FACT: 1.4 million Americans have Pacific Island roots.

THE NUMBERS: U.S.-Pacific Island economic links –

Aid                 $20 million
Imports          $486 million
Remittances  $300 million

WHAT THEY MEAN:

Speaking last month to the Pacific Islands Forum (the annual assembly of 18 countries and territories around the South Pacific*), Vice President Harris regretfully observes that “in recent years the Pacific Islands may not have received the diplomatic attention and support that you deserve.” To make up for lost time, she announces an array of new political and economic supports, to be finalized this September at the first U.S.-Pacific Islands summit ever held:

• Opening new embassies in Tonga and Kiribati (both countries of about 100,000 people, now served by the U.S. embassy in Suva, the capital of Fiji), along with an AID office in Fiji and a new Peace Corps volunteer program.
• Raising annual U.S. aid to Pacific Island states from $21 million to $60 million for “economic development and ocean resilience” along with “infrastructure programs that are sustainable, high quality, climate friendly, and very importantly do not result in insurmountable debts.”
• Pledging to conclude a long-pending South Pacific Tuna Treaty and cooperative policies to reduce illegal/unreported/unregulated fisheries.

All this will be amplified, presumably with more ideas, by a “U.S. National Strategy on the Pacific Islands” to be published sometime after the summit.  Some explanation below, plus a couple of suggestions:

Background: The South Pacific expanse spans 3,000 islands, spread out over an expanse of sunlit water as large as Asia, Europe, and North America combined.  These islands combine to form 14 independent countries, two French departments, one U.S. state plus three insular territories.  They are home to 50 million people, of whom 35 million live in Australia and New Zealand, 9 million in Papua New Guinea, 1.5 million in Hawaii, and 2.5 million in the other 15 countries and territories combined.

This region suddenly seems like an arena for big-power diplomatic competition. Some of its rapidly proliferating Chinese aid programs are civilian and visually striking: a ring road around Papua New Guinea’s capital Port Moresby, a large hospital on the coastal road east of Suva in Fiji, a “royal military band” facility in Tonga. Others carry murkier overtones of intelligence and high naval strategy: leaked mutual defense and telecommunications arrangements between China and the Solomon Islands, the sudden withdrawal of coral atoll-state Kiribati from the Forum after a visit by the Chinese Foreign Minister, etc.  With this subtext, the VP’s concern and interest presumably goes beyond abstract hope to raise the American diplomatic profile.

The policy outlined in her speech focuses, along with climate and fisheries policy, on aid and infrastructure development. These are useful and needed no doubt; on the other hand, the impact of aid likely has some limits.  On one hand, the Pacific Islands are already the world’s most aid-saturated region.  By the Sydney-based Lowy Institute’s calculations, they receive $2.4 billion in aid annually.  This amounts to 10 percent of the region’s economy, a figure sixteen times higher than the 0.6% average for all low- and middle-income countries.  Adding more may encourage the governments of very small countries – setting aside Papua New Guinea, the populations range from 11,000 in Nauru to 900,000 in Fiji – to take on more aid than they can manage.

More conceptually, a strategy focused particularly on aid may miss an area of American “comparative advantage”, which Harris’ speech notes in observing that 1.4 million Americans trace family to the Pacific islands.  A useful insight here comes from the influential 1993 essay Our Sea of Islands, in which the late Tongan intellectual Epeli Hau’ofa argued that the people of Pacific island nations should see themselves as citizens of a large ocean continent extending to expatriate communities in the United States, Australia, and New Zealand, rather than as comparatively helpless residents of small and isolated islands.  He notes in particular the large role these communities play in island economies through remittances and exchanges of goods (clothes, TVs, refrigerators etc. going to the islands; crafts, agricultural goods, information coming in turn), and concludes with a caution against very heavy reliance on aid: “Ordinary Pacific people depend for their daily existence much more on themselves and their kin, wherever they may be, than on anyone’s largesse.”

With this in mind, two policy options for the VP and her administration associates as they think about next steps:

1. Trade preferences: Americans bought $0.5 billion worth of goods from Pacific islands last year. This is a tiny sum in the $2.8 trillion world of U.S. goods imports, but a large part of the islands’ export portfolio.  A simple way to bolster it would be renewal of the Generalized System of Preferences, the main U.S. trade program for developing countries, which lapsed in 2020.  Before the lapse, it provided substantial support for growth and employment through candied and sushi-grade ginger and taro from Fiji, canned tuna from the Solomon Islands, taro and cassava from Tonga. A more ambitious option would be creation of a special trade program analogous to the Caribbean Basin Initiative’s permanent duty-free access to the U.S., which could offer additional support for processed fish exports.

2. Reducing remittance costs: The 1.4 million Americans from Pacific Island and Native Hawaiian families noted in Harris’ speech are a source of income almost equal to trade. Remittances — wires of money from workers abroad to families — account for 7%-10% of Pacific island GDP, and peak at levels of 43% of GDP for Tonga and 21% for Samoa. Assuming a roughly equal division between the islands’ three main remittance sources (the U.S., Australia, and New Zealand), this would probably mean about $300 million per country.  The challenge is that, by World Bank tallies, Pacific islanders abroad pay a lot more than other remittance senders for their generosity:  bank and wire fees eat up 11% of remittance value for Vanuatu, 9.8% for Tonga, and 8.4% for Samoa.  Reducing these costs to 2.9% of remittance — the figure for equally remittance-reliant El Salvador — this would free up as much as 2% of national income for some countries, all of which would go directly to families.

Summary: Harris’ remarks are a thought-provoking read and a good beginning for policy; but one has room for more.

* Australia, Cook Islands, Marshall Islands, Federated States of Micronesia, Fiji, French Polynesia, Marshall Islands, Nauru, New Caledonia, New Zealand, Niue, Palau, Papua New Guinea, Samoa, Solomon Islands, Tonga, Tuvalu, Vanuatu, and associate member Tokelau. Outlier Kiribati withdrew on July 14.

FUTURE READINGS:

Some quick geography/economy background: Geographers traditionally divide the South Pacific into three areas with Fiji more or less in the middle. Melanesia, just north and east of Australia, includes Papua New Guinea, the Solomon Islands, New Caledonia, and Vanuatu, which have large extractive-industry economies driven by timber and mining exports to China. Polynesia, the largest expanse of ocean, goes east from Fiji through Tonga and Samoa to Tahiti, Hawaii and Easter Island (and also includes New Zealand’s Maori community), with fisheries along with taro, vanilla, ginger, and other specialty agriculture. Most Polynesian trade is with the U.S., Australia, and New Zealand. Micronesia, in the north heading toward Guam, has six countries mostly made up of small coral atolls with especially high climate change risk; three of these (Palau, the Marshall Islands, and the Federated States of Micronesia) have special trade access to the U.S. dating to their independence.  Fiji, in the center, is a middle-income state with a diversified economy with the region’s main air and maritime logistics centers and the University of the South Pacific, along with a large tourism sector, agriculture, and light manufacturing.

U.S. policy:

Remarks by Vice President Kamala Harris to the Pacific Islands Forum.

The White House promises more in the run-up to next month’s Summit.

Capitol Hill views from the Congressional Pacific Islands Caucus.

Policy spectrum: 

A regional overview from the Forum Secretariat looks at climate change response, COVID, nuclear weapons tests legacies, and big-country diplomacy.

Epeli Hau’ofa’s Our Sea of Islands essay and other writings on Pacific islands culture and government in We Are the Ocean.

The Diplomat on Kiribati’s withdrawal from the Forum.

Brookings Institution China scholar Patricia Kim on the possible implications of the China-Solomon Islands security document.

