FACT: Seven countries have ratified the WTO fishery subsidies agreement.

THE NUMBERS: Fishery subsidies (2018 estimates*) –

World	$35.4 billion
Asia	$19.5 billion
China only	$7.5 billion
Europe	$6.4 billion
EU members	$3.8 billion
U.S./Canada/Mexico	$4.4 billion
U.S.	$3.4 billion
South/Central America	$2.0 billion
Africa	$2.1 billion
Oceania	$0.8 billion

* Sumaila et al.

WHAT THEY MEAN:

A year ago at the WTO’s 12th Ministerial Conference in Geneva, the 164 WTO members “reached consensus” — WTO-speak for agreeing on something with no holdouts — on the first new multilateral trade agreement in a decade. This is the “Agreement on Fishery Subsidies,” a trade/environment accord that “prohibits support for illegal, unreported and unregulated (IUU) fishing, bans support for fishing overfished stocks, and ends subsidies for fishing on the unregulated high seas.”

Where does it stand a year later? Some context first, on fish, ships, and money:

Fish: Last year’s fishery market, according to the UN’s Food and Agriculture Organization in State of World Fisheries and Aquaculture 2022, totaled about $406 billion at “first sale” (i.e. price on the dock, rather than on the plate) with $151 billion of this from exports. “Capture” marine fishing (i.e., caught from a boat as opposed to farmed) produced about 80 million tons of seafood, a total which has been roughly stable for the last 25 years. (The freshwater catch came to 10 million tons, and aquaculture about 88 million tons.) To put these figures in context, the human race collectively weighs about 500 million tons.

The top fishing countries by the FAO’s tally are China, Indonesia, Peru, India, and Russia, with the U.S., Vietnam, Japan, Bangladesh, and Norway next. Together, these ten countries catch about half the global “capture fishing” total. China alone, at 13 million tons, makes up about a seventh of the combined marine and freshwater catch, and (see below) is also the largest provider of fishery subsidies. Estimates for the sustainability of this catch often read the data differently, but express similar pessimistic messages. FAO says that “the fraction of fishery stocks within biologically sustainable levels decreased to 64.6% in 2019” (from nearly 90% as of 1974), or in more detail that 35.4% of world fisheries are overfished, 57.3% are at maximum yield, and only 7.2% are “underfished.” The view of the NGO Oceana (not necessarily contradictory in factual terms, but different in emphasis) is that only 17% of fisheries are currently able to produce more fish, and over 80% “cannot withstand additional fishing”.

Ships: The FAO’s report counts 4.1 million fishing vessels on the water in 2022, topped by 2.7 million in Asia and 1 million in Africa. Most are very small, and the total includes 1.5 million sailing or rowing boats. About 45,000, though, are large factory-type ships of lengths over 25 meters and weight above 100 tons. To put this in context, UNCTAD’s World Maritime Review 2022 reports that the world’s cargo fleet comprises 102,899 ships of more than 100 tons. Navies operate about 10,000 boats, while wealthy individuals and businesses sail around in about 10,800 pleasure yachts. So all told, FAO’s figure suggests that about a third of the world’s big ships are large fishing vessels.

It would be nice to think that these large fishing ships are professionally managed and less likely to be involved in IUU or other destructive fishing practices than small boats.  But this is not so. One notorious individual case, that of the Vladivostok 2000 — a converted oil tanker said in media reports to be the world’s largest factory fishing vessel — is an example. At 228.6 meters in length and 49,400 tons, it is about twice as large as UNCTAD’s 21,700-ton average for major cargo ships, and can process half a million tons of fish a year. V2K was blacklisted by the South Pacific Regional Fisheries Management Organization as an IUU vessel ten years ago (under its earlier name Damanzaihao) but continues in operation and is en route this week in the Sea of Okhotsk, traveling from Russia’s Maritime Province to Sakhalin Island.

Subsidies: Estimates of the scale of fishery subsidies are currently about $35.4 billion (as of 2018) — that is, nearly a tenth of “first sale” and a quarter of export value. A detailed look from a research group finds these subsidies heavily concentrated in Asia, where China pumps $7.5 billion into fishery fleets each year and other Asian states add $13 billion more. North America and Europe combine for $8 billion; Latin, Africa, and Pacific subsidies are modest by comparison, combining for a value of about $5 billion. About 80% of subsidies go to large boats and fleets, and 20% to smaller boats and artisanal fisheries. By function, $22 billion goes to ramp up the size of fishing fleets, and $7 billion to subsidize fuel.

Back now to the WTO. Last June’s agreement caps fully 24 years of official negotiating, dating back to the Clinton administration’s adoption of fishery subsidy reduction as a WTO cause in the late 1990s. So, quite an accomplishment for governments, activists, scientists, and responsible industry. On the other hand, reaching a consensus on the text was a milestone rather than a final act, and (setting aside big implementation and enforcement jobs), still has two steps to go:

(1) Ratifications and acceptances: The agreement requires ratification by two-thirds of the WTO’s 164 members to go into effect. Only then will countries be required to start cutting back their fishing-fleet enhancement, fuel, and other subsidy budgets. Seven countries have ratified so far: the United States, Canada, Iceland, the Seychelles, Singapore, Switzerland, and the United Arab Emirates.

(2) Unsettled issues: Finally, the agreement has a “provisional” quality, as it left some issues unsettled last year.  WTO members need to settle these to make it permanent. Especially notable among them is treatment of subsidies related to overcapacity. Once in force the agreement will last only for four years and self-terminate if these remaining questions aren’t settled in future talks.

 

 

FURTHER READING:

Counting fish and boats:

FAO’s State of World Fisheries and Aquaculture 2022 reports on fish take, fleets and employment, sustainability and more. A sample, breaking down the 80 million tons of sea catch:

• 67 million tons of fish, led by anchovies, Alaska pollock, and skipjack tuna;
• 5.6 million tons of crustaceans, mostly varieties of shrimp and crab;
• 5.9 million tons of mollusks, topped by squid;
• 0.5 million tons of edible jellyfish, sea urchins, sea cucumbers, and miscellaneous other sea life.

FAO’s report.

UNCTAD’s World Maritime Review 2022, meanwhile, tracks the world’s merchant fleet.

Negotiators and agreement text: 

The WTO’s agreement on fishery subsidies reduction.

A Washington signature ceremony.

Fishery subsidies and sustainability:

Rashid Sumaila et al. in Science Direct tabulate a worldwide $35.4 billion in fishery subsidies by region, purpose, large vs. small ships, and more.

Final thought from the researchers:

“[In the past decade] no real progress to eliminate capacity-enhancing subsidies has been made. For example, fuel subsidies are still the largest subsidy type being provided by countries. This is not good news as this subsidy is the most directly linked to overfishing. A concerted effort by all countries to discipline these subsidies via the WTO or other mechanisms is crucial.  … The fact that countries that fall within the high HDI [“high development index,” a UN index of wealth] group, including Russia and China, provided 87% of total global subsidies is telling. It is clear that to discipline subsidies and safeguard marine fisheries, these countries will need to step up.”

Oceana reports that $5.3 billion worth of subsidies, or a fifth of the world total, go to support fleets operating in other countries’ water.

… and reviews depleted, overfished, and sustainable fisheries.

UNCTAD on subsidies, sustainability, and policy.

And “IUU” (illegal, unreported, unregulated) on the water: 

Track the notorious Vladivostok 2000, steaming this week from Vladivostok to Sakhalin.

The U.S. Coast Guard vs. a Chinese IUU fleet and its diplomatic defenders in the South Pacific.

And a list, regularly updated, of 352 vessels blacklisted by Regional Fisheries Management Organizations for IUU fishing.

 

 

ABOUT ED

Ed Gresser is Vice President and Director for Trade and Global Markets at PPI.

Ed returns to PPI after working for the think tank from 2001-2011. He most recently served as the Assistant U.S. Trade Representative for Trade Policy and Economics at the Office of the United States Trade Representative (USTR). In this position, he led USTR’s economic research unit from 2015-2021, and chaired the 21-agency Trade Policy Staff Committee.

Ed began his career on Capitol Hill before serving USTR as Policy Advisor to USTR Charlene Barshefsky from 1998 to 2001. He then led PPI’s Trade and Global Markets Project from 2001 to 2011. After PPI, he co-founded and directed the independent think tank Progressive Economy until rejoining USTR in 2015. In 2013, the Washington International Trade Association presented him with its Lighthouse Award, awarded annually to an individual or group for significant contributions to trade policy.

Ed is the author of Freedom from Want: American Liberalism and the Global Economy (2007).  He has published in a variety of journals and newspapers, and his research has been cited by leading academics and international organizations including the WTO, World Bank, and International Monetary Fund. He is a graduate of Stanford University and holds a Master’s Degree in International Affairs from Columbia Universities and a certificate from the Averell Harriman Institute for Advanced Study of the Soviet Union.

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FACT: India is now the world’s most populous country.

THE NUMBERS: Annual deaths to natural disasters* –

World population	17.5%
World GDP	3.0%*
World goods/services exports	2.2%

 

* Exchange-rate basis, IMF estimate. The alternative purchasing-power parities calculation gives a GDP share of 5.9%.

WHAT THEY MEAN:

One day towards the end of April, or perhaps in the early days of May, a handful of births and a few memorial services left India (by the U.N.’s estimates) passing China as the world’s most populous country. (Bharat 1.427 billion; Zhongguo 1.426 billion.) A couple of India-in-the-world observations at this point of transition:

1. People: India’s 1.427 billion people represent a bit more than one in six of the world’s 8 billion. Apart from being a shade above China’s now-gently-declining population, the total is (a) about equal to the population of continental Africa, and (b) 200 million more than the 1.24 billion of all high-income countries combined. Put another way, seven of India’s 28 states and Union Territories would be among the world’s 20 most populous countries.

2. Economy: Indian GDP, now fifth-largest in the world after passing France in 2019 and the U.K. in 2020, is about $3.7 trillion and growing at 5.9% by IMF estimates this year.  This puts India at about 3% of the $105 trillion world GDP (with the U.S. at $26.9 trillion, China $19.4 trillion, and the EU $17.8 trillion). Perhaps still modest in comparison to population, but growing faster than all 19 of the other top-20 world economies this year (and also faster than 49 of the world’s top 50, just shaded by the Philippines’ 6.0%).  International Monetary Fund forecasters see enough sustained growth for India to reach $5 trillion in 2027, passing both Germany and Japan that year.

3. Trade flows: India’s presence in trade flows remains particularly small.  As of 2021, India’s $395 billion in goods exports made up 1.8% of a $22.4 trillion world total, at par with Spain and the United Arab Emirates.  Its $240 billion in services exports draws a lot of attention and is in fact larger, but still is only 4% of the $6.0 trillion world services-export total.  Some of this reflects geography — particularly the constant turbulence and frequent border closures with Pakistan — but not all; it’s hard to find explanations outside policy for India’s very small trading relationships with the ASEAN and the East African countries on its east and west.

4. Trade policy: India’s contemporary trade diplomacy inherits powerful swaraj (“self-sufficiency”) instincts, and (at least in the view of two generations of frustrated American trade negotiators) puts more energy toward import limits than export goals. As of 2022, India’s tariff rate is the highest among the 164 WTO members — 18.3% by simple applied average according to the WTO’s World Tariff Profiles 2022, or 12.6% by trade-weighted average. India is also the WTO’s most enthusiastic anti-dumping user, with 775 anti-dumping penalties reported from 1995 through 2022, about a sixth of the 4,463 total known worldwide. One index of the consequences is India’s modest overall share of trade; another one is the particularly low level of trade with neighboring countries — about 3% of ASEAN’s goods exchanged, and 5% of sub-Saharan Africa’s. India’s place in services trade is, however, larger — 4.0% of exports, slightly above India’s GDP share but probably still below potential.

 

FURTHER READING:

The U.N.’s Department of Economic and Social Affairs on a world-population milestone.

