial and Trade Flows (F1)
• Jan 07, 2012 8:00 am, Hyatt Regency, Crystal A
  Trade and Labor Markets: Evidence from Matched Employer-Employee Data (F1)
• Jan 07, 2012 10:15 am, Hyatt Regency, Field
  Intermediation and Transport Costs in International Trade (F1)
• Jan 07, 2012 2:30 pm, Hyatt Regency, Toronto
  Estimating Trade Elasticities (F1)
• Jan 07, 2012 2:30 pm, Hyatt Regency, Columbus G
  International Trade (F1)
• Jan 07, 2012 2:30 pm, Hyatt Regency, Water Tower
  International Trade and Trade Policy: In Memory of Robert E. Baldwin (F1)
• Jan 07, 2012 2:30 pm, Hyatt Regency, Regency C
  New Directions in Trade and Geography (F1)
• Jan 08, 2012 8:00 am, Hyatt Regency, Dusable
  Advances in International Trade (F1)
• Jan 08, 2012 10:15 am, Hyatt Regency, Regency C
  International Trade Agreements (F1)
• Jan 08, 2012 10:15 am, Hyatt Regency, Columbus H
  Multi-Product Firms and Product Quality in International Trade (F1)
• Jan 08, 2012 1:00 pm, Hyatt Regency, Grand Suite 5
  Global Production Chains (F1)
• Jan 08, 2012 1:00 pm, Hyatt Regency, Gold Coast
  Labor Market Impacts of Trade (F1)

Plenty of trade-related material in this morning’s NBER email:

• The External Impact of China’s Exchange Rate Policy: Evidence from Firm Level Data by Barry Eichengreen, Hui Tong #17593 (IFM)
• Coping with Shocks and Shifts: The Multilateral Trading System in Historical Perspective by Douglas A. Irwin, Kevin H. O’Rourke #17598 (ITI)
• Size Inequality, Coordination Externalities and International Trade Agreements by Nuno Limao, Kamal Saggi #17603 (ITI)
• Skill Biased Heterogeneous Firms, Trade Liberalization, and the Skill Premium by James Harrigan, Ariell Reshef #17604 (ITI LS)

A new Chicago Booth website polls expert economists on public policy issues. It recently asked people to strongly agree, agree, disagree, or strongly disagree with the following statement:

Federal mandates that government purchases should be “buy American” unless there are exceptional circumstances, such as in the American Recovery and Reinvestment Act of 2009, have a significant positive impact on U.S. manufacturing employment.

Here are two responses that caught my eye:

The aggregate outcomes were:

My Twitter feed lit up with comments about Christmas trees today. Simon Lester spots the logic behind the already-abandoned Christmas Tree Promotion Board: Canada and the US make real trees, China produces artificial trees.

Previous holiday installments at Trade Diversion: Christmas Tariffs.

The next five-year agricultural plan farm bill will cover 2013-2017. The NY Times looks at where Congress is headed, in a piece titled “Farmers Facing Loss of Subsidy May Get New One“:

Lawmakers’ reluctance to simply eliminate a subsidy without adding another in its place demonstrates how difficult it is for Washington to trim the federal largess that flows to any powerful interest group. Indeed, the $5 billion program that lawmakers are willing to throw under the tractor, known as the direct payment program, was created in 1996 as a way to wean farmers off all such supports — and instead was made permanent a few years later…

It is unclear how much support a new subsidy would garner, since many lawmakers view farm programs as a likely source of budget savings. Critics say that farm subsidies today have little to do with helping struggling family farmers. Instead, they go predominantly to well-financed operations with large landholdings. All told, the subsidies amount to about $18 billion a year — about half of 1 percent of the federal budget…

Direct payments have come under fire, however, because farmers get them whether markets are high or low. The new subsidy, called shallow-loss protection, would act as a free insurance policy to cover commodity farmers against small drops in revenue. Most commodity farmers already buy crop insurance to protect themselves against major losses caused by large drops in prices or damage to crops. Those policies typically guarantee 75 to 85 percent of a farmer’s revenue, with the federal government spending $6 billion a year to pay more than half the cost of farmers’ premiums.

The proposed new subsidy would add another layer of protection to guarantee 10 to 15 percent of a farmer’s revenue, paying out not only in years of heavy losses, but also when revenue dipped less severely…

It is unclear how much the proposal would cost taxpayers. Dr. Schnitkey said the plan could pay farmers $40 billion over 10 years. That would be $20 billion less than the programs it replaced, including direct payments and some smaller subsidies.

But Dr. Smith, the Montana State economist, said the cost could be much greater because the plan used recent high crop prices as its benchmark.

A couple of trade papers that have been circulating for a long time are now finally in published form in this month’s issue of Econometrica:

• De Loecker  - “Product Differentiation, Multiproduct Firms, and Estimating the Impact of Trade Liberalization on Productivity“
• Eaton, Kortum & Kramarz – “An Anatomy of International Trade: Evidence From French Firms” (PDF via Kortum)

Rob Johnson and Guillermo Noguera describing not-yet-posted research:

[W]e combine time series data on sectoral production and bilateral trade with benchmark input-output tables for the OECD and major emerging markets, covering 80-90% of world trade and GDP. We find rapid and accelerating declines in the domestic content of exports of most countries. Preliminary results suggest that the value added content of trade declined by nearly twice as much in the decade from 1995-2005 than in the prior two decades. These declines are concentrated within manufacturing sectors, and not due to the changing composition of world trade. At the bilateral level, there are large differences in the rate and timing of changes across trading partners. Further, we detect cyclical patterns in the value added content of trade, which tends to rise in recessions due to the compression of demand in sectors that are most vertically specialized.