Trade:

Trade Fact series editor/PPI Vice President Gresser, then in government, visits a Fijian ginger factory and GSP exporter in 2018. They were buying sushi-quality vinegar from Oregon and Florida-made machinery, and selling candied ginger and sushi ginger back.

And a look at the GSP program, with a friendly critique of Congressional reauthorization bills and suggestions for next steps.

Remittances:

The World Bank on remittance flows to Pacific Island nations during and after COVID.

Sydney-based Lowy Institute on remittance policy.

Aid programs from the U.S./Australia/New Zealand:

The Lowy Institute’s Pacific Aid Map, with aid figures by country and donor.

USAID’s Pacific Islands programs.

MCC’s Solomon Islands Threshold Program.

AUSAID’s Pacific programs.

And New Zealand’s Pacific Islands aid and diplomacy.

And from China:

MoFA on China’s Pacific aid programs.

… and the Chinese Embassy in Tongan capital Nuku’alofa reviews deliveries of water tanks, computers, and tractors along with building a “royal military band” facility.

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: Mexico is now the principal source of illicit fentanyl and methamphetamines sold in the U.S.

THE NUMBERS: U.S. deaths by drug overdose –

* Mortality from overdoses from the Centers for Disease Control; user totals from HHS’ Substance Abuse and Mental Health Services Administration. Many overdose deaths involve use of combinations of drugs, so overdoses measured by individual substances often double- or triple-count.

WHAT THEY MEAN:

After two decades of steady escalation, drug overdoses caused over 107,000 premature deaths in the United States last year. This was more than double the 41,500 overdose fatalities of 2012 and six times the 17,400 recorded in 2000. Or, alternatively, it is more than the combined total of U.S. deaths to automobile accidents (38,800 in 2020, 42,400 in 2021) and homicides (24,600 in 2020, likely higher in 2021).

Four classes of drugs, often in combination, account for most of these overdoses: synthetic opioids such as fentanyl, whose very high “purity” and variable chemical content make them especially dangerous; “psychostimulants” such as methamphetamines; cocaine; and heroin along with other natural or semi-synthetic opiates refined from naturally grown opium poppies. The Drug Enforcement Administration’s most recent “Annual Drug Threat Assessment” report, released in early 2021, suggests that (a) most of these products are imported, and (b) supply chains for opioids and amphetamines have changed substantially over the past decade and now center on Mexican production and land transport. A precis:

1. Opioids and opiates: A decade ago, fentanyl was mostly made in China and (being very light and cheap to transport) shipped to the U.S. via air cargo. Use of this from-China-by-air route has sharply declined since 2019, however. Most U.S.-consumed fentanyl is now produced in Mexico and moved to the U.S. by land. DEA’s report suggests a complex and adaptable precursor-chemical “supply chain,” with the relevant chemicals “primarily from sources originating in China, including purchases made on the open market, smuggling chemicals hidden in legitimate commercial shipments, mislabeling shipments to avoid controls and the attention of law enforcement, and diversion from the chemical and pharmaceutical industries.” Heroin production appears simpler in the DEA report; about 92% is from Mexico, refined from locally grown opium.

2. Psychostimulants: The methamphetamine supply system has likewise evolved over the past decade, though in this case away from local U.S. lab production. As with heroin, “most of the methamphetamine available in the United States is clandestinely produced in Mexico,” using precursor chemicals purchased from China and India. As with opioids and heroin, the finished products travel mainly by land.

3. Cocaine: Coca leaf is grown and refined into cocaine principally in Colombia and secondarily in Bolivia and Peru. DEA believes total cocaine production is around 1,900 tons per year. Cocaine trafficking routes appear to have remained stable over the last two decades, with cocaine transported in smuggling boats and planes, or using cargo containers, through the Caribbean with smaller quantities arriving by land through Central America and Mexico.

FUTURE READINGS:

CDC’s grim estimates of death by drug overdose in the United States, 2000-2021, summarized by year:

And the numbers in detail by year and substance.

The Substance Abuse and Mental Health Services Administration has tables for use of narcotics, abuse of prescription drugs, marijuana, alcohol and tobacco use.

The White House releases the 2022 National Drug Control Strategy, including health and overdose prevention, data improvement, DEA and CBP funding, anti-money laundering programs, and international police coordination.

And DEA’s 2020 National Drug Threat Assessment reviews use, production, and trade of narcotics.

And three global economy context questions:

(a) How large is the international narcotics trade? A 2019 RAND study estimates that in 2016 Americans were spending $150 billion on narcotics. This total included $50 billion on marijuana and $100 billion on heroin, cocaine, and methamphetamines, but did not venture a guess on opioids. Accepting RAND’s estimate for the sake of argument, a guess at the value of the imports would require understanding the markup from border to distributor to retail. As a guidepost, the National Coffee Association put U.S. consumer spending on coffee (also almost entirely imported) at $74 billion, or about 12 times that year’s $6 billion in coffee imports. A 10:1 markup for heroin, cocaine, and amphetamines would suggest an import value of around $10 billion, but presumably a criminal business’ markup would have to be much higher.  At 20:1, a figure of $100 billion in U.S. retail spending on narcotics would imply $5 billion in import value, the equivalent of about 1 percent of the $385 billion in legitimate imports from Mexico in 2021, and not far from the value of total U.S. coffee imports.  Obviously the 20:1 figure is arbitrary and could be quite different, and may also vary by narcotics type.

(b) How large is the criminal economy? On a world scale, a 2017 paper by the DC-based Center for Global Financial Integrity guessed at a total of $426 billion to $651 billion for illicit drug trade as of 2014, including both intra-country and cross-border transactions, as part of a larger $1.8-$2.2 trillion global shadow economy. (The other elements include counterfeiting, human trafficking, illegal wildlife/fishery/logging exports, and other illicit activities.) Cocaine, amphetamines, opiates and opioids accounted for about 60% of the illegal drug business, and marijuana and hashish-type products 40%. The ~$2 trillion estimate, if correct, would have been about 2.5% of that year’s $77 trillion global GDP.

(c) How many drug users are there, and which countries are the largest narcotics markets? UN’s Office on Drugs and Crime’s annual World Drug Report reviews production, transport, health, and other policy matters, and also estimates users counts worldwide.  Their most recent guesses:  209.2 million users of cannabis, 61.3 million of opioids, 34.1 million of amphetamines and other stimulants, 31.1 million of opiates, and 21.5 million of cocaine.  The analysis of use in UNODC’s 2022 report covers regions rather than countries, but suggests (though not stating explicitly) that the U.S. is the world’s largest narcotics market and largest importer: “North America” is the largest market for cocaine and amphetamines, and at par with Asia for opioids.  By population, comparing HHS user estimates for the U.S. to the UN’s worldwide estimates, American narcotics use seems slightly above the world average rate for amphetamines (2.6 million of the UN’s 34.1 million users), below the average for heroin and other opiates, and well above average for fentanyl-type opioids and cocaine.  Read more in the UNODC’s World Drug Report 2022.

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: Energy makes up nearly a fifth of U.S. exports this year.

THE NUMBERS: Energy share of U.S. merchandise exports –

2022*   18.1%
2021    16.8%
2020   10.5%
2010    6.4%
2000    1.7%
1932    13.2%**

* Six months of available data, January-June 2022
** Previous record

WHAT THEY MEAN:

Export growth figures are usually boring and small: A 2.3% growth rate might suggest a weak year; 7.5% or 10.2% a very good one; a drop of -2% would be exceptionally bad. Here are this year’s U.S. natural gas export rates to a string of European countries, based on the data available for the first six months of 2022:

What is going on here? Three things, one transitory and the other two suggesting an accelerating revolution in energy trade:

(a) The usual answer in natural-resource trade is the commodity markets. In the aftermath of Russia’s invasion of Ukraine, oil prices are up from $41.30 to $107 per barrel since 2020, and the International Monetary Fund’s index of natural gas prices is nine times its 2020 level. These effects are typically transitory – with prices up, export money goes up too; when they go back down, export earnings fall with them.