The IMF’s World Economic Outlook database tracks and estimates GDP in dollars and by growth rates, imports and exports, and lots more, for all countries.

The WTO reviews Indian trade policy now (or more precisely January 2021; new review coming next year).

India’s Embassy in D.C.

… and the March 2023 U.S.-India Commerce Department/Commerce Ministry joint statement reviews the state of U.S.-India trade and goals for 2024.

Indian Trade policy then: 

The Arthasastra, an encyclopedia-type Sanskrit work traditionally ascribed to the Maurya empire’s 4th century B.C. political fixer Kautilya, has a reasonable claim to be not only the world’s oldest political guidebook but also the oldest trade-policy manual (or even the first think-tank product, translating in English to 800 pages on war, administrative organization, tax, natural resource management, and more, complete with bullet-point format). Quick samples:

As a strategist and diplomat, Kautilya has a pessimistic, probably overly reductive premise:  any bordering kingdom is your enemy; any neighbor of that kingdom, so long as it doesn’t also border you, is your natural ally. As a human resources theorist, he’s practical and not much inhibited by conventional scruples: “Those who are cruel, lazy, and devoid of any affection for their relatives shall be recruited as poisoners.” On the other hand, K. takes a sensible view of natural resource management (designate state forests and limit their exploitation for wood), and views consumer protection as an important government responsibility. His trade advice is precise, profit- and growth-minded, and divides easily into three parts:

(a) Trade facilitation: A wise ruler will appoint officials responsible to keep international trade routes “free from obstruction by courtiers, state officials, thieves, frontier guards, and herds of cattle.” (Note the assumption that the main obstructors are likely to be the king’s own greedy officials.) Also, set up marketplaces in towns and at crossroads to ensure access to imports.

(b) Import promotion: Importers should get special privileges as suppliers of essential goods.  Kautilya recommends (i) exempting the early-India equivalent of the retail and wholesale sectors from taxes imposed on people selling only locally-produced goods, and (ii) allowing them to make 10% profits as opposed to the 5% cap for local business.  Offsetting this, he recommended a 20% ad valorem tariff — coincidentally, almost identical to the 18.3% “simple average applied” tariff the WTO reported for India last year — with the uncharacteristically sentimental exceptions of duty-free treatment for goods meant for weddings, dowries, and religious occasions.

(c) Export policy: Here Kautilya is cautious, apparently reflecting the relatively poor information available to rulers about foreign markets and likewise the high level of physical risk involved in moving valuable stuff past the border. Kings should authorize exports, he says, but only careful investigation shows that (i) their likely selling price would bring a profit after netting out the costs of shipbuilding, harbor and/or road fees, tariffs, and payoffs to royals in the receiving kingdom, or (ii) that exports would bring some other (unstated) “economic, political, or strategic” advantage. He forbids exports of metals, armor, weapons, or other national security assets, and advises a strong armed guard for outbound caravans.

Kautilya’s Arthasastra in modern translation.

And now:

The WTO’s Tariff Profiles 2022 catalogs tariff rates in 145 countries and economies around the world.  These can go into great detail — simple average bound, “non-agricultural,” peaks, etc. A first approximation (using “simple average applied”) looks like this, with Iran and Sudan as the highest-tariff countries in the list (and perhaps the world) to Hong Kong and Singapore among five zero-tariff economies:

Sudan	21.6%
Iran	20.1%
India	18.3%
Brazil	13.3%
Nigeria	12.1%
Jamaica	8.6%
South Africa	7.8%
China	7.5%
El Salvador	6.0%
Malaysia	5.6%
European Union	5.4%
Japan	4.2%
United States	3.4%
Timor-Leste	2.5%
Peru	2.4%
New Zealand	1.9%
Mauritius	0.8%
Singapore	0.0%

The WTO’s Tariff Profiles 2022.

And the WTO’s anti-dumping statistics.

… Or direct to a count of anti-dumping penalties by country, each year from 1995-2022 and with the full 28-year totals.

 

 

ABOUT ED

Ed Gresser is Vice President and Director for Trade and Global Markets at PPI.

Ed returns to PPI after working for the think tank from 2001-2011. He most recently served as the Assistant U.S. Trade Representative for Trade Policy and Economics at the Office of the United States Trade Representative (USTR). In this position, he led USTR’s economic research unit from 2015-2021, and chaired the 21-agency Trade Policy Staff Committee.

Ed began his career on Capitol Hill before serving USTR as Policy Advisor to USTR Charlene Barshefsky from 1998 to 2001. He then led PPI’s Trade and Global Markets Project from 2001 to 2011. After PPI, he co-founded and directed the independent think tank Progressive Economy until rejoining USTR in 2015. In 2013, the Washington International Trade Association presented him with its Lighthouse Award, awarded annually to an individual or group for significant contributions to trade policy.

Ed is the author of Freedom from Want: American Liberalism and the Global Economy (2007).  He has published in a variety of journals and newspapers, and his research has been cited by leading academics and international organizations including the WTO, World Bank, and International Monetary Fund. He is a graduate of Stanford University and holds a Master’s Degree in International Affairs from Columbia Universities and a certificate from the Averell Harriman Institute for Advanced Study of the Soviet Union.

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FACT: Corruption is a large factor in the global economy, but one with few verifiable statistics.

THE NUMBERS: U.S. “corruption perception” ranking, Transparency International –

2022        24th
2020       28th
2017        16th

WHAT THEY MEAN:

Corruption is notoriously difficult to track and measure: hidden from the public for obvious reasons, slippery to define, perhaps meaning one thing in government and other things in businesses, unions, media, nonprofits, etc. Those hoping to put numbers on it find it still harder to get anything very reliable. Even the White House’s June 2021 Memorandum on Establishing the Fight Against Corruption as a Core United States National Security Interest wound up passing on a long-debunked data point. (“It has been estimated that acts of corruption sap between 2% and 5% of global gross domestic product.” See below for a look at the origins of this statistic.) But though particular numbers and definitions may dissolve under examination, broad definitions, general observations, and case studies alike suggest that the White House’s view of corruption as a security threat is well-founded. Three useful approaches:

(1) Definitions – Corruption beyond bribery and crimes: William Riordan’s Plunkitt of Tammany Hall (1905), an admiring/appalled biography-in-interviews of an early 20th century NYC political boss, explains why actual bribery (and by extension other crimes) aren’t always the right things to look for. “With the grand opportunities all around for a man of political pull,” says Plunkitt, “there’s no excuse for stealin’ a cent.”  He viewed taking a bribe as the high-risk, low-reward act of a fool, because the big money was in low-risk, high-reward insider deals. Plunkitt made himself rich through perfectly legal purchases of land he knew NYC would later designate for city parks, which he then sold to the city at much higher prices a few months later. As a more sinister and security-linked modern counterpart, look perhaps to the high-pay, low-work sinecures and Board consultancies Russia’s state energy and mining firms were giving out to retiring Western politicians during the 2010s.

(2) A general approach – Corruption shifts wealth and reduces long-term growth: The IMF’s Paolo Mauro (2021) looks at ways in which corruption can shift taxation and spending, and (over time) eat away at long-term growth and development. He reports that governments in low-corruption countries collect about 4% of GDP more in tax revenue than governments in high-corruption countries, and that in practical terms this suggests that if high-corruption governments reduced corruption rates to those of their low-corruption counterparts, they would gain perhaps $1.25 trillion in revenue. This wouldn’t be “lost,” or “sapped” from global GDP, but would presumably move away from mansion-building and tax-haven accounts to public investment. Moreover, Mauro observes, lower-corruption governments use revenue differently (spending somewhat less of their money on defense and public works and somewhat more on education and public health), and get more growth for the money:

“Grand corruption is usually associated with complex and costly projects such as construction and defense equipment. By comparison, it is harder to collect bribes on teachers’ and health care workers’ wages. As a result, spending on education and health is likely to be lower where corruption is high, making it less likely that worker productivity and living standards will improve.”

(3) A case study – Corruption and the erosion of state legitimacy: In Thieves of State (2015), Sarah Chayes draws on ground-level experience to explain how province- and federal-level corruption hollowed out attempts to build a representative government in Afghanistan, prefiguring the fall of the state:

“Officeholders who had to recoup the money they’d spent buying their jobs would request assignments in zones where cash flowed.  Senior officials, anticipating the sums to be collected, would not try too hard to fill billets in impoverished rural districts.  … An absence of integrity in the system meant that this late in the game [2009] constructive men and women had been stripped out – and by now might want to stay clear. ‘No one would dirty his hands getting near this government,’ a Kandahar-area farmer exclaimed to me once.’” 

In conclusion: The White House might have been a bit quick to pass on an interesting data point. But it’s probably right to view corruption as a national security threat, and to think about ways to do better.

 

FURTHER READING:

Policy: 

The White House’s June 2021 Memorandum designating corruption as a national security threat.

… six months later, the formal “Anti-Corruption Strategy” launch.

… and from this past March, Treasury Secretary Yellen updates.

Analyses and examples: 
    
IMF analyst Paolo Mauro estimates that governments lose about $1 trillion in tax revenue to corruption.

Sarah Chayes’s prescient Thieves of State: Why Corruption Threatens Global Security analyzes the fall of democratic Afghanistan six years before it actually happened.

And William Riordan’s admiring/appalled look at turn-of-the-20th-century American city politics in Plunkitt of Tammany Hall: A Series of Very Plain Talks on Very Practical Politics.

A cautionary statistical tale:

Where did the White House figure come from? To refresh, the June 2021 Memorandum asserted that: “it has been estimated that acts of corruption sap between 2 and 5 percent of global gross domestic product.” Others — the U.N. Secretary General, academic analysts, etc. — had used variants of this before, often adding a figure of “$2.6 trillion” to the percentage. A January 2021 note by the World Bank’s Anti-Corruption Resource Center tracked this back through a quarter-century of quotations and extrapolations, to a 1998 speech on money laundering (a different though related topic) by then-International Monetary Fund Managing Director Michel Camdessus. Camdessus had cautiously suggested that the ratio of annual laundering flows to global GDP might be 2% to 5%. A separate organization appears to have inappropriately converted this in 2008 from a “flow” to a “net cost to global GDP” and derived the $2.6 trillion in losses from it.  (World GDP in 2007 was $58 trillion.)  The WB group’s plea: “No organisation or advocate should cite this statistic under any circumstances.”

The WB fact-checks 10 frequently cited corruption stats, and finds not even one of them usable.

… a similar error from the UN Secretary-General (2018).

… and a depressing coda, in which the WB press office encourages lazy tweeters to forward a short sentence that seems more likely to aggravate the problem than to warn over-eager analysts away. (“A popular estimate is that more than $2.6 trillion, or 5% of global GDP, is lost to corruption annually around the world.”)
  
Another approach:

What then might be a useful measurement? One very well-known approach is that of Transparency International, a 30-year-old NGO which else publishes an annual Corruption Perceptions Index. This is a kind of global opinion poll asking how corrupt the respondents think various governments and institutions might be. Their most recent edition, released in January 2023 and covering perceptions as of late 2022, ranks 180 countries. It places Denmark, Finland, and New Zealand at the very top; North Korea, South Sudan, and Somalia at the bottom; and India exactly in the middle.  The U.S. is in 24th place. This is an improvement from the 28th-place ranking of 2020, enough to America’s anti-corruption image above those of Taiwan, Bhutan, Chile, and the United Arab Emirates, but still well below the 16th-place ranking in the 2017 Index (and only sixth among the G-7 countries). TI’s summary suggests that the U.S.’ not-entirely-savory reputation reflects perceptions less of corruption in state/federal bureaucracies or of private-sector businesses than of a deteriorating political system:

“The [U.S.’] lack of progress on the CPI [Corruption Perceptions Index] can be explained by the persistent attacks on free and fair elections, culminating in a violent assault on the U.S. Capitol, and an increasingly opaque campaign finance system.”

Transparency International’s 2022 Corruption Perceptions Index, with links to earlier Indexes back to 1995.

 

 

ABOUT ED

Ed Gresser is Vice President and Director for Trade and Global Markets at PPI.

Ed returns to PPI after working for the think tank from 2001-2011. He most recently served as the Assistant U.S. Trade Representative for Trade Policy and Economics at the Office of the United States Trade Representative (USTR). In this position, he led USTR’s economic research unit from 2015-2021, and chaired the 21-agency Trade Policy Staff Committee.

Ed began his career on Capitol Hill before serving USTR as Policy Advisor to USTR Charlene Barshefsky from 1998 to 2001. He then led PPI’s Trade and Global Markets Project from 2001 to 2011. After PPI, he co-founded and directed the independent think tank Progressive Economy until rejoining USTR in 2015. In 2013, the Washington International Trade Association presented him with its Lighthouse Award, awarded annually to an individual or group for significant contributions to trade policy.

Ed is the author of Freedom from Want: American Liberalism and the Global Economy (2007).  He has published in a variety of journals and newspapers, and his research has been cited by leading academics and international organizations including the WTO, World Bank, and International Monetary Fund. He is a graduate of Stanford University and holds a Master’s Degree in International Affairs from Columbia Universities and a certificate from the Averell Harriman Institute for Advanced Study of the Soviet Union.

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FACT: Louisiana is the U.S.’ top exporting state.

THE NUMBERS: Export share of state “GDP,” 2022, goods only –

Louisiana	43.4%
Texas	20.6%
Oregon	11.4%
Alabama	9.2%
Indiana	9.9%
Washington	8.4%
Wisconsin	6.8%
Pennsylvania	5.4%
Massachusetts	4.8%
New Mexico	3.9%
D.C.	1.0%
Hawaii	0.7%

* Goods only (manufactures, agriculture, energy, mining, returns, waste & scrap, low-value shipments); no data exists for state services exports.

WHAT THEY MEAN:

A note from Virginia electric co-op newsletter “Cooperative Living” last week tallies farms and trade: 41,500 Virginia farms export $4 billion a year to 152 countries, topped by China at $1.36 billion, then Canada, Taiwan, Mexico, and Japan at $362 million, $161 million, $140 million, and $129 million.

Their piece draws on work at the Census, Department of Agriculture, and the Bureau of Economic Analysis, whose stat experts over the past decade become steadily more ambitious and precise in tracking exports down to states, cities, and “metro areas.” Their data — try in particular the Commerce Department’s “TradeStats Express” — show that (a) Virginia overall is very close to the “typical” state, placing exactly 24th in 2022 with $25 billion in total exports; (b) is one of 34 states for whom Canada is the top overseas (if that’s the right term) customer, and one of 13 whose top ag market is China; and (c) together with the agriculture exports comes in at $5.8 billion in energy, $2.2 billion in computers and electronics, and $1.4 billion worth of paper (fifth-ranked in the country); $631 million in waste and scrap metal for recycling, $188 million in pesticides and “other agri-chemicals,” and so on.

To produce such figures is challenging. Manufactured goods, for example, are usually composite assemblies of parts made in lots of places rather than monoliths built from scratch at a single site. (If a car has an engine made in Ohio, a windshield made of Kentucky glass, a chassis from Indiana metals, computers using semiconductor chips in Arizona, all coming together at a Michigan factory, the logical and preferred — but still not totally satisfying — answer is that it’s “from” Michigan.) Agricultural exports are even more hotly disputed: One Department calculates totals based on the location of the port or railhead where river barges and containers full of (say) soybeans come together to load for shipment abroad, and counts processed foods as manufactured goods, while another uses average production value by state and counts processed foods as agricultural products.  And nobody has figured out a way to calculate state services exports. But these points noted, the government’s upgraded state data make one thing very clear, make a lot of things pretty clear, and provide many interesting points to say about state specialties, regional economies, and their links abroad:

Very clear: As of 2022, Gov. John Bel Edwards’ Louisiana is the king of state exporters.  Louisiana’s $122 billion in exports last year — more than double the $56 billion in 2017 — gives the state a 43% export-share-of-GDP ratio when matched against its $281 billion GDP.  This is twice the 20.6% ratio of second-place Texas. The boom mainly reflects the roaring growth of U.S. energy exports centered around Louisiana’s three specially designed liquefied natural gas export terminals. (Since 2021, the U.S. has been the world’s top energy exporter, with gas and oil, and the smaller coal/electricity/biofuels sectors, accounting for 18.4% of U.S. exports last year, an all-time record far above the 13.2% peak achieved in the 1920s.)

A look at the top five state export-to-GDP ratios illustrates:

Louisiana       43.4%
Texas             20.6%
Puerto Rico   17.0% (2021)
Kentucky       13.2%
Mississippi     11.8%

Pretty clear: The remaining 46 states and D.C. fall in a range from sixth-place Oregon’s 11.4% through the 5% to 7% common in the Northeast, to the lowest export-to-GDP ratios (D.C.’s 1.0% and Hawaii’s 0.7%). Finding patterns is tricky given that some of the data remain blurry, especially for small, agriculture-reliant inland states. But overall, Southern and Midwestern states appear on average somewhat more export-reliant than East Coast and West Coast states.  Measured in total dollars, Texas (benefiting, like Louisiana, from a gas and oil surge) is easily the top exporter at $486 billion, with California a distant second at $186 billion. (Though, given the absence of services data, this doesn’t include anything Californians may possibly be earning from overseas sales of software, movies showings, music downloads, etc.). Louisiana’s $122 billion is third, followed by New York’s $106 billion and Illinois’ $78 billion. The next five are Florida, Washington, Michigan, Ohio, and Pennsylvania.

Lots of Information: TradeStats Express lets you arrange the data in an unusual variety of ways: by overseas markets, by single products, in-depth panoramas for particular states, comparisons among neighboring states, etc. For example, Texas is by far the top state exporter to sub-Saharan Africa at $5.1 billion of a nationwide $18 billion; Pennsylvania, meanwhile, is the U.S.’ top exporter of sugars and confectionery, while Florida leads in ships and boats, and California in mushrooms.  As to farmed fish, Maine exports over two-thirds of the U.S. total. Or, as noted earlier, Canada is the top market for 34 states, while among the rest, Mexico is the top market for six states (Arizona, California, Kansas, Nebraska, New Mexico, Texas); China for four (Alaska, Washington, Oregon, and Massachusetts); Germany for two (Alabama and Connecticut); the U.K. for one state (Utah) and the District of Columbia; and one each for Brazil, (Florida), Singapore (Hawaii), Switzerland (New York**) and the Netherlands (Puerto Rico). Or, a few single-state studies:

1. Arizona: On the bottom-left corner of the map, Arizona’s $27 billion in exports rank 20th in total dollars, in a three-way tie with Virginia and Minnesota. Mexico is Arizona’s main customer, buying $8.7 billion or about a third of the $27 billion total. Canada is second, followed by China and the Netherlands. Top products are aerospace ($4.6 billion), semiconductors and electronics ($4.4 billion), and old-standard metal ores ($2.2 billion).

2. Illinois: The U.S.’ fifth-largest exporter at $78 billion in 2022, Illinois relies especially heavily on Canadian and Mexican customers ($23.8 billion and $11.7 billion respectively).  Australia is the third-largest at $4.6 billion, buying mainly farm equipment and medicines, followed by Germany and China. Illinois beats California and Texas as top exporter to Australia, and ranks 4th for New Zealand.

3. Kentucky: Gov. Andy Beshear’s justifiably enthusiastic press release notes heavy international investment in Kentucky business: “Kentucky’s international presence includes more than 500 facilities that employ almost 115,000 people and represent 33 different countries.” His trade experts, obviously adept followers of the Census and BEA stats, report exports of $34.4 billion led by “aerospace products and parts, pharmaceuticals and medicines, motor vehicles”, etc., with Canada, Mexico, the U.K., China, and France as the Kentucky’s top five buyers.

4. Oregon: The most “export-intensive” state in the West in 2022, with exports accounting for 11.4% of Oregonian GDP. China is easily the top market, buying $8.3 billion of Oregon’s $34 billion in total exports, mostly semiconductors and related high-tech electronics.  Next come Mexico, Canada, Malaysia, and Ireland.

5. Puerto Rico: The Commonwealth’s $20.7 billion in exports are very concentrated in pharmaceuticals, which make up $16.3 billion or nearly 80% of the total.  Most go to Europe: $3.5 billion to Spain, $3.4 billion to the Netherlands, and $1.3 billion to Italy, with Japan and China next, followed by Belgium, Germany, and Austria.  The only Caribbean neighbor in Puerto Rico’s top 20 markets is the Dominican Republic, in 11th place at $465 million.

6. Vermont: And in the map’s top right corner, with $2.5 billion in 2022 exports, Vermont ties New Hampshire as the most export-reliant Northeastern state. (6.2% of Vermont’s $40.6 billion GDP.)  Semiconductors and other electronics account for about half of the total, with Canada the top market at $777 million, Taiwan second at $465 million, and China third at $211 million.  Note the $54 million in sugars and confectioneries — presumably the iconic “sweetest thing,” maple syrup and maple sugar — all destined for Canada.

* Using 2021 exports and ‘GDP’ for Puerto Rico, as the 2022 figures aren’t yet available.
** A 2022 anomaly, probably reflecting a one-year surge in gold exports; typically Canada is New York’s top market.

 

 

FURTHER READING:

From the states: 

Cooperative Living (pg. 35) has a snapshot of Virginia farm exports.

???? King of exports: Louisiana Gov. John Bel Edwards pitches natural gas exports and investment opportunities in Asia last March.

Kentucky Governor Andy Beshear on Kentucky’s global investment/SME export boom.

Puerto Rico’s export development program.

Data sources: 

BEA’s interactive & visualization data masterpiece.

Census’ convenient one-page state and metro-area trade data reports.

… and behind the numbers, a look at how Census tracks the figures back to local origins and the places they begin to blur.

USDA’s state agricultural trade data.

… and as with Census above, an explanation of how USDA’s Economic Research Service calculates origins.

BEA’s state GDP figures.

And for international context and comparisons, the WTO’s World Trade Statistical Review 2022 (2021 data; next annual edition likely in November).

 

 

ABOUT ED

Ed Gresser is Vice President and Director for Trade and Global Markets at PPI.

Ed returns to PPI after working for the think tank from 2001-2011. He most recently served as the Assistant U.S. Trade Representative for Trade Policy and Economics at the Office of the United States Trade Representative (USTR). In this position, he led USTR’s economic research unit from 2015-2021, and chaired the 21-agency Trade Policy Staff Committee.

Ed began his career on Capitol Hill before serving USTR as Policy Advisor to USTR Charlene Barshefsky from 1998 to 2001. He then led PPI’s Trade and Global Markets Project from 2001 to 2011. After PPI, he co-founded and directed the independent think tank Progressive Economy until rejoining USTR in 2015. In 2013, the Washington International Trade Association presented him with its Lighthouse Award, awarded annually to an individual or group for significant contributions to trade policy.

Ed is the author of Freedom from Want: American Liberalism and the Global Economy (2007).  He has published in a variety of journals and newspapers, and his research has been cited by leading academics and international organizations including the WTO, World Bank, and International Monetary Fund. He is a graduate of Stanford University and holds a Master’s Degree in International Affairs from Columbia Universities and a certificate from the Averell Harriman Institute for Advanced Study of the Soviet Union.

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FACT: Height of papers needed to qualify T-shirt as ‘CAFTA duty-free’: ~ four inches.