(b) The U.S. produces much more energy than before, propelled by investments made during the high-price China boom era, circa 2004-2012. The Department of Energy’s figures (measured by energy content) show U.S. production of oil, natural gas, and renewable energy up from 41 quadrillion BTUs in 2010 to 71 quadrillion BTUs in 2021. With a lot more available, the U.S. is accordingly exporting more than ever before.

(c) Russia is no longer a reliable supplier. Russia’s use of energy supply as a political tool has convinced European buyers to find new sources, as PPI’s Paul Bledsoe very presciently advised three months before the invasion of Ukraine.  American liquefied natural gas (LNG) is the logical replacement on security grounds, and a lower-methane emissions option as well). Louisiana in particular, home to two of the U.S.’ seven LNG terminals, has seen its exports double in two years; Gov. Edwards, noting that “market forces disrupting the world economy are creating a historic opportunity for our state,” plans a set of new infrastructure investments to help make the shift permanent.

Taken together, the figures reveal an incipient revolution in world energy trade. At 16.8% of American merchandise exports in 2021, and 18.1% through June of 2022, energy is already well above the 89-year-old record set in the Hoover administration. (At 13.2%, or $208 million of that year’s Depression-shrunken $1.58 billion in total U.S. exports.) Internationally, having surpassed Russia and Saudi Arabia last year, the U.S. is the world’s largest energy* exporter for the first time in a century. The dollar figures look like this:

2022    $420 billion?**
2021     $240 billion
2020      $151 billion
2015      $105 billion
2010       $82 billion
2000       $13 billion

*  Crude and refined petroleum, natural gas, coal, electricity, other.
** Annualized based on six months of available data.

A graph from the Energy Information Administration (link below):

FUTURE READINGS:

PPI’s Paul Bledsoe on natural gas exports, lower-methane emissions, and European/Asian security:

December 2021, on Europe’s ability to reduce overall emissions and ease a security threat by replacing Russian with American natural gas.

And following up, June 2022, on cleaner/less dangerous energy for Asia.

Two takes from Louisiana: 

Governor John Bel Edwards and associates on European markets, infrastructure development, and Louisiana export growth.

And the Acadian Advocate looks at soaring LNG shipments from the six U.S. LNG terminals.

Data and a bit of explanation:

The Department of Energy’s Energy Information Administration explains liquefied natural gas.

… and tracks U.S. energy imports and exports.

The European Union’s Eurostat on energy imports from Russia (though only through 2021).

Sweden’s Energy Ministry reviews vulnerability to Russian energy coercion, March 2022.

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: Greenland is losing 280 billion tons of ice each year.

THE NUMBERS: Volumes of fresh water –

Total worldwide:                  ~40.0 million cubic km
Antarctic ice sheets:             ~24.7 million cubic km
Groundwater & permafrost:  ~12.0 million cubic km
Greenland ice sheet:               ~2.9 million cubic km
Glaciers and ice-caps:              ~0.1 million cubic km
Lakes, ponds and rivers:          ~0.1 million cubic km

WHAT THEY MEAN:

As Congress concludes its work on the “Inflation Reduction Act,” with its arrays of decarbonization and clean industry programs, a note from NASA’s climate program at Caltech:

“The mass of the Greenland ice sheet has rapidly declined in the last several years due to surface melting and iceberg calving. Research based on observations from the Gravity Recovery and Climate Experiment (GRACE) satellites (2002-2017) and GRACE Follow-On (since 2018) indicates that between 2002 and 2021, Greenland shed approximately 280 gigatons of ice per year, causing global sea level to rise by 0.03 inches (0.8 millimeters) per year.”

How much water is this exactly? According to a rough estimate published by the U.S. Geological Survey, the world’s store of fresh water — all the glaciers, ice sheets, lakes, rivers, and groundwater combined — is about 40 million cubic kilometers by volume. About three fifths of this, or 24.7 cubic kms, is locked up in the 30-million-year-old Antarctic ice sheets. Ground water adds 12 million cubic kms. Greenland’s ice sheet — about 2.7 million years old and averaging a mile in height — holds about 2.9 million cubic kms. By volume and height, this makes the ice sheet something like the Mediterranean Sea suspended a few feet above the Arctic Ocean. Alternatively, Greenland holds about 15 times as much fresh water as the 0.2 million cubic kms of liquid in all the picturesque and historic lakes, rivers, and mountain glaciers of the Americas, Asia, Africa, Australia, Europe, and smaller islands combined.

How much, then, is 280 gigatons of ice? By one comparison, converted into liquid this would be about half the 530 gigatons of water flowing down the Mississippi River each year. By another, given that by arithmetic the Greenland ice sheet weighs about 2.9 quadrillion tons, losing 280 billion tons means that about 0.01% of it, or one ten-thousandth, is melting off each year. This is likely to accelerate: A recent survey published by the National Academy of Sciences estimates that expected warming through 2100 is likely to melt enough of it to raise sea levels by one meter, implying loss of about an eighth of the ice sheet or twice the above-ground fresh water outside Antarctica. Melting all of it would raise sea levels by about 24 feet, and require about 1000 years under current climate-change trajectory.* So, Congress’ action this week is perhaps not very timely, but it is also not too late.

* The presumably less likely case of an Antarctic ice-sheet melt would raise the seas by 190 feet.

FUTURE READINGS:

Flight  

NASA’s GRACE project at Caltech monitors Greenland ice sheet melt rates.

Danish research program EastGrip is a 30-person team investigating the behavior of the ice sheet through radar, drilling for ice cores to a depth of 2500 meters (1.5 miles), and surface observations to understand past climate effects on ice sheets, chemical content at various levels, melting and internal ice flows, etc.

Proceedings of the National Academy of Sciences on likely future melting trends.

The National Snow and Ice Data Center’s “Greenland Ice Sheet Today” bulletin shows surface melting at “moderate” levels compared to 2020 and 2021, principally along the western/southern coastal strip with some on the far northern coast.

… and also from the NSIDC, a look at adaptation in southern Greenland polar bear populations.

And the U.S. Geological Survey counts the world’s fresh water.

Policy: 

The Senate Democratic Caucus summarizes the Inflation Reduction Act’s energy and climate change provisions.

The White House’s Office of Science & Technology Policy announces Arctic policies.

And more about Greenland:

The world’s largest island and undisputed fresh-water superpower is roughly one-fifth the size of the United States, and 80% covered by ice. About 56,000 people — 6,000 Danes, 50,000 Inuit — live on the actually “green” bits. Administered by Denmark since 1721, in constitutional terms Greenland is a politically autonomous kingdom under the Danish monarchy, with a right in theory to declare independence. The odd interlude in which the Trump administration suddenly proposed to “buy” it four years ago rested on a complex set of concerns about access to potentially large mineral lodes (Greenland is thought to be home to an array of rare-earth metals useful in clean-energy manufacturing but potentially damaging to mine, as well as messy to mine; also gold, silver, zinc, tantalum, etc.) along with concerns about Arctic sea lanes and intelligence surveillance.  For now, Greenland’s main industry is about $1 billion in cold-water fisheries for snow crab, cold-water shrimp, turbot, halibut, and other northern catch.

The Greenland government’s page, evidently only in Greenlandic (an Inuit language) and Danish.

Denmark reviews mineral resources.