THE NUMBERS: U.S. clothing import growth, 2005-2022* –

World	+$30.2 billion
Vietnam	+$15.7 billion
Bangladesh	+$7.3 billion
China	+$4.0 billion
Cambodia	+$2.8 billion
India	+$2.8 billion
Indonesia	+$2.8 billion
Pakistan	+$1.6 billion
CAFTA/DR**	+$1.4 billion
Jordan	+$0.9 billion
Egypt	+$0.8 billion
Italy	+$0.8 billion
Haiti	+$0.6 billion
Kenya	+$0.3 billion
Ethiopia	+$0.3 billion
Peru	+$0.2 billion
Colombia	-$0.3 billion
Korea	-$1.0 billion
Mexico	-$2.6 billion
Hong Kong	-$3.5 billion

* * Counting from completion of CAFTA/DR. See below for a more recent count of change 2012-2022.
** Guatemala, El Salvador, Honduras, Nicaragua, Costa Rica, and the Dominican Republic as a group.  More detail: Nicaragua +$2.0 billion, Honduras +$0.6 billion, El Salvador +$0.3 billion, Guatemala +$0.1 billion, Costa Rica -$0.5 billion, Dominican Republic -$1.2 billion.

WHAT THEY MEAN:

CBP’s “border encounter” statistics show about 34,000 Central Americans reaching the U.S.’ southern border each month so far this year. Ten years ago, following their trek north in his book The Beast* (2010) Salvadoran journalist Oscar Martinez recounts stories of gang kidnappings and extortion, rape and sexual abuse, fatal falls from the roofs of trains along the way, and likely arrest at the end. Asking himself in closing why anyone would make such a trip, Martinez decides that the largest cause is simple:

“They’re unable to accept that miserable routine of waking up at five in the morning to travel two hours on a dangerous public transit system to get to a fast-food restaurant or a market or a warehouse in San Salvador, or Tegucigalpa, or Guatemala City, where they spend the whole day toiling away at undignified work only to return to their small homes, dog-tired, making a measly minimum wage that barely lets them afford beans and tortillas for their children.”

Vice President Kamala Harris makes a similar comment in a February conference on the “Northern Triangle” (Guatemala, Honduras, and El Salvador):

“[P]eople generally do not want to leave home.  And when they do, it is because they are either fleeing some harm or because staying home will mean that they cannot satisfy the basic needs of their family and themselves.”

The conclusion drawn from their comments — that if the U.S. has a particular interest easing political stress and migration pressure in Central America, American policy should encourage investment and higher-quality employment — has a forty-year history. Four decades ago, the Ronald Reagan/Tip O’Neill “Caribbean Basin Initiative” aimed to encourage clothing-making in Central America by waiving U.S. tariffs under a complex legal formula known as “Section 807,” which offered buyers of Central American-made clothes duty-free treatment so long as the shirts, blouses, etc. were made of U.S.-produced fabric. The hope was that a growing garment industry would create many jobs, dampen the economic volatility arising from heavy reliance on fruit and coffee exports, reduce the social temperature, and so ease peace-making. A decade later, Central American maquiladora factories — long lines of sewing machines operated by young women; complementary male employment in factory repair, and transport — provided $4.8 billion of America’s $39.4 billion in clothing imports, or about eighth (by value) of the total.

After 20 years, the “CAFTA-DR” – the full and permanent Free Trade Agreement now joining the U.S. with Guatemala, El Salvador, Honduras, Nicaragua, Costa Rica, and the Dominican Republic – replaced the CBI in phases from 2005 through 2009. Its hope was that a permanent agreement would make the region more competitive and build buyer confidence. But in practice, this hasn’t exactly happened. Though Central America’s clothing trade has grown a bit in dollar terms, despite its tariff advantage the region’s share of U.S. imports has dropped from 12.3% in 2005 to 10.1% in 2022. Though CAFTA-DR clothes have no tariff, while as of 2022 Asian clothes were taxed at an average of 18.8%,** most new clothing imports in the last two decades have come from Asia. (China in the 2000s, Vietnam and Bangladesh in the 2010s and 2020s). Also a bit striking: imports from FTA partner Jordan and ‘preference’ beneficiary Haiti (which operates under another upgrade of CBI rather than a free trade agreement), though smaller overall, have grown much faster than imports from the CAFTA-DR countries.

Why?  A plausible explanation is the complexity and costliness of the CAFTA/DR agreement. Like its CBI predecessor, CAFTA-DR retains a clause — known as a “yarn-forward rule” in apparel-trade jargon — requiring nearly all of (say) a T-shirt’s cloth and yarn*** to be made in the U.S. or a CAFTA country to qualify it for duty-free status. This means very restricted supply options for garment factories — to cite FTA partners only, no high-quality Peruvian cotton, no Colombian cloth, no Korean yarn or thread. Furthermore, CAFTA/DR includes a 143-page list of “product-specific rules of origin” writing special provisions for individual products meant to suit the very specific business models of many individual U.S. firms as of 2005. As a case in point, the agreement’s denim rules were meant to guide Central American manufacturers to fabric from a particular U.S. mill in North Carolina. As a sample of the daunting legal language this entails, here’s a passage drawn from the 2007 “textile amendment” requiring users to monitor the width of wool in the lining of jackets and skirts down to the half-micron:

“Chapter Rule 1 Except for fabrics classified in tariff item 5408.22.aa, 5408.23.aa, 5408.23.bb, or 5408.24.aa, the fabrics identified in the following headings and subheadings, when used as visible lining material in certain men’s and women’s suits, suit-type jackets, skirts, overcoats, carcoats, anoraks, windbreakers, and similar articles, other than men’s and boys’ and women’s and girls’ suits, trousers, suit-type jackets and blazers, vests, and women’s and girls’ skirts of wool fabric, of subheadings 6203.11, 6203.31, 6203.41, 6204.11, 6204.31, 6204.51, 6204.61, 6211.39, or 6211.41, provided that such goods are not made of carded wool fabric or made from wool yarn having an average fiber diameter of less than or equal to 18.5 microns, must be both formed from yarn and finished in the territory of one or more of the Parties: 51.11 through 51.12, 5208.31 through 5208.59, 5209.31 through 5209.59, 5210.31 through 5210.59, 5211.31 through 5211.59, 5212.13 through 5212.15, 5212.23 through 5212.25, 5407.42 through 5407.44, 5407.52 through 5407.54, 5407.61, 5407.72 through 5407.74, 5407.82 through 5407.84, 5407.92 through 5407.94, 5408.22 through 5408.24, 5408.32 through 5408.34, 5512.19, 5512.29, 5512.99, 5513.21 through 5513.49, 5514.21 through 5515.99, 5516.12 through 5516.14, 5516.22 through 5516.24, 5516.32 through 5516.34, 5516.42 through 5516.44, 5516.92 through 5516.94, 6001.10, 6001.92, 6005.31 through 6005.44, or 6006.10 through 6006.44.

Compliance with these rules requires 31 classes of documents ranging from bills of lading and employee time-cards to contracts with dyers and finishers, invoices, proofs of payment and so on; the resulting sheaf of paper is said typically to be about four inches high. Apart from the cost and lawyer-hours involved in verifying all this, rules designed for specific products from particular factories tend to lose relevance over time. In the denim case, the plant in question closed after a chemical accident in 2017, and since then Guatemala, El Salvador, and Honduras have stopped selling jeans to the U.S.

Thus CAFTA producers have been treading water as full-tariff competitors in Southeast Asia boomed. The Jordan agreement and the Haiti programs, simpler as they require only a showing of local added value rather than requiring detailed sourcing, appear much more successful.

Turning back now to Martinez’ journalism and Vice President Harris’ observation, the main point – to lower social temperatures and reduce migration pressure — still seems like a strong one. With it in mind, can we do better?  Could individual pieces of the CAFTA/DR that are no longer relevant – perhaps the denim piece — be scrapped? Could Congress allow Central American factories to use cloth and yarn from FTA partners, or Latin America generally? Or perhaps the whole thing might be redone, merged with the “USMCA” and the string of smaller FTAs going south from Panama to Colombia, Peru, and Chile?

* A bit dated as a description of the migrant route around 2010, but still relevant. ‘The Beast’, La Bestia, is a migrant nickname for southern Mexican freight trains.
** Counting Chinese products, many of which are subject to the Trump administration’s additional “301” tariffs. The 2022 rate for Asian clothes excluding Chinese-made goods was 16.6%.
*** Using a cotton T-shirt because this (HTS 61091000) is the top import from the CAFTA/DR countries, at $2.8 billion of the U.S.’ $35 billion in total imports (everything, clothes, coffee, oil, mangoes, etc.) from these countries last year. 

 

FURTHER READING:

Harris on Central America strategy this February.

The White House’s “Root Causes of Migration” strategy document.

And Ronald Reagan’s 1982 Caribbean Basin Initiative message.

Book recs: 

On migrants: Martinez’ The Beast: Riding the Rails and Dodging Narcos on the Migrant Trail.

… and for clothing-trade background: (as with Martinez’ book, slightly dated but still full of insights), Pietra Rivoli’s Travels of a T-shirt in the Global Economy (2005).

Data:

Customs and Border Patrol tabulate border ‘encounters’.

Clothing and textile import data in various forms from the Commerce Department’s Office of Textiles and Apparel.

The CAFTA/DR:

Full agreement text for CAFTA/DR; see Chapter 4, Annex 4.1 and “Textiles Amendment” for clothing rules.

An alternative clothing-import table:

The chart at the top counts from the signature of CAFTA/DR in 2005. A more recent count, looking at the decade 2012 to 2022 would be somewhat different, with China down rather than up, Vietnam and Bangladesh getting almost 2/3 of all new imports, and slightly higher growth for the CAFTA/DR countries. Same table, though a bit shorter:

World	+$23.6 billion
Vietnam	+$11.3 billion
Bangladesh	+$5.3 billion
India	+$2.8 billion
CAFTA/DR	+$2.7 billion*
Cambodia	+$2.0 billion
Pakistan	+$1.4 billion
Jordan	+$1.0 billion
Italy	+$1.0 billion
Sri Lanka	+$0.7 billion
Indonesia	+$0.7 billion
Turkey	+$0.7 billion
Egypt	+$0.5 billion
Haiti	+$0.6 billion
Peru	+$0.4 billion
Madagascar	+$0.4 billion
Burma	+$0.4 billion
Kenya	+$0.3 billion
Ethiopia	+$0.3 billion
Colombia	+$0.1 billion
Mexico	-$0.2 billion
China	-$8.4 billion

*Within CAFTA/DR, totals are Nicaragua +$1.4 billion, Guatemala +$0.7 billion, Honduras +$0.6 billion, El Salvador +$0.1billion, Dominican Republic unchanged, Costa Rica -$0.2 billion.

 

 

 

 

ABOUT ED

Ed Gresser is Vice President and Director for Trade and Global Markets at PPI.

Ed returns to PPI after working for the think tank from 2001-2011. He most recently served as the Assistant U.S. Trade Representative for Trade Policy and Economics at the Office of the United States Trade Representative (USTR). In this position, he led USTR’s economic research unit from 2015-2021, and chaired the 21-agency Trade Policy Staff Committee.

Ed began his career on Capitol Hill before serving USTR as Policy Advisor to USTR Charlene Barshefsky from 1998 to 2001. He then led PPI’s Trade and Global Markets Project from 2001 to 2011. After PPI, he co-founded and directed the independent think tank Progressive Economy until rejoining USTR in 2015. In 2013, the Washington International Trade Association presented him with its Lighthouse Award, awarded annually to an individual or group for significant contributions to trade policy.

Ed is the author of Freedom from Want: American Liberalism and the Global Economy (2007).  He has published in a variety of journals and newspapers, and his research has been cited by leading academics and international organizations including the WTO, World Bank, and International Monetary Fund. He is a graduate of Stanford University and holds a Master’s Degree in International Affairs from Columbia Universities and a certificate from the Averell Harriman Institute for Advanced Study of the Soviet Union.

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FACT: Korea, the world’s most robotic country.

THE NUMBERS: Robot installations, 2021* –

“Industrial”                       517,000
  Electronics                    136,000
Automotive                   121,000
All other                        260,000
Specialized services        121,000
“Consumer”                     19 million

* International Federation of Robotics, 11/22

WHAT THEY MEAN:

Reporting from Guangzhou last November, Reuters finds Chinese workers losing interest in manufacturing work:

“More than 80% of Chinese manufacturers faced labor shortages ranging from hundreds to thousands of workers this year, equivalent to 10% to 30% of their workforce, a survey by CIIC Consulting showed. China’s Ministry of Education forecasts a shortage of nearly 30 million manufacturing workers by 2025.”

The article’s young blue-collar Chinese interlocutors now prefer additional education or finding jobs in services (and a startlingly large number, Reuters also says, are “adopting a minimal lifestyle known as ‘lying flat,’ doing just enough to get by and rejecting the rat race of China Inc.”) China’s factories seem, however, to be adapting – in part by trying to offer higher wages, but also by hiring metal and plastic stand-ins. The International Federation of Robotics’ annual snapshot of the robot universe, World Robotics 2022, reports that over half of last year’s 517,385 newly employed industrial robots last year went to work in China, and that Chinese factories are now more robot-heavy than America’s:

“Every other robot globally installed in 2021 ended up in China: Installations surged by 51% to 268,195 units.”  

On a broader scale, IFR’s report divides the new-robot picture into three parts:

Industrial robots: Last year’s Chinese robot surge was unusually large, but also reflects a trend sustained over the past decade. China is now by far the world’s top industrial-robot employer, home to 1.22 million working factory robots, or over a third of the world’s 3.48 million total. A contributor to this is the shifting industry-sector balance of robot use: auto plants (especially in the U.S., Japan, Korea, and Germany) were the first and historically the largest employers of robots, but have been surpassed at least in raw numbers by the electronics industry.

By this total count, China is the world’s robot metropolis. A different perspective — the ratio of robots to human workers — finds neighboring Korea easily eclipsing even China’s mighty robot army. The Korean government reports exactly 1,000 robots for every 10,000 Korean factory workers, far ahead of second-place Singapore’s 670 robots per 10,000 factory workers. After them comes Japan at 399 and Germany at 397; China is sixth at 322; and Taiwan and the U.S. essentially tie for eighth at 276 and 274 respectively. (The world average is 141.)  Japan, finally, is likely the industrial-robot production center; though this year’s report doesn’t have a figure, last year’s cited Japan as producing 45% of industrial robots.

Specialized services robots: Robot services professionals are fewer in numbers than their proletarian factory cousins — 121,000 new ones last year, about a quarter of the 517,000 new industrials — and (like the human “services sector”) are very diverse. The largest group, 49,500, went to work in logistics, carrying packages in warehouses and delivery centers, and moving industrial components through factories. Another 20,000 took “hospitality” jobs, such as ferrying food from kitchen to table in large restaurants* or greeting customers; 14,800 went to work in hospitals, clinics, or emergency medical services, 12,600 in industrial cleaning work, and about 8,000 in farms, dairy, and ranching. IFR’s report regrettably doesn’t have figures on the countries in which these high-skill robots are lighting up, but notes that (in some contrast to the industrial-robot world, where Japan is the largest producer and neighbors Korea and China the leading users), the U.S. is the largest services-robot manufacturer.

Homes: Finally, 19 million humble domestic robots went to work in homes, mainly for interior cleaning and vacuuming, but also for lawn-mowing.

* The Trade Fact series editor encountered two attentive and polite restaurant robots at a restaurant in Chiang Rai in the northern reaches of Thailand in February. Thai industrial-robot installation rose by 36% last year, to about 4,000.

 

FURTHER READING:

Chinese workers not so interested in factory jobs.

… but no worries, here are the metal and plastic replacements. Global highlights from the International Federation of Robotics’ World Robotics 2021.

… and IFR’s closer looks at industrial and services robots.

The New York-based Institute of Electrical and Electronics Engineers has a weekly new-robot video. Try the prototype seabed-cleaning jellyfish-robot.

… and also has a sentimental look back at Unimate, the first operating industrial robot (1961, GM plant, New Jersey).

Industry and research international: 

Most roboticized country: The Korean Association of Robot Industry.

Largest producer: The Robotics Society of Japan.

This one may not pan out: Thai gourmets develop a robot for verifying ingredient-authenticity, aroma, and general tastiness of tom yam.

A 17-point robotics and application plan from China’s Ministry of Industry and Information Technology.

Singapore has a robot-police patrol dedicated to scolding people.

A few looks ahead, and one look back, from robot arts and lit:

Capek’s R.U.R. (1921) invented the word “robot,” and the classic “robot uprising” plot. The title acronym stands for a fictional “Rossum’s Universal Robots” company, with “Rossum” a slightly modified version of the Czech word for “reason,” and “robot” likewise an adapted term for “worker.” A Penn State robotics academic looks at R.U.R. a century later.

In robot-friendly Japan, by contrast, Astro-Boy (said to be the first anime character) is a helpful friend to humanity.

Stanislaw Lem’s “Mortal Engines” collection speculates about machine intelligence. In “The Hunt”, a well-meaning human pilot volunteers to destroy a supposedly mad robot; next, in “Mask,” a troubled, self-aware female robot-assassin tracks down a political dissident.

Philip K. Dick thought humans and robots would lose the ability to distinguish themselves from one another.

And Adrienne Mayer’s Gods and Robots: Myths, Machines, and Ancient Dreams of Technology takes the long look back, at visions of androids, flying cars, computers, and other semi-inventions in classical Greece, with comparators from India, Babylon, and the mechanical men of the Qin Dynasty court.

 

 

ABOUT ED

Ed Gresser is Vice President and Director for Trade and Global Markets at PPI.

Ed returns to PPI after working for the think tank from 2001-2011. He most recently served as the Assistant U.S. Trade Representative for Trade Policy and Economics at the Office of the United States Trade Representative (USTR). In this position, he led USTR’s economic research unit from 2015-2021, and chaired the 21-agency Trade Policy Staff Committee.

Ed began his career on Capitol Hill before serving USTR as Policy Advisor to USTR Charlene Barshefsky from 1998 to 2001. He then led PPI’s Trade and Global Markets Project from 2001 to 2011. After PPI, he co-founded and directed the independent think tank Progressive Economy until rejoining USTR in 2015. In 2013, the Washington International Trade Association presented him with its Lighthouse Award, awarded annually to an individual or group for significant contributions to trade policy.

Ed is the author of Freedom from Want: American Liberalism and the Global Economy (2007).  He has published in a variety of journals and newspapers, and his research has been cited by leading academics and international organizations including the WTO, World Bank, and International Monetary Fund. He is a graduate of Stanford University and holds a Master’s Degree in International Affairs from Columbia Universities and a certificate from the Averell Harriman Institute for Advanced Study of the Soviet Union.

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FACT: U.S. Customs seizes 75 shipments of counterfeit goods imports each day.

THE NUMBERS: Counterfeit goods seizures by U.S. Customs* –

FY2021 value             $3.3 billion
Number of seizures    27,115

FY2016 value             $1.4 billion
Number of seizures    31,560

FY 2011 value            $1.1 billion
Number of seizures    24,792

* CBP data; “value” is at the “Manufacturers Suggested Retail Price” of an authentic item.

WHAT THEY MEAN:

Here’s fashion magazine Allure with a closeup on the criminal fringe of the global manufacturing economy, through the lens of a 2016 seizure of counterfeit perfume in New York:

“Five men have been arrested in New York by U.S. Immigration and Customs (ICE) for knowingly selling counterfeit designer perfumes made with ingredients including antifreeze and urine across at least seven states … The authorities reportedly recovered approximately 10,000 boxes of the faux scents, whose ingredients included the aforementioned urine and antifreeze along with ‘other unpleasant, flammable, or dangerous chemicals that burn when applied to the skin.’ ”  

Background: The most recent big-picture study of trade in counterfeits, a 2021 report from the OECD, estimated an upper limit of $464 billion worth of counterfeit goods flowing across borders in 2019.  This would have been 2.5% of that year’s $19.8 trillion in goods exports — not much different from the 3.3% counterfeit share they estimated for 2016 and the same as their 2.5% estimate for 2013. By the OECD’s account, 90% of counterfeit goods come from five places — China, Hong Kong, Singapore, Turkey, and the United Arab Emirates — and the most frequently counterfeited products include shoes, clothes, perfumes and cosmetics (making Allure‘s New York arrest story a pretty representative case), along with watches and leather products like luggage and handbags.

U.S. counterfeit seizure statistics likewise seem to show a fairly stable level of counterfeit trade (or at least of interdictions of counterfeit goods) over the past decade, after a sharp rise in the 2000s. CBP’s FY2011 report tallied 24,792 seizures of counterfeit shipments (about 70 each day), and the 2016 report noted a higher total, at nearly 32,000.  The 2021 total, at 27,115 seizures, was in between. Three ways to look at these totals:

(a) Number and kind of products: The 27,115 seizures in 2021 in turn brought in over 115,000 different “lines” of products, which reflect OECD’s report on the most frequently counterfeited goods fairly well: 73,367 seizures of counterfeit designer clothes, shoes, and luggage; 3,155 of personal products like the counterfeit perfumes, medicines, and medical products (including, in that troubled year, 35 million substandard masks and 38,154 useless or dangerous faux-COVID test kits); 5,380 sets of consumer electronics items, and 1,083 shipments of aircraft and auto parts.

(b) Origins: Here the U.S. statistics slightly differ from those of the OECD.  As with OECD, they report China and Hong Kong as the top sources, accounting for 51,787 of the 115,000 “lines” of counterfeit goods, and also have Turkey in third with 10,781 lines.  The remaining two are the Philippines with 6,416, and Colombia with 5,912.

(c) Transport methods: Counterfeit goods most frequently travel to the U.S. (assuming that CBP’s seizure statistics more or less accurately reflect the counterfeiting industry’s logistics choices) by express deliveries and mail shipments. CBP’s figures show 16,926 of the seized shipments arriving via express delivery, while 7,293 arrived by mail, 2,274 by maritime cargo, and 622 by unspecified other methods. The maritime cargo seizures, however, were apparently very large and valuable; weighted towards consumer electronics counterfeits, they accounted for $1.5 billion or half the total value of all seizures.

The amount of counterfeit goods which get all the way to consumers is by nature uncertain. The CDC, looking closely at medicine, says that “in high-income countries, such as the United States, less than 1% of medicines sold are counterfeit.” Medicines, though, are presumably an area where providers are especially cautious and law enforcement especially vigilant.  CBP’s advice to consumers (and the message implicit in Allure’s graphic description of counterfeit perfume ingredients), though, is to be careful with what you buy: “Counterfeit products are low quality and can cause injuries or even death when used.”

 

 

FURTHER READING:

Ewww – Allure (2016) on the gross ingredients and nasty side-effects of counterfeit perfume.

… and a similar report this week from CBP, on a seizure of 150 parcels containing 744 counterfeit Botox shipments this Monday in Louisville.

CBP’s one-page, three-point guide for consumer awareness.

CBP explains policy in Finance Committee testimony (2018).

… and from the U.S. Trade Representative Office, this morning’s “Special 301” report on intellectual property reviews counterfeiting law and enforcement on pp. 16-20.

U.S. seizure data: 

The Customs Service’s annual reports on counterfeit seizures, by country and type of good, back to FY2003.  Seizure counts rise steadily from the 5,973 of FY2003 to 14,675 in FY2007 and 19,959 in FY 2010, peak at above 31,000 in FYs 2016, 2017, and 2018, and then drop back a bit to the 27,115 of FY2002.  Next update likely in September.

And direct to last year’s figures.

World picture:

OECD on the $461 billion world of counterfeit trade as of 2019.

… and also from OECD, a close-up of counterfeiting in perfumes, cosmetics, and other especially risky products.

Medicine closeup:

The Food and Drug Administration on counterfeit medicine risks in the United States.

… and CDC guidance for buying medicine abroad.

And the World Health Organization’s home-page for counterfeit medicine.