U.S. policy, via the Embassy in Copenhagen.

The NYT looks at metal ores and mining.

…while NPR catalogues big-power interests and motives in the far north.

Perspective from the Inuit Circumpolar Council, with indigenous reps. from the U.S., Canada, Greenland, Denmark, Finland, and (still) Russia.

And the 10-day weather report for Nuuk (50°F and wet all week).

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: Over 100 million people worldwide have been forcibly displaced from their homes.

THE NUMBERS: UNHCR’s annual counts of refugees, internally displaced people, asylum seekers, and others forced from their homes –

2022        103 million
2021          89 million
2020          82 million
2016          65 million
2012          42 million

WHAT THEY MEAN:

From Matthew 2:13, the “Flight to Egypt” story:

“An angel of the Lord appeared to Joseph in a dream and said, “Rise, take the child and his mother, and flee to Egypt, and remain there till I tell you; for Herod is about to search for the child, to destroy him.” And he rose and took the child and his mother by night, and departed to Egypt, and remained there until the death of Herod.”

In modern legal terms, the family would be “refugees”, under the relevant 1951 U.N. Convention: people who have crossed a national border “owing to a well-founded fear of being persecuted for reasons of race, religion, nationality, membership of a particular social group or political opinion,” and cannot safely return home. The passage does not recount the family’s reception in Egypt, then a Roman province, though the implication is that they found a place to live and a temporary livelihood. An announcement from the University of Maryland’s Rosham Center for Persian Studies (a 15-year-old center for Persian language and cultural study) provides a modern parallel, combining government support and policy with non-profit charities and individual volunteerism:

“Afghan refugees are currently the largest refugee population in the D.C.-Maryland-Virginia area served by the International Rescue Committee. While making the difficult adjustment to life in a new country they frequently struggle with a variety of problems, including social isolation/integration into the community, developing English language skills, and learning about local community resources and American culture.  UMD students chosen to participate in the ARA Program as ARA interns help our new Afghan neighbors during their transition into their new life in America while themselves benefiting from the opportunity to learn more about Afghan Persian culture and the Dari dialect of Persian spoken in Afghanistan. ARA interns also receive training in refugee care from the IRC and additional training in Afghan culture and Dari (Persian) from Roshan-UMD faculty.”

Background: The U.N. High Commission on Refugees (UNHCR) keeps an annual count of refugees, along with “internally displaced” people (i.e., those forced to leave home for similar reasons but who have not crossed an international border), and several other categories* of people forced from homes by violence or threat of persecution.  The steadily rising tallies over the last decade, and the acceleration of their growth in the last five years, are a human index of deteriorating world peace and security:

• In 2012, UNHCR counted 41.8 million ‘forcibly displaced’ people, including 10.5 million refugees, 26.4 million internally displaced people, 10.5 million cross-border refugees, and 5.8 million in other classifications.
• By the end of 2016, this count had risen to 65 million, including 17 million refugees, 40 million internally displaced people, and 8 million other.
• Five years later, at the end of 2021, the count was at 89 million, pushed up by a series of state breakdowns and civil wars: overthrows of elected governments in Afghanistan and Burma, Russian military intervention in Syria, civil wars in Ethiopia and Yemen, economic collapse in Venezuela. UNHCR’s end-2021 “Global Trends” report finds that children made up 40% of this total, or 36.5 million boys and girls.
• By mid-2022, the Russian invasion of Ukraine had raised the total above 100 million for the first time, with 4.6 million Ukrainians now refugees and another 6.5 million internally displaced, along with an additional 367,000 in Myanmar and 270,000 in Burkina Faso.

Parallel to this is a second story of tenuous hope for shelter and resettlement.  Six countries now host nearly half the world’s refugees: Turkey with 3.8 million, Colombia with 1.8 million, Pakistan and Uganda with 1.5 million each, Germany and Poland with 1.3 million each. In the United States, roughly three million Americans (including two currently serving Members of Congress) came to the U.S. as refugees, and are now permanent residents or citizens. From the turn of the century to 2016, the State Department was admitting 27,000-85,000 refugees per year for resettlement, which was roughly 3% to 8% of net immigration, depending on the year.  The Trump administration cut admissions to 11,411 in FY2021, the lowest level since passage of the 1980 U.S. law defining refugee eligibility. The count has rebounded a bit since, with 15,100 arriving from the beginning of the Fiscal Year in September 2021 through June 2022, including the Afghans now acclimatizing at the University. In parallel with this, the Justice Department runs a “Temporary Protected Status” program, with stays of deportation and work authorization (though not citizenship) for about 400,000 nationals of 15 countries.

* Other classifications in UNHCR’s count of forcibly displaced people include Palestinians in the U.N. Relief and Works Administration’s jurisdiction, asylum seekers, and Venezuelans displaced abroad.

FUTURE READINGS:

Flight  

UNHCR reports over 100 million people forcibly displaced from homes worldwide.

… also notes 20-year trends, main source countries, countries with the largest incoming populations, and more.

… and summarizes country situations in:

Ukraine

Afghanistan

Syria

Ethiopia

Venezuela

Burma

Shelter 

The Justice Department’s Temporary Protected Status data.

The State Department’s refugee resettlement program site.

… and State Dept data on refugee resettlement from FY2000 through FY2022 (through June). The largest arriving groups for the first nine months of FY2022: 3,735 from Congo (DROC), 3,525 from Syria, 1,308 from Sudan, 1,129 from Burma, 1,028 from Ukraine, and 846 from Afghanistan.

The Department Health and Human Services explains available services.

U.S. Citizenship and Immigration Services on sponsoring Ukrainian refugee arrivals.

And the University of Maryland’s Rosham Center explains its Afghan refugee support program.

And resettlement 

Rep. Stephanie Murphy, D-Fla., on growing up in a refugee family and support for Afghan allies of the U.S.

Minnesota’s Hmong community celebrates a local girl.

Delaware encourages refugee business creation.

And Atlanta does the same.

D.C.’s African refugee community runs a family support and job center for newly arrived Ethiopian, Eritrean, Syrian and others.

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: Digital bank accounts can help Cambodian garment workers stay safe and earn more from their wages

THE NUMBERS: Estimated monthly data flows over the internet, worldwide* –

2022                396 exabytes
2020                254 exabytes
2015                  76 exabytes
2010                    3 exabytes
1998           0.0001 exabytes

* Estimates from Cisco’s Visual Networking Index, 2017 and earlier reports.

WHAT THEY MEAN:

It is a quarter-century since WTO members approved a “moratorium” on applying tariffs to electronic transmissions, at “MC-2” — the second Ministerial conference — in the spring of 1998. Last June, a quarter-century later, the twelfth Ministerial conference extended this once again, with another decision point at the 13th Ministerial conference likely in late 2023. In the intervening years:

•  The world’s internet user community has grown from 147 million (of whom 77 million were American) to 5.3 billion or two-thirds of the world’s people in mid-2022.
• The digital economy has grown to about 15.5% of global GDP, equivalent to $16 trillion, a figure close to the $18 trillion Chinese and EU economies.
• The scale of information flowing across telecom networks, according to estimates in Cisco’s now-slightly-dated Virtual Networking Initiative, rose about 4-million-fold, from 100 terabytes to a likely 396 exabytes per month.
• The cost of transferring information has dropped by a likely 99%, as fiber-optics replaced copper submarine cables and low-altitude satellites proliferated.
• Debate over the “moratorium” this spring centered on growth, development, and taxation: How does the economic and social value of rising information flows match up against the revenue poor-country governments could take by taxing these information flows (while in doing so slowing their growth). Here is a small human case for the choice WTO members have made so far:

Cambodia’s 800,000 garment workers, mostly young women from rural towns and villages, have been the country’s engine of industrial development over the past generation. At the national minimum wage for garment factories, they earn $194 and up monthly, which is about 50% above Cambodia’s $1,591 per capita income at paycheck time. But they lose some of this, and assume personal risks that workers in middle-income and rich countries don’t, because they are mostly paid in cash and have great difficulty finding safe places to put their money.