And beyond the borders: 

Wealthy countries with sophisticated and efficient customs enforcement record most seizures of counterfeit goods; in lower-income regions, seizures are less systematic and counterfeits are much more likely to reach consumers. As an example, the UN’s Office of Crime and Drug Control reports that substandard or counterfeit medicine rates are above 40% in eight countries — Venezuela, Suriname, Mali, Ghana, Malawi, Nepal, Bhutan, and Vietnam — and between 20% and 39% in 15 more.  They published estimates this spring that these counterfeits contribute to as many as 267,000 annual deaths from malaria, and 169,000 deaths from childhood pneumonia. UNODC’s examination of counterfeit medicine in Africa, with a closeup on especially vulnerable low-income Sahelian states.

 

 

ABOUT ED

Ed Gresser is Vice President and Director for Trade and Global Markets at PPI.

Ed returns to PPI after working for the think tank from 2001-2011. He most recently served as the Assistant U.S. Trade Representative for Trade Policy and Economics at the Office of the United States Trade Representative (USTR). In this position, he led USTR’s economic research unit from 2015-2021, and chaired the 21-agency Trade Policy Staff Committee.

Ed began his career on Capitol Hill before serving USTR as Policy Advisor to USTR Charlene Barshefsky from 1998 to 2001. He then led PPI’s Trade and Global Markets Project from 2001 to 2011. After PPI, he co-founded and directed the independent think tank Progressive Economy until rejoining USTR in 2015. In 2013, the Washington International Trade Association presented him with its Lighthouse Award, awarded annually to an individual or group for significant contributions to trade policy.

Ed is the author of Freedom from Want: American Liberalism and the Global Economy (2007).  He has published in a variety of journals and newspapers, and his research has been cited by leading academics and international organizations including the WTO, World Bank, and International Monetary Fund. He is a graduate of Stanford University and holds a Master’s Degree in International Affairs from Columbia Universities and a certificate from the Averell Harriman Institute for Advanced Study of the Soviet Union.

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FACT: Natural disaster death rates fell by over 90% in the last century.

THE NUMBERS: Annual deaths to natural disasters* –

2020s          13,000 (world population 8 billion)
1970s           99,000 (world population 4 billion)
1920s           524,000 (world population 2 billion)

* Our World in Data

WHAT THEY MEAN:

Each year brings about the same count of floods, earthquakes and tsunamis, droughts, hurricanes and cyclones, and other tragedies and disasters of geology and weather. But the toll these events take on life, society, and the economy seems to lessen over time. Website Our World in Data, using a simultaneously gloomy and hopeful database developed by the University of Louvain, summarizes:

“[O]ver the course of the 20th century there was a significant decline in global deaths from natural disasters. In the early 1900s, the annual average was often in the range of 400,000 to 500,000 deaths. In the second half of the century and into the early 2000s, we have seen a significant decline to less than 100,000 — at least five times lower than these peaks.  This decline is even more impressive when we consider the rate of population growth over this period. When we correct for population — showing this data in terms of death rates (measured per 100,000 people) — then we see a more than 10-fold decline over the past century.”

Why? Gingerly comparing two sets of historical tragedies and disasters:

Japan and Earthquakes: This September marks the centennial of the Great Kanto Earthquake, the deadliest in Japanese history, which struck Taisho-era Tokyo in 1923.  Believed to have reached 7.8 on the Richter Scale,* the quake killed over 105,000 of the city’s then-2.2 million residents through building collapses and fires. (Based on the Japanese government’s most recent estimates; earlier estimates were closer to 150,000.) The vastly larger Great Tohoku Earthquake of 2011 — 9.1 on the Richter scale, 20 times more powerful than the 1923 event — is thought by geologists the fourth-largest earthquake ever measured anywhere. It nonetheless took many fewer lives, because of the efficiency of Japan’s urban building codes, sea walls able to absorb at least some of the tsunami impact, immediate electronic warnings to bullet trains and motorists, and rapid-response civil defense bureaucracy.

Bangladesh and Cyclones: The Bhola Cyclone which struck Bangladesh in 1970, during which winds reached 145 mph, may have killed half a million people. More recent cyclones, though sometimes comparably powerful, are less deadly. The 2020 “super-Cyclone Amphan” and its 150 mph winds, for example, took 26 lives in Bangladesh, 98 in India’s neighboring West Bengal province, and 4 in Sri Lanka. Drawn from a least-developed country rather than Japan’s high-income, high-tech economy, Bangladesh’s post-Bhola experience is an equally powerful illustration of the ways in which weather service, evacuation drills, cultivated coastal mangrove forests to absorb storm impact, and evacuation drills are, though unable to prevent disasters, can make them far less dangerous.

More generally, the Our World in Data figures suggest that the level of annual disaster deaths is quite variable, and not precisely comparable across time since large individual events often affect not only annual totals but decade-long averages. Nonetheless, the broad trend seems clear. The 1920s featured the highest number of annual disaster deaths on average in OWiD‘s table, at over half a million per year. In the 1970s, a half-century later, the average was just below 100,000 disaster deaths per year.  For the 2010s, it was 45,000 per year; and for the incomplete 2020s, the lowest of all at 13,000 per year.

The scale of this decline varies for different kinds of events. The sharpest reductions are in deaths to droughts and consequent famines, which are down 99.8% from the 472,400 per year average of the 1920s to 2,012 per year in the 2010s and 837 per year so far in the 2020s. (Famines remained significant causes of death in South Asia through the 1940s and in China to the early 1960s, and in the Horn of Africa until the last such event in anarchic Somalia 30 years ago. Better infrastructure, emergency relief, globalization, and multiple sources of food can ensure that people don’t starve when local or individual international sources go down, people no longer starve.) Losses to inland river floods have dropped almost as sharply. Those to earthquakes and tsunamis seem more uneven, with the recent averages much affected by the 2007 Port-au-Prince earthquake and the Indian Ocean tsunami which struck Indonesia, Thailand, and Sri Lanka in 2004. Hurricane and cyclone mortality, finally, is down about 90%, from 12,000 to 14,000 per year in the mid-20th century to about 1,600 per year so far in the 2020s, with Bangladesh’s post-Bhola experience striking evidence for the success of preparation and disaster relief in vulnerable least-developed countries.  Last word to Our World in Data:

“This trend does not mean that disasters have become less frequent, or less intense. It means the world today is much better at preventing deaths from disasters than in the past.”

 

FURTHER READING:

Stats on natural disasters from Our World in Data.

… direct to a 1900s-2020s table of declining natural disaster tolls by decade.

… and the University of Louvain’s disaster database.

Japan – 

The Japan Times reports on Japan’s information-sharing on tsunami and earthquake preparation.

… and Minimisanrikyu twelve years after the Great Tohoku Earthquake.

Bangladesh –

The Bangladesh Cyclone Preparedness Program.

The World Meteorological Organization on Cyclone Bhola and its lessons.

The Guardian on super-cyclone Amphan.

And the U.S. National Institutes of Health (2012) reflect on declining cyclone mortality in Bangladesh.

More –

Tsunami preparation in Thailand.

East African Community plans drought and storm responses.

And the Federal Emergency Management Agency’s International division.

And some long looks back at three turn-of-the-last-century U.S. events –

California: The U.S. Geological Survey analyzes the 1906 San Francisco earthquake, thought to have killed 2,000 people.

Texas: NPR on the 1900 Galveston hurricane and its 6,000-12,000 lost lives.

Pennsylvania: Johnstown remembers the 1889 flood and its 2208 deaths.

 

 

ABOUT ED

Ed Gresser is Vice President and Director for Trade and Global Markets at PPI.

Ed returns to PPI after working for the think tank from 2001-2011. He most recently served as the Assistant U.S. Trade Representative for Trade Policy and Economics at the Office of the United States Trade Representative (USTR). In this position, he led USTR’s economic research unit from 2015-2021, and chaired the 21-agency Trade Policy Staff Committee.

Ed began his career on Capitol Hill before serving USTR as Policy Advisor to USTR Charlene Barshefsky from 1998 to 2001. He then led PPI’s Trade and Global Markets Project from 2001 to 2011. After PPI, he co-founded and directed the independent think tank Progressive Economy until rejoining USTR in 2015. In 2013, the Washington International Trade Association presented him with its Lighthouse Award, awarded annually to an individual or group for significant contributions to trade policy.

Ed is the author of Freedom from Want: American Liberalism and the Global Economy (2007).  He has published in a variety of journals and newspapers, and his research has been cited by leading academics and international organizations including the WTO, World Bank, and International Monetary Fund. He is a graduate of Stanford University and holds a Master’s Degree in International Affairs from Columbia Universities and a certificate from the Averell Harriman Institute for Advanced Study of the Soviet Union.

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FACT: U.S. tariffs on cheap stainless steel spoons are four times higher than tariffs on sterling silver spoons.

THE NUMBERS: U.S. tariff rates –

Sterling silver spoons:                                  3.3%
Stainless steel spoons, ≥25 cents each:       6.8%
Stainless steel spoons, <25 cents each:      14.0%

* About 20% for a spoon valued at 25 cents on imports; 25% for a spoon costing 10 cents or less. Tariff lines are 71141130 for sterling silver, 82159930 for stainless steel spoons costing less than 25 cents each, and 82159935 for spoons at or above 25 cents each.

WHAT THEY MEAN:

How is it that cheap spoons are taxed more heavily than sterling silver?

In his 1832 essay on the U.S.’ tariff law, the former Treasury Secretary Albert Gallatin — then  a 70-year-old observer and occasional commentator on policy; in earlier life a teenage immigrant from Geneva in the 1780s, a Jeffersonian-Republican politician and founder of the Ways and Means Committee in the 1790s, and Treasury Sec. for the Jefferson and Madison administrations from 1801-1814 — makes a cautious case for progressive taxation:

“Higher duties on luxuries than on articles generally, and in some cases exclusively, used by the less wealthy classes of society are justified by the propriety of laying a heavier burden on those who are the best able to bear it.”

He then glumly notes that, tariffs being an especially opaque way to raise money, and businesses and wealthy people being more able to investigate and complain about their “burdens” than the public in general and the poor in particular, the tariff laws of 1816 and 1828 had done the opposite.

“The principal commodities which have been selected for special protection, iron and all the coarser woollen articles of clothing, are as well as salt, coal, and sugar, essentially necessary to all classes of society.  The duties laid on such commodities fall therefore much more heavily, in proportion to their means, on the less wealthy classes; and it has already been seen with what singular ingenuity that on woollens has been so arranged, as to make the poor pay, in every instance, considerably more than the rich.  This your memorialists consider to be one of the most obnoxious features of the restrictive system.”

Income and payroll taxes now far exceed the $90 billion tariff system as a U.S. revenue source. But 190 years after Gallatin’s essay, the case of spoons raises some strikingly similar questions. Buyers of cheap stainless steel spoons pay about four times the tax on wealthy neighbors buying sterling, to wit:

(1) Mass-market: Low-priced stainless steel spoons, imported at prices below 25 cents each, get a 14% tariff. For readers familiar with the D.C. metro area, think middle-class and low-income families in Rockville or P.G. County, or the Salvadoran and Ethiopian restaurants along Georgia Avenue just north of the District. No such spoons seem to be made in the U.S. at all.

(2) Luxury: The tariff on sterling silver spoons is 3.3%, a bit less than a quarter of the cheap-stainless rate. Say, McLean and Georgetown, the Mayflower and the Four Seasons, downtown law firms, etc. In this sector, American companies and individuals do make sterling silver spoons, sometimes in batches and sometimes as artisanal pieces, but the prices are high enough to make tariff rates irrelevant.

(3) Mid-tier: More expensive stainless steel falls in the middle, with a 6.8% tariff.  One company in upstate New York, Sherill Industries, makes high-priced stainless steel silverware, whose prices seem to average around $4.00 per piece.