Visiting factories around Phnom Penh a decade ago, the Trade Fact series editor noticed that almost all the line workers at sewing machines were wearing silver necklaces, earrings, and bangles. Experts and factory managers explained that this was not a fashion choice, but the best among a poor set of savings options. Since rural Cambodia lacked an effective birth certificate or ID system, workers could not open bank accounts and took wages in cash. To avoid carrying lots of paper money around, or trying to hide it in their (usually shared) apartments, they would visit pawn shops and buy small pieces of jewelry, essentially ‘wearing’ their savings until the holidays. Then they would resell the jewelry at a small loss in order to bring remittance money and presents to their families.  In financial-services jargon, this is a negative-interest savings account, but the best choice available since it is physically safer than others.

World Bank researchers now see the falling cost and eased availability of financial information transfer — the ability to move data cheaply and securely, combined with worker’s widespread adoption of smartphones with low-cost monthly data plans — beginning to change this system. For a one-time fee of $5,900, a Cambodian garment factory can contract with a bank or telecom company to replace cash payouts with automatic digital deposit that workers can access through phones and ATMs with unique pins. This in turn will enable a worker to earn interest and develop credit rather than losing part of her wages to pawnshops, and send remittances home digitally rather than carrying a purseful of cash on a bus.

This local case has analogues throughout the low-income world as data flows grow cheaper and reach more countries:  financial inclusion for informal-sector workers, telemedicine for rural areas, weather and soil bulletins for farmers, and other support for the poor. More generally, World Bank researchers believe that raising access to mobile digital service by 10% in low-income countries raises per capita income by 2% (and in sub-Saharan Africa by a somewhat higher 2.5%). The WTO members will be arguing these matters as they prepare for “MC-13” sometime late in 2023 or early 2024.  Arguments for slowing this growth by taxing it, however attractive to accountants in Finance ministries, need to be weighed against larger-scale potential loss in development and daily life.

FUTURE READINGS:

Digital growth and policy 

What does “grow from 100 terabytes per month in 1998 to 396 exabytes in 2022” mean? A “byte” is eight binary digits, enough information to form one letter. Prefixes run as follows: kilo represents 1,000, mega 1 million, giga 1 billion, tera 1 trillion, peta 1 quadrillion, exa 1 quintillion, and zetta 1 sextillion. Yotta comes next, but has not yet been achieved by anything human. Thus, the 396 exabytes thought to be transmitted each month this year are about 4 million times more information than the 100 monthly terabytes of 1998.  By analogy, the ratio of digital information flows in 1998 to those of 2022 is about the same as the ratio of the 2 million trees in and around Washington D.C., to the 3 trillion trees thought to be alive and growing on Planet Earth.

Cisco’s most recent Annual Internet Report, with counts of users, devices, and speed for the world and regions.

The WTO looks to another debate on electronic transmissions, tariffs, finance, and development in its next Ministerial conference.

Data flow, development, and the garment worker 

The World Bank examines the role of digital information and inclusion in low-income country development.

… and looks at the transition from cash payments to digital banking for Cambodian garment workers.

The International Labour Organization has a wide-scale take on life and work in Cambodia’s garment and shoe factories.

And a look back:

The White House electronic commerce report, from the Clinton administration in 1997, argues that “Unnecessary regulation of [Internet-based] commercial activities will distort development of the electronic marketplace by decreasing the supply and raising the cost of products and services for consumers the world over. … Accordingly, governments should refrain from imposing new and unnecessary regulations, bureaucratic procedures, or taxes and tariffs on commercial activities that take place via the Internet..

CNN recalls the world’s Internet user community as of 1998.

And the WTO’s 1998 Declaration on Electronic Commerce.

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: 4.85 billion people have been vaccinated against COVID-19 worldwide

THE NUMBERS: Vaccination rates for adults, by world income group*

Upper-middle income countries       78%
High-income countries                      73%
United States                                     67%
World                                                  61%
Lower-middle income countries        55%
Low-income countries                        19%

Source: Ourworldindata.org for percentages by income level. World Bank definitions for these classifications are above $13,205 in Gross National Income per capita for ‘high-income, $4,206 – $13,204 for upper-middle income, $1,086 – $4,205 for lower-middle income, and under $1,085 for low-income.

WHAT THEY MEAN:

The world’s first COVID vaccine jab, delivered by nurse May Parsons, went to a 91-year-old Margaret Keenan at University Hospital Coventry in England, on December 8, 2020. That was 331 days after the first publication of the coronavirus’ DNA sequence. With another 589 days have gone by since Ms. Keenan’s first shot, where do we stand?

According to the Johns Hopkins University Coronavirus Information Center, health care providers like Ms. Parsons have given 11.84 billion vaccine shots worldwide. This has “fully vaccinated” 4.84 billion people, or 61% of the world’s population. (“Fully vaccinated” by JHU’s definition: two mRNA shots or one Johnson and Johnson shot.)  A study last month conducted by the British medical journal The Lancet calculates that these vaccinations have cut worldwide COVID-19 deaths by a range from 14.4 million to 19.8 million, in the context of an epidemic of 565 million known cases and 6.4 million known deaths. Each day the total rises a bit, as providers administer about 9 million more shots. This is a remarkable, even stunning, achievement of government and private-sector science, transnational manufacturing and logistics, and health-provider delivery.  But it remains an achievement with gaps; and these may grow more important as new variants emerge and immunity conferred through early vaccination fades.

One gap is that of income. People in rich and upper-middle income countries are somewhat more likely to be vaccinated than people in lower-middle-income countries, and low-income countries are far behind both. Low-income countries also appear to be relatively more reliant on Chinese- and Russian-produced vaccines that offer lower levels of protection than U.S./European vaccines. There are also some gaps by region – vaccination rates appear relatively high in South America, East Asia, ASEAN, the Pacific Islands and western Europe, and relatively low in southern and eastern Europe, the Middle East, the Caribbean, South Asia, and Africa. These general patterns have many exceptions — low-income Asian countries including Cambodia and Bhutan are near the top of the vaccination-rate tables, for example — and some countries in very similar circumstances report quite different results. As an extreme case, the world-low vaccination rate in JHU’s table is Burundi’s 0.1% of the population (13,800 of 12 million people); next-door Rwanda is at 65%, essentially the same as the United States.

The U.S. in a way mirrors the international pattern, with vaccination rates by state varying widely, and modestly correlating with state median income levels, political divisions, and larger geography. New England, where vaccination rates are in the 75% to 84% range, is comparable to the rates in Japan, France, and Australia, and taken as a distinct region would be near the top of the high-income spectrum. D.C., Hawaii, Puerto Rico, New York and New Jersey are also in the top ten. The “least vaccinated” group includes Wyoming and a set of deep South states; here, rates are in the 51%-55% range and at par with lower-middle income countries such as Tajikistan, Bolivia, and Honduras (and upper-middle income Russia). Explanations for relatively high U.S. state rates of vaccination may include lower public “vaccine hesitance”, strong outreach from state governments, high health-provider-to-population ratios and low levels of uninsured people.  Explanations for lower rates, the reverse.

A table illustrates, with vaccination levels in sample countries and U.S. states drawn from the Johns Hopkins University Coronavirus Information Center:

Much, then, achieved. But with 3 billion still unvaccinated around the world, mortality counts still at 15,000 weekly, new variants emerging every few months, and many early vaccination recipients needing booster shots, much still to do.

* Using the District’s own 77% count; JHU has a perplexing 100% rate for D.C.

FUTURE READINGS:

The Lancet calculates that vaccinations have saved between 14.4 million and 19.8 million lives

And the Royal College of Nursing on Parsons, Keenan, and the first COVID shot.

Data on vaccination rates, new cases, death rates by country and U.S. state, etc. 

Ourworldindata.org has an interactive site allowing selection of particular countries and regions.

Johns Hopkins U. Coronavirus Information Center reports 6.4 million deaths among 560 million cases since December 2020.  The mortality count has diminished to a still-high 12,000 deaths per week worldwide, from levels in the range of 50,000-100,000 deaths per week from mid-2020 through late 2021.

At home:

Rhode Island’s 84% vaccination rate is the highest in the U.S.

Washington, D.C., is at 77% by its own count; the JHU list somehow credits the District with a 100% vaccination rate. Either way, one of the top U.S. vaccination performers.  Mayor Muriel Bowser explains vax requirements.

The Centers for Disease Control and Prevention COVID-19 site.

Overseas:

USAID outlines its COVID aid program in low- and middle-income countries.

The WTO explains the state of debate on intellectual property rules and COVID.

The African Union outlines vaccination trends and policies in Africa.

The Rwanda Biomedical Centre has Q&A on vaccination.

And the OECD reviews the supply chains that produce and deliver vaccines.

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: World shipping container capacity has grown six-fold since 2000

THE NUMBERS: World container-shipping fleet capacity, in TEUs* –

2022         25.8 million TEU
2010          12.8 million TEU
2000          4.3 million TEU
1990            1.2 million TEU
1980            0.5 million TEU

* “Twenty-foot Equivalent Units.” A TEU represents one 20 x 8 x 8.5 foot shipping container; a 40-foot container is two TEUs.

WHAT THEY MEAN: 

A quick modern maritime trade history, in three ships:

1. The Warrior: In 1954, the National Academy of Sciences studied the voyage of a “general cargo” freighter from New York to Hamburg. The Warrior, measuring 142 meters long, 19 wide, and 32 deep, had a crew of 44. On this voyage it carried 194,582 individual pieces of cargo, which weighed 5,015 tons and arrived at the port in a kaleidoscopic 15 types of “packaging.” The study’s author counted 24,036 bags, 10,671 boxes, 717 cartons, 74,908 cases, 5 “reels”, 815 barrels, 888 cans, 15,38 drums, 2,877 packages, 2,634 pieces, 21 crates, 10 transporters, 2,880 bundles, 53 wheeled vehicles, and 1,525 “undetermined” types of packages. A 22-person “longshore gang” took 35 days to pack this cargo in wooden pallets in New York and load it onto the ship. The German crew at the other end of the trip needed 4 days to unload it after arrival.

2. The Ideal-X: The first container ship, a retrofitted World War II freighter renamed Ideal-X, launched in April 1956 from Newark on a trip to Houston. It was about the same size as the Warrior — 160 meters long, 9 wide, and 21 deep — and carried 58 proto-containers holding 10,572 tons of cargo. Malcolm McLean, the North Carolina trucking executive who designed it, is said to have calculated that traditional “breakbulk” loading of Warrior-type ships cost $5.83 per ton of cargo. (“Breakbulk”: Loading individual cargo items into ship holds after packing them in wooden pallets; see below for a real-life case study in this.) Simply disconnecting a truck’s trailer from the chassis and putting it on deck, by contrast, cut this cost by 97%, to 16 cents per ton. Ideal-X took eight hours to load.

By 1990, a worldwide fleet of 1169 container-ships was carrying around over 1.2 million TEU, or an average of over 1,000 twenty-foot containers per ship. A decade-old but still striking paper (Daniel Bernhofen, Zouheir el-Sahli, Richard Kindner) investigated the effects of the shift from break-bulk to containerized cargo, concluding that it had been about twice as powerful a driver of trade growth as tariff cuts and trade agreements. Specifically:

a. Participation in the two multilateral GATT agreements of the era — the “Kennedy Round” of 1968 and the “Tokyo Round” of 1979, which applied to 94 countries as of 1990 — raised trade volume 285%, or three-fold.

b. Participation in free trade agreements (meaning in practice the creation of the European Economic Community in the late 1950s, its expansion from the original six members to 12 between 1973 and 1985, plus the U.S.-Canada auto pact of 1965, the U.S.-Israel FTA of 1985, and the U.S.-Canada FTA of 1988) raised trade about 45% or half-fold. (If “half-fold” is a word).

c. Adoption of container shipping raised trade 790%, or nine-fold.

3. The Ever Alot: Since Mclean’s ingenious low-tech innovation, container shipping has followed a sort of Moore’s Law-like expansion curve, with capacity at least doubling every decade. By 2000, fleet capacity had reached 2400 ships carrying 4.3 million TEU, and by 2010, 4700 ships and 12.8 million TEU. The 6,406 container ships active as of mid-2022 carry 25.8 million TEU, meaning an average of over 4,000 containers per ship. A median-size container vessel is said to take about 15 hours to load and unload.

The largest container ship yet built — unpoetically but accurately named Ever Alot – is owned by Taiwan’s Evergreen lines, and went into service on June 22. It is 400 meters long, 61.5 meters wide, and 100 meters deep; requires a crew of 25; and can carry 24,004 TEU. At maximum weight, this would be about half a million tons of cargo, equivalent to 100 Warriors or 50 Ideal-X’s. Ever Alot arrives at Malaysia’s Tanjung Pelepas port tomorrow.

FURTHER READINGS:

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: ‘Globalization’ is not so new 

THE NUMBERS: Merchandise trade as share of GDP –

2022       22.1%
1790       22.7%?

WHAT THEY MEAN:

After the Fourth, Yorktown, the Treaty of Paris, and the Constitution, they began to argue …

Nobody really knows how large America’s early-republic economy was. The website www.measuringworth.com, an economic history project at the University of Illinois, nonetheless makes an admirable try, estimating a U.S. GDP of $189 million in 1790. We do know trade figures, though: that year, Alexander Hamilton’s newly hired Customs agents counted $23 million in imports and $20 million in exports.

Assuming the GDP estimate is about right, goods trade would have been equal to a bit less than 23% of the economy. Today’s trade and GDP stats, counted in trillions rather than millions of dollars, are about 100,000 times bigger. But measured against one another, they make the 21st-century and 18th-century economies look eerily similar. With the Bureau of Economic Analysis estimating U.S. GDP at $25 trillion this year and Census trade data suggesting $3.5 trillion in goods imports and $2.1 trillion in exports, the 2022 goods-trade-to-GDP ratio is just above 22%, almost identical to that of 1790.

Similar circumstances can elicit similar ideas and responses. In this post-Fourth week, here are some post-Independence perspectives, each with its own contemporary echoes and advocates:

1. Alexander Hamilton’s Report on Manufactures (1791) the first U.S. government paper on trade policy, was also the first on the topic now termed “competitiveness.” Then serving as Treasury Secretary, Hamilton rebuts arguments that low-wage foreign competition (from textile, machinery, and other factories in Industrial Revolution Britain and Europe) made it impossible for the U.S. to compete in manufacturing:

“While in the article of wages the comparison certainly turns against the United States … the degree of disparity is diminished in proportion to the use which can be made of machinery. To illustrate this last idea: let it be supposed that the difference in price in two countries of a given quantity of manual labor requisite to the fabrication of a given article is as ten, and that some mechanic power is introduced into both countries which, performing half the necessary labor, leaves only half to be done by hand, it is evident that the difference in the cost of the fabrication of the article in question, as far as it is connected with the price of labor, will be reduced from ten to five.”