Gallatin’s term “obnoxious” is subjective, but doesn’t seem unreasonable here. Neither the cheap-spoon line (“82159930”) nor the sterling line (71141130”) appear to affect trade flows much, so in this case the tariff system is acting much more in its ‘tax’ role than its ‘trade’ role. There’s little doubt that in this case the poor are taxed considerably more than the rich, and the spoons case is more a typical case than a weird anomaly. An illustrative table of 12 products, drawn from PPI testimony to the International Trade Commission last year:

In this perspective, Gallatin seems to identify a structural challenge that remains powerful despite the passage of nineteen decades. Perhaps especially in tariffs as opposed to more transparent income or sales taxes, low-income people often don’t know when they are being taxed and aren’t in a position to ask for lighter burdens.  And in the political system, most tariff analysis relates to trade policy rather than the role of tariffs in taxation; Gallatin’s Ways and Means Committee, in fact, appears not to have held a hearing on the tax implications of tariff policy since 1974. So with little knowledge about strange phenomena like the differential rates on stainless steel and sterling even among policymakers, policies rarely get critical examination and “the less wealthy classes” seem to wind up carrying the heavier burdens.

 

 

FURTHER READING:

Analysis then and now:

Frederick Taussig’s State Papers and Speeches on the Tariff collection (1892), featuring Gallatin’s 1832 essay along with other 18th- and 19th-century trade policy luminaries (Alexander Hamilton, Daniel Webster, and the now-obscure Robert Walker, who was James K. Polk’s Treasury Secretary in the 1840s).

Economists Miguel Acosta and Lydia Cox trace the low-tariffs/luxury vs. high-tariff/mass-market skew of the U.S. tariff system back to agreements of the 1930s and 1940s.

PPI’s Ed Gresser looks at consumer goods tariff inequities in 2022 testimony to the International Trade Commission.

Tariff schedule:

The Harmonized Tariff Schedule; see Chapter 71, heading 7114 for sterling silver and other precious-metal “silverware,” and Chapter 81, heading 8215 for “base metal.”

And a summary of the 11,414 current U.S. tariff lines – how many “duty-free,” how many covered by tariffs, how many the various Free Trade Agreements waive.

And via the St. Louis Fed, a copy of the 1828 tariff law which so annoyed ex-Secretary Gallatin.

More on Gallatin:

The Treasury Department’s Albert Gallatin statue.

Nicholas Dungan’s admiring 2010 bio.

And a silverware-maker:

Liberty Tabletop in New York.

 

 

ABOUT ED

Ed Gresser is Vice President and Director for Trade and Global Markets at PPI.

Ed returns to PPI after working for the think tank from 2001-2011. He most recently served as the Assistant U.S. Trade Representative for Trade Policy and Economics at the Office of the United States Trade Representative (USTR). In this position, he led USTR’s economic research unit from 2015-2021, and chaired the 21-agency Trade Policy Staff Committee.

Ed began his career on Capitol Hill before serving USTR as Policy Advisor to USTR Charlene Barshefsky from 1998 to 2001. He then led PPI’s Trade and Global Markets Project from 2001 to 2011. After PPI, he co-founded and directed the independent think tank Progressive Economy until rejoining USTR in 2015. In 2013, the Washington International Trade Association presented him with its Lighthouse Award, awarded annually to an individual or group for significant contributions to trade policy.

Ed is the author of Freedom from Want: American Liberalism and the Global Economy (2007).  He has published in a variety of journals and newspapers, and his research has been cited by leading academics and international organizations including the WTO, World Bank, and International Monetary Fund. He is a graduate of Stanford University and holds a Master’s Degree in International Affairs from Columbia Universities and a certificate from the Averell Harriman Institute for Advanced Study of the Soviet Union.

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FACT: Multinationals employ three out of every 10 American workers. 

THE NUMBERS: Employees of multinational firms (U.S.- and foreign-based) as a share of total U.S. private-sector employment –

2020          31%
2019           29%
2012           26%
2002          26%
1992           25%

WHAT THEY MEAN:

Here is J.M. Keynes, looking back from 1919 at the “globalized” world of the 1910s, from the perspective of a wealthy (male) Londoner:

“[For] the middle and upper classes, life offered, at a low cost and with the least trouble, conveniences, comforts, and amenities beyond the compass of the richest and most powerful monarchs of other ages. The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, in such quantity as he might see fit, and reasonably expect their early delivery upon his doorstep; he could at the same moment and by the same means adventure his wealth in the natural resources and new enterprises of any quarter of the world, and share, without exertion or even trouble, in their prospective fruits and advantages; or he could decide to couple the security of his fortunes with the good faith of the townspeople of any substantial municipality in any continent that fancy or information might recommend.”

Taking up his themes of easy and uninterrupted flows of investment and trade a century later, with some employment focus as against Keynes’ investor-and-consumer viewpoint–

The U.N. Conference on Trade and Development’s annual “World Investment Report”, reports that annual cross-border “foreign direct investment” flows have varied between $1 trillion and $2 trillion over the last decade, with the U.S. in most years both the largest source and recipient. Last year was a typical example, with the U.S. receiving $367 billion of the worldwide $1.6 trillion in total inbound FDI flows, and sending out $404 billion.

Reporting each year on these flows’ real-world manifestations, the Commerce Department’s Bureau of Economic Analysis publishes figures on international businesses’ employment, investment stocks, employment, R&D, payrolls, and so forth in the United States and abroad. Their most recent editions cover the year 2020 and find U.S. “affiliates” of foreign-based firms employing 8.6 million workers, and U.S.-based firms with overseas operations employing 28.4 million people in the U.S. (along with 14 million overseas). Together, then, internationally operating businesses employed 37 million private-sector workers, or 31% of the COVID-depressed 120 million total. Two bits of perspective on this:

(1) Economic role: The “multinational’ firms — both U.S. “parents” and foreign “affiliates” — are particularly employers in manufacturing (10 million of 12.2 million), retail (10 million of 17 million, and information industry (2.0 million of 2.7 million).  They are also very prominent in private-sector science, together accounting for $430 billion of 2020’s $717 billion in U.S. R&D spending. (U.S.-based firms did most of this at $361 billion, not counting $59 billion in overseas R&D; U.S.-based affiliates of foreign firms contributed $73 billion in U.S.-based R&D. And they account for about two-thirds of U.S. goods trade, including $1.08 trillion of 2020’s $1.66 trillion in exports, and $1.43 trillion of the $2.35 trillion in imports.

(2) Over time: At least with respect to employment, multinationals’ role in U.S. economic life has been pretty stable over the last generation. The 31% share of employment in 2020 is at the high end of BEA’s records, but this is mainly because, before COVID vaccines, employment was especially depressed in industries with fewer multinationals, such as restaurants, hotels, beauty shops, and other small services businesses. Over the last 30 years, the “multinational” share of U.S. employment has varied between 25% and 29% of private-sector workers – or, to cite a few specific years, 26% of the 121 million private-sector workers in 2012, 26% of the 108 million in 2002, and 25% of the 90 million in 1992. Over this time, U.S.-based multinationals have added about 11 million employees in the U.S. (17.5 million then, 28.4 million in 2020), while simultaneously adding 10 million overseas. International firm employment in the U.S. has grown at a slightly faster pace in percentage terms but less sharply in total numbers, rising by about 80% from 4.8 million in 1992 to 8.6 million in 2020.

Lots of money and research, the various products of the world freely available, employment rising at typically modest but positive gradations each year. All this may feel a bit reassuring, as “geopolitics” grows steadily more menacing, and international institutions fray at the edges — but it also makes Keynes’s close, as he reflects on how fragile the apparent calm and stability of his own recent past were, especially unsettling:

“[H]e [the hypothetical upper-middle class Londoner, probably referring to himself] regarded this state of affairs as normal, certain, and permanent, except in the direction of further improvement, and any deviation from it as aberrant, scandalous, and avoidable. The projects and politics of militarism and imperialism, of racial and cultural rivalries, of monopolies, restrictions, and exclusion, which were to play the serpent to this paradise, were little more than the amusements of his daily newspaper, and appeared to exercise almost no influence at all on the ordinary course of social and economic life.”

 

FURTHER READING:

More from BEA: 

U.S.-based multinationals.

… and earlier reports on American multinationals 2004-2021, with a link to an archive dating back to 1982.

International firms in the United States.

… and the counterpart set of reports on foreign investment in the United States.

International perspective: 

UNCTAD’s World Investment Report 2022.

Sources and destinations: 

BEA’s figures look at U.S. private-sector investment abroad as well as multinationals operating here, with some detail on destinations for U.S. investment and the ownership of investment here. As both a destination and a source, Europe is the main partner and Canada is disproportionately large. By value (“investment stock”), Europe is home to $4 trillion of $6.5 trillion in U.S. FDI abroad (2020), with the U.K. at $1.0 trillion, EU members $2.7 trillion, and Switzerland, Norway, Iceland, and Turkey together $0.25 trillion. Latin American countries are at $0.25 trillion, led by Mexico at $110 billion; Asia and the Pacific are at $960 billion, topped by Singapore at $294 billion, Australia at $167 billion, and Japan and China both around $118 billion. Measured by jobs, though, U.S. firms employ about as many people in Asia as in Europe. A table of U.S. overseas employment by region:

Looking the other way, European firms are likewise the main international employers in the United States, at 5 million jobs or about 60% of the 8.6 million total. By country, U.K. firms led at 1.2 million, followed by Japanese at just above 1 million, Canadians just below, Germans at 885,000, French at 740,000, and Dutch at 569,000. Japanese firms employed a bit more than 1 million Americans, second only to the Brits; Canadians just a bit less at 940,000. Chinese firms, though receiving much attention and publicity, were modest employers of Americans at 153,000; Mexicans were at 89,000, and Indians 73,000.

And the ghost at the banquet: 

Keynes’ The Economic Consequences of the Peace (1919).

 

 

ABOUT ED

Ed Gresser is Vice President and Director for Trade and Global Markets at PPI.

Ed returns to PPI after working for the think tank from 2001-2011. He most recently served as the Assistant U.S. Trade Representative for Trade Policy and Economics at the Office of the United States Trade Representative (USTR). In this position, he led USTR’s economic research unit from 2015-2021, and chaired the 21-agency Trade Policy Staff Committee.

Ed began his career on Capitol Hill before serving USTR as Policy Advisor to USTR Charlene Barshefsky from 1998 to 2001. He then led PPI’s Trade and Global Markets Project from 2001 to 2011. After PPI, he co-founded and directed the independent think tank Progressive Economy until rejoining USTR in 2015. In 2013, the Washington International Trade Association presented him with its Lighthouse Award, awarded annually to an individual or group for significant contributions to trade policy.

Ed is the author of Freedom from Want: American Liberalism and the Global Economy (2007).  He has published in a variety of journals and newspapers, and his research has been cited by leading academics and international organizations including the WTO, World Bank, and International Monetary Fund. He is a graduate of Stanford University and holds a Master’s Degree in International Affairs from Columbia Universities and a certificate from the Averell Harriman Institute for Advanced Study of the Soviet Union.

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FACT: Two-thirds of the world now has internet access

THE NUMBERS: Internet users as a share of the world population – 

2022                      66%
2018                       50%
2012                       34%
2009                      25%
2002                      10%
1990                       0.05%

WHAT THEY MEAN:

The venerable International Telecommunications Union (ITU), the world’s oldest “international organization,” has been printing, telegraphing, broadcasting, and posting telecom data since its launch in 1865.* Its most recent look at the digital world, out last September, finds 5.3 billion people, or two-thirds of the world’s 8 billion population, now have internet access. Two observations on this:

(1)  This year’s 5.3 billion internet users are nearly three times the 2.0 billion ITU counted in 2010; over ten times the 0.4 billion it found in 2000; and about 1,000 times the roughly 3 million comp sci students, telecom enthusiasts, and government officials using the pre-WWW, copper-cable-based networks of 1990. In high-income countries, more than 90% of people are now online, with the exceptions (if the U.S. is a good sample) mostly infants and elderly people who don’t want service. Many of the newer users — 600 million have logged on since the COVID pandemic — are now in lower-income regions: Least-developed country use has jumped from 89 million to 407 million since 2015, and 40% of sub-Saharan African households are now online, as against 11% in 2015.