The balance of the Report calls for a program of importing labor-saving machines, passage of a patent law to stimulate American inventors, incentives for high-skilled immigration, cash prizes for innovative American factories, and an infant-industry trade protection scheme using temporarily high tariffs or exclusions for products ranging from starched wigs, bell-metal, and glue to whiskey, whale-oil, pewter cups and bowls, furniture, chocolate, rifles, and books. Hamilton’s former Federalist Papers partner, James Madison, was by then leader of an opposition party in the House of Representatives, and made sure the program got nowhere.

2. Thomas Jefferson’s Report on Foreign Commerce (1793), from a different angle two years later, is the first U.S. government catalogue of foreign trade barriers. Reviewing tariff rates, product exclusions, state trading monopolies, and shipping (“navigation”) restrictions in the U.K., France, Spain, Portugal, Denmark, Sweden, and the Netherlands along with their colonial possessions in Latin America, Canada, and the Caribbean, Jefferson as Secretary of State combines theoretical support for open markets with reciprocity in practice:

“Instead of embarrassing commerce under piles of regulating laws, duties, and prohibitions, could it be relieved from all its shackles in all parts of the world, could every country be employed in producing that which nature has best fitted it to produce, and each be free to exchange with others mutual surplusses for mutual wants, the greatest mass possible would then be produced of those things which contribute to human life and human happiness; the numbers of mankind would be increased, and their condition bettered. Would even a single nation begin with the United States this system of free commerce, it would be advisable to begin it with that nation; since it is one by one only that it can be extended to all. … But should any nation, contrary to our wishes, suppose it may better find its advantage by continuing its system of prohibitions, duties and regulations, it behooves us to protect our citizens, their commerce and navigation, by counter prohibitions, duties and regulations, also. Free commerce and navigation are not to be given in exchange for restrictions and vexations; nor are they likely to produce a relaxation of them.”

A sample of the findings:

“Our bread stuff is at most times under prohibitory duties in England, and considerably dutied on re-exportation from Spain to her colonies. Our tobaccoes are heavily dutied in England, Sweden and France, and prohibited in Spain and Portugal. Our rice is heavily dutied in England and Sweden, and prohibited in Portugal. Our fish and salted provisions are prohibited in England, and under prohibitory duties in France. Our whale oils are prohibited in England and Portugal. And our vessels are denied naturalization in England, and of late in France. … Spain and Portugal refuse, to all those parts of America which they govern, all direct intercourse with any people but themselves. … We can carry no article, not of our own production, to the British ports in Europe, nor even our own produce to her American possessions.”

3. Thomas Paine and economic integration as a support for peace: And from a non-government, dissenting-intellectual perspective, Paine argues in The Rights of Man (1790) for international economic integration as a deterrent to war:

“I have been an advocate for commerce, because I am a friend to its effects. It is a pacific system, operating to cordialise mankind, by rendering nations, as well as individuals, useful to each other. If commerce were permitted to act to the universal extent it is capable, it would extirpate the system of war, and produce a revolution in the uncivilised state of governments. … Commerce is no other than the traffic of two individuals, multiplied on a scale of numbers; and by the same rule that nature intended for the intercourse of two, she intended that of all. For this purpose she has distributed the materials of manufactures and commerce, in various and distant parts of a nation and of the world; and as they cannot be procured by war so cheaply or so commodiously as by commerce, she has rendered the latter the means of extirpating the former.”

FURTHER READINGS:

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: The U.S. collects about as much tariff money on Pakistani goods as on British goods. 

THE NUMBERS:

WHAT THEY MEAN:

Looking at the U.S. tariff system as domestic tax policy for an International Trade Commission hearing last week, PPI’s Ed Gresser found much to dislike. In this role, it turns out to be mainly a way to tax cheap clothes, shoes, and other consumer goods, many of them not made in the United States for decades. As such, it is a remarkably regressive way to raise money, and not obviously effective as a job or production protector.

How does it look from the other side of the border? The complicated answer is, it basically depends where you are on the other side. For most countries U.S. tariffs turn out to be pretty modest, in a range from close to zero to about 5%. For low-income Asian countries reliant on clothing and textile exports, it is very restrictive; for China and to some extent for the world, it has changed a lot since 2017. As a starting point, a quick list (using trade-weighted averages, i.e., tariff payments divided by the value of goods imports) illustrates the world averages of 2017 and 2021, and the variation among countries:

What explains these patterns?

High tariffs on low-income Asia: The low-income Asian countries at the top of the list — Bangladesh, Cambodia, Pakistan, and Sri Lanka — specialize in exports of clothing and home textiles. Tariffs on these goods average over 11%, and spike to 32% (as one example, for polyester shirts). By comparison, IT goods, medical equipment, natural resources like oil and fish, and primary agricultural commodities are zero, while heavy-industry and sophisticated consumer goods generally get low tariffs.  Thus the startling fact that buyers of Pakistan’s modest $5.3 billion worth of shirts, towels, and similar goods pay almost as much as buyers of $56.6 billion in British medicines, aircraft parts, automobiles, and art auction prizes. Likewise, buyers of struggling Sri Lanka’s underwear and clothing paid $325 million last year; the bill for buyers of Norway’s $6.7 billion in salmon, oil, and pharmaceuticals was $34 million, an order of magnitude smaller.

Low-to-medium rate on others: If the highest rates show up in low-income Asia, the lowest are for countries of several different types: (a) energy and natural resource exporters (oil for Kuwait, fish for Fiji, and so on); (b) the 20 U.S. FTA partners, where Canada, Jordan, El Salvador and Colombia stand in for the larger group; and (c) countries enrolled in the African Growth and Opportunity Act or the Caribbean Basin Initiative, such as Kenya, South Africa, Liberia, Haiti, and Jamaica.  Larger wealthy and middle-income countries (the U.K., Germany, Brazil, Argentina, Thailand, Japan, etc) have diversified export mixes, typically with a lot of zero-tariff products, a lot of mid-tariff products, and some high-tariff goods, and typically wind up in a range from 1% to 3%.

Changing rates for the world and China: Finally, the system has changed substantially over the last five years, with the worldwide average rate doubling from 1.4% in 2017 to 3.0% in 2021.  This is principally due to the Trump administration’s “301” tariffs on Chinese goods. The “232” tariffs on steel and aluminum, though equally controversial, affect only about 1.5% of imports, and changed overall averages only very modestly for the world or large partners like the EU or Japan. For Chinese goods specifically, average rates have jumped from 2.7% in 2017 to 11.3% in 2021 – very high in comparison to the vast majority of countries, but still actually below the normal, permanent rates for products from Bangladesh.

FURTHER READINGS:

Gresser on the tariff system and American underserved and underrepresented communities.

A long view: The U.S. International Trade Commission tracks U.S. tariff rates from the McKinley Tariff of 1890 to 2020.

… and analyzes the 11,414 U.S. tariff lines — How many are zero? How many duty-free under FTAs and preferences? How many are “specific duties,” or flat fees, instead of percentages? — etc.

The U.S. tariff system.

International comparisons

The World Bank’s interactive table of average tariff rates worldwide and by country uses “simple averages” (the rates for each single tariff line in a country’s “schedule” added up, then divided by the total number of tariff lines) rather than the “trade-weighted” averages above. This approach has grown less useful as a gauge generally (as more countries use FTAs and other special programs), and especially for the U.S. since the 301 and 232 tariffs.