(2)  Information exchange is rising faster than user count. ITU estimated 1,230 terabits of bandwidth in use every second (Tbps) in 2022, up from 979 Tbps in 2021, and four times the 292 Tbps it found in 2017. About 40% of data exchange goes on in Asia, which accounted for 542 of the 1,230 TBps last year. Europe added 242 TBps, the Western Hemisphere (including the U.S., Canada, the Caribbean, and Latin America) 224, and the rest of the world 220.

Intellectual and cultural assessments of the rising user counts and accelerating data exchanges are always pretty subjective. Economic measurements are also often murky, but there are some useful gauges, especially with respect to the U.S.. The OECD, for example, estimates that the $25 trillion U.S. economy now includes $112 billion in annual sales of data and data-related advertising, and that data stocks are worth about $421 billion in national “wealth.” With respect to trade, the Commerce Department’s Bureau of Economic Analysis reports $89 billion in U.S. exports of information and communications services and $594 billion in digitally deliverable services in 2021 — together, more than a quarter of the $2.26 trillion in total U.S. exports.

In purely physical terms, the growth in user counts will have to slow down by the late 2020s. But the scale of information exchange can easily keep rising, since the physical capacity to carry data continues to grow both under the oceans and above the atmosphere. The glass-watchers at TeleGeography, for example, see 552 submarine cables operating in 2023, with 33 new ones scheduled to go live this year and 19 more so far in 2024. Meanwhile, satellites are handling larger shares of data flow, and 1,000 to 1,500 new ones go into orbit each year.

In ‘governance’ terms, however, questions about fraying policies and thickening cyber-borders seem to be intensifying even as the Internet accommodates more users and carries more information. Examples: steady interest among lots of governments in digital service taxation; last year’s efforts, especially from India, to end the WTO’s 24-year-old “moratorium” on tariffs for digital transmissions; and the quiet but intense ideological tug-of-war between the “internet sovereignty” concepts proposed by authoritarian governments and the “multi-stakeholder”/free flow of data views held traditionally by the U.S. and most liberal democracies, and elaborated in last year’s 61-country Declaration for the Future of the (“open, free, global, interoperable, reliable, and secure”) Internet.

* Created to deal with the questions raised by the deployment of the first telegraph cables; converted into a League of Nations organization in 1919, and a U.N.-specialized agency more recently.

 

FURTHER READING:

ITU’s 2023 “Facts and Figures” report on internet populations, data exchange, smartphone use, and more worldwide and by region.

OECD researchers measure the value of U.S.-held and -exchanged data.

And BEA tallies U.S. ICT and digitally deliverable services trade.

PPI on digital issues:

Chief Economist Michael Mandel reports on the high-performance U.S. digital economy post-COVID crisis (lower inflation than the rest of the economy, net gain of +1.4 million jobs or 66% of net private-sector job creation).

… Jordan Shapiro on privacy.

… And Malena Dailey on the risk of overenthusiastic antitrust.

Policy:

The State Department’s Bureau of Cyberspace and Digital Policy.

… and the 61-country Declaration for the Future of the Internet, including 39 in Europe, five in the Pacific, three in Africa, one in the Middle East, and 9 in the Western Hemisphere (of which two are Caribbean, two North American, one Central American, and four South American).

… the WTO’s digital technology and trade site.

… the African Union’s continental digital strategy.

… the OECD debates digital services taxes.

… China’s White Paper on digital policy, “Jointly to Build a Community With a Shared Future in Cyberspace.”

… and perceptions of Chinese digital strategy from U.S. non-governmental analysts at Pacific Forum, via the State Department.

Sea and space:

TeleGeography’s summary of fiber-optic cable deployment.

… and its interactive cable map, with search by year of deployment, countries and landing points, etc.

… and Reuters on cable deployment, geopolitics, and U.S.-China rivalry.

SpaceFlightNow’s launch calendar for 2023.

 

 

ABOUT ED

Ed Gresser is Vice President and Director for Trade and Global Markets at PPI.

Ed returns to PPI after working for the think tank from 2001-2011. He most recently served as the Assistant U.S. Trade Representative for Trade Policy and Economics at the Office of the United States Trade Representative (USTR). In this position, he led USTR’s economic research unit from 2015-2021, and chaired the 21-agency Trade Policy Staff Committee.

Ed began his career on Capitol Hill before serving USTR as Policy Advisor to USTR Charlene Barshefsky from 1998 to 2001. He then led PPI’s Trade and Global Markets Project from 2001 to 2011. After PPI, he co-founded and directed the independent think tank Progressive Economy until rejoining USTR in 2015. In 2013, the Washington International Trade Association presented him with its Lighthouse Award, awarded annually to an individual or group for significant contributions to trade policy.

Ed is the author of Freedom from Want: American Liberalism and the Global Economy (2007).  He has published in a variety of journals and newspapers, and his research has been cited by leading academics and international organizations including the WTO, World Bank, and International Monetary Fund. He is a graduate of Stanford University and holds a Master’s Degree in International Affairs from Columbia Universities and a certificate from the Averell Harriman Institute for Advanced Study of the Soviet Union.

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FACT: ‘Total column ozone counts’ are rising

THE NUMBERS: World ozone-depleting substance consumption* –
1989              1.32 million tons
2005              0.25 million tons
2010              0.10 million tons
2015              0.01 million tons?

* Includes chlorofluorocarbons, hydrochlorofluorocarbons, methyl bromide, carbon tetrachloride, halons, and methyl chloroform. (Our World in Data)

WHAT THEY MEAN:

Here is a success story:

Chlorofluorocarbons, known for pronunciation’s sake as “CFCs,” are strings of carbon atoms joined with the halide elements fluorine and chlorine rather than their more common hydrogen-ion partners. First synthesized in 1928 by American refrigerator-makers, they were used worldwide as coolants and industrial solvents from the 1930s to the 1990s by manufacturers, building superintendents, food-service professionals, and home-owners, all of them unaware that CFCs react easily with ozone, and that this, in turn, could have large consequences.

Via eleventh-grade chemistry, meanwhile, ozone is a pungent form of oxygen arranged chemically as “O3,” as distinct from breathable oxygen “O2.” Floating in a “layer” 15-35 kilometers above the earth, ozone absorbs ultraviolet light and in doing so reduces the risk of skin cancer to people, cools lower-atmosphere temperatures, and facilitates photosynthesis in land plants and oceanic phytoplankton. CFCs are fairly stable molecules that float around for a long time — depending on the particular molecule, they can last from 100 to 200 years before breaking up and raining down out of the sky — and react quickly with ozone.  Thus their release from buildings and refrigerators began an era of high-atmosphere chemical reactions, which scientists predicted in the 1970s and then detected as a fall in the atmosphere’s “total column ozone” count by 1985. This eased ultraviolet light passage to the earth, with especially large effects over Antarctica where a large “hole” of missing ozone appeared in the early 1980s, first at about 5 million square km and reaching 28 million square km by 2000.

How to respond? The Montreal Protocol, a monument of Reagan-administration and international environmental diplomacy, banned the production and use of CFCs in 1987, and has since been ratified and implemented by 196 countries and territories.  Over the ensuing 35 years, production and industrial consumption of CFCs has dropped by about 100%, from 1.1 million tons in 1986 to 43,000 tons in 2005, then to a tiny 63 tons in 2010, and since then oscillating around zero.  (“About 100%” and “oscillating” because sometimes discovery and destruction of unused CFC stocks create a negative output; alternatively, sometimes destruction of old buildings inadvertently releases old “banks” of CFC-containing insulation for a small positive output.)

The “Kigali Amendment” negotiated under the Obama administration in 2016 added a ban on hydrofluorocarbons — a temporary replacement for CFCs which are less potent ozone-depleters but have strong greenhouse effects — and made the sale of the next generation of chemicals conditional on participation.  This went into effect in 2019, with Senate ratification last fall. The HFCs are supposed to be gone by 2030.

Two results of all this:

(1) CFC atmospheric concentration down: Near zero in 1920, the level of chlorine in the Antarctic stratosphere hit 2.2 parts per billion in 1980 and peaked at 4.7 parts per billion in the mid-1990s.  Since then it has been falling by 0.4% to 0.8% per year, with NOAA charts showing “CFC-11” down from 540 points per trillion to 490 ppt since the late 1990s, “CFC-12” from 270 ppt to 220 ppt, and “CFC-113” from 84 ppt to 68 ppt.  The current CFC level is about 3.5 parts per billion, and though CFCs degrade only slowly, NOAA’s projections show a return to 1980 levels by the 2070s.

(2) Ozone layer slowly recovering: As CFC levels drop, ozone levels have stabilized.  UNEP believes “total column ozone” is rising by about 1% to 3% per year, and the “ozone hole” above Antarctica now oscillates in a range between 16 million square km in 2019 and 24.5 million square km in 2022. The UN Environmental Programme’s 2022 ozone assessment tentatively projects that atmospheric ozone will return to its 1980 levels sometime around the year 2040 worldwide, and in the 2060s for the Antarctic. The reduced emissions of CFC and related gases, meanwhile, appear to have averted a rise of 0.5 to 1 degree Celsius in average global temperatures; and the Kigali Amendment is likely to prevent another 0.5-degree rise.

So altogether: With good scientific evidence, commitment by governments of quite different political outlooks, implementation by bureaucracies and businesses, and some modest temporary sacrifice for the common good, policy can achieve a lot.

 

FURTHER READING:

Then – 

From Ronald Reagan’s enthusiastic comments on the Montreal Protocol in April 1988:

“The Montreal protocol is a model of cooperation. It is a product of the recognition and international consensus that ozone depletion is a global problem, both in terms of its causes and its effects. The protocol is the result of an extraordinary process of scientific study, negotiations among representatives of the business and environmental communities, and of international diplomacy.  It is a monumental achievement.” 

Full text from the Reagan Library

35 years later, the U.S. Environmental Protection Agency explains ozone-depletion chemistry

And in 2016, President Obama announces the Kigali Amendment

Now –

NOAA on the state of the ozone

Nairobi-based UN Environmental Programme oversees the Montreal Protocol and explains the laws and obligations

Smithsonian Institution studies ultraviolet effects on phytoplankton (and thus on photosynthesis and a large oceanic carbon sink)

MIT analysts track down CFC banks, with up to 2.1 million tons of CFC still stored

And NASA’s ‘ozone watch’ tracks ozone density (as measured in Dobson Units) over the South Pole

 

 

ABOUT ED

Ed Gresser is Vice President and Director for Trade and Global Markets at PPI.

Ed returns to PPI after working for the think tank from 2001-2011. He most recently served as the Assistant U.S. Trade Representative for Trade Policy and Economics at the Office of the United States Trade Representative (USTR). In this position, he led USTR’s economic research unit from 2015-2021, and chaired the 21-agency Trade Policy Staff Committee.

Ed began his career on Capitol Hill before serving USTR as Policy Advisor to USTR Charlene Barshefsky from 1998 to 2001. He then led PPI’s Trade and Global Markets Project from 2001 to 2011. After PPI, he co-founded and directed the independent think tank Progressive Economy until rejoining USTR in 2015. In 2013, the Washington International Trade Association presented him with its Lighthouse Award, awarded annually to an individual or group for significant contributions to trade policy.

Ed is the author of Freedom from Want: American Liberalism and the Global Economy (2007).  He has published in a variety of journals and newspapers, and his research has been cited by leading academics and international organizations including the WTO, World Bank, and International Monetary Fund. He is a graduate of Stanford University and holds a Master’s Degree in International Affairs from Columbia Universities and a certificate from the Averell Harriman Institute for Advanced Study of the Soviet Union.

Read the full email and sign up for the Trade Fact of the Week