This noted, the table reports a worldwide average of 5.2% as of 2017, down by about 2/3 from the 15.6% average of 1993, and by about half from the 10.8 percent world average of 2000. The world’s highest rate is the Bahamas’ 23.7%, with a few other small islands and countries (the Cayman Islands, Bermuda, and Djibouti) next. The lowest are the zeroes for Hong Kong and Macao, with very slightly higher 0.1% averages in Brunei and Singapore.

The WTO’s World Tariff Profiles 2021 has a much more detailed look, with simple averages, trade-weighted averages, “tariff peak” counts, ag vs. non-ag., and more for 151 countries.

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 ProgressiveEconomy 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: The WTO has overseen two new international trade agreements in the last decade.

THE NUMBERS: GATT/WTO agreements since 1990 –

1994    Uruguay Round Agreements

1996    Information Technology Agreement

1997    Financial Services Agreement

1998    Basic Telecommunications Agreement

1999    “Moratorium” on Tariffs on Electronic Transmissions

2013    Trade Facilitation Agreement

2022    Agreement on Fisheries Subsidies

WHAT THEY MEAN:

Wrapping up their 12th Ministerial Conference (“MC-12”) at 4:30 a.m. last Friday after a 48-hour negotiating marathon, WTO members announced a set of agreements on electronic commerce, fisheries subsidies, and other matters. Temporarily stepping a long way back from their content, here is context from Franklin Roosevelt’s March 1945 letter to Congress announcing the opening of the world’s first “multilateral” trade negotiations:

“The point in history at which we stand is full of promise and of danger. The world will either move toward unity and widely shared prosperity or it will move apart into necessarily competing economic blocs. We have a chance, we citizens of the United States, to use our influence in favor of a more united and cooperating world. Whether we do so will determine, as far as it is in our power, the kind of lives our grandchildren can live.”

Two years later, these first set of talks ended without achieving all Roosevelt or Truman (whose administration completed them) had hoped for, but with a 23-country tariff-reduction accord known as the General Agreement on Tariffs and Trade.  This, the “GATT,” is the direct ancestor of the modern, 164-member World Trade Organization. Whether the “grandchildren” in question — say, those born in 1980 and afterwards — have in fact lived in a world of “widely shared prosperity” is a controversial subject, though they have incontestably lived in a world of steadily falling poverty.*

Unity is another question. After eight agreements of steadily escalating scope from 1947 through 1994, and four in the later 1990s, the WTO has spent most of the 21st century in increasingly bitter policy stalemate. The organization’s most ambitious goal — the Doha Round, launched in 2001 — never got done, as the membership deadlocked between a liberalizing wing and an India/South Africa/Brazil/China “policy space for developing countries” wing. Up to last week its members had managed only one new agreement (the 2013 Agreement on Trade Facilitation) since the turn of the century. Since then, the Trump administration’s blockage of the WTO’s dispute function eroded the group’s ability to settle arguments over existing agreements; and U.S.-China tariff confrontation, inward policy turns and rising nationalism in a series of major economies, and finally the unprovoked invasion of one WTO member by another raised direct questions about the organization’s ability to function, and more broadly whether appeals to common interests and liberal internationalist ideals of Roosevelt’s type still find listeners.

Last week’s events suggest the cautious answer is that yes, they probably do. A slightly more detailed review of the “MC-12” decisions includes: (1) extension of the 23-year-old international “moratorium” on impositions of any tariffs on electronic transmissions; (2) a compromise text on intellectual property waivers for Covid-related vaccines, diagnostics, and therapeutics; (3) a program for ‘institutional reform’ meant to be concluded by 2024; (4) guidelines for agricultural stockpiles and export controls, and (5), a wholly new agreement on worldwide fisheries subsidy controls, completed after two decades of discussion, as follows:

• Subsidies prohibited to illegal, unreported, unregulated fishing fleets.
• Subsidies prohibited to fishing in depleted fisheries
• Subsidies prohibited to fleets outside national jurisdiction
• Further negotiations on subsidies contributing to overcapacity in fishing fleets, with a deadline for conclusion by 2023

All in all, a reminder that even in times of distress and division, governments with good will can reach common goals through good-faith negotiation, and address common threats through pragmatic agreement.  Roosevelt’s fear of a world divided into “necessarily competing economic blocs” (or one that simply fractures and fragments) remains very relevant today; but the aspiration he expresses for widely shared prosperity has resonance still.

* World Bank data: 43% of the world’s people lived in absolute poverty in 1980; 27% in 2000; 8.6% in 2018, the last year for which the Bank has an estimate.

FURTHER READING

The WTO membership’s MC-12 decisions.

Direct-General Dr. Ngozi Okonjo-Iweala (pictured above) closes the Ministerial.

And Deputy Director-General Anabel Gonzalez has an inside-the-WTO assessment.

Fishery subsidies:

Governments subsidize fishing fleets at about $20 billion a year, with the largest sums coming from China, the U.S., the European Union, Japan, and Korea. The idea of a WTO agreement to cut or eliminate subsidies contributing to over-fishing was first raised in the 1990s during the Clinton Administration, and WTO talks on the topic officially began in 2001 with the Doha Declaration. (Its wording: “The ministers mention specifically fisheries subsidies as one sector important to developing countries and where participants should aim to clarify and improve WTO disciplines”). Here’s an estimate of fishery subsidies.

An informed reaction from International Institute for Sustainable Development.

NOAA on illegal, unreported, or unregulated fishing.

A comment from U.S. Trade Representative Katherine Tai.

And a reminder of the point of it all:

Roosevelt to Congress on the launch of the first multilateral trade negotiations.

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 ProgressiveEconomy 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: Immigrant players have hit 32 of the Washington Nationals’ 50 home runs this year. 

THE NUMBERS: Immigrants as share of population

WHAT THEY MEAN:

In this evening’s Nationals-Braves game, the Nats’ 26-man roster features 10 foreign-born players: four from the Dominican Republic, three from Venezuela, and one each from Panama, Cuba, and Nicaragua. Soto (pictured below), Cruz, Franco, Hernandez, Robles, and Ruiz account for two-thirds of the team’s admittedly modest 50 home runs this year. The visiting Braves have eight international players — Venezuela three, Curacao two, Mexico, Cuba, and the D.R. one each. Both teams pretty well reflect MLB’s overall 28% share of international players. Meanwhile, before and after the game someone has to take care of the grass; while the Nats reasonably decline to publish stats on their groundskeepers, about 33% of all U.S. groundskeepers and building maintenance people are foreign-born. This small window on the U.S.’ immigrant workforce illustrates a sort of national “smile curve,” in which the immigrant workforce is especially large in tough, physical blue-collar work, and also in high-end glamor jobs. More generally:

The current edition of the BLS’ Labor Characteristics of the Foreign-Born Workforce, out May 22, found 26.4 million immigrant workers — combining foreign-born U.S. citizens, green card holders, employees on work visas, and undocumented — in the United States as of 2021. Their 17.3% share of America’s 152.6 million employed men and women is high in historical terms – more than triple the 5% of Nixon-era 1970 — though below the 20.5% peak President William Taft’s statisticians recorded in 1910. Definitional differences make the U.S. data hard to compare precisely to experience in other countries, but based on the World Bank’s figures for immigrant shares of population, the U.S. appears (a) far below the majority-immigrant populations of the Persian Gulf, (b) well above the mostly local East Asian workforces, and (c) fairly similar to other large, wealthy western countries. Parsing out BLS’ rather aggregated figures, and adding a few other sources, three particularly international sections of the American workforce are as follows:

Glamor Jobs: A lot of TV and prestige press exposure here. About 28% of major league baseball players and an identical 28% of professional basketball players were born abroad. In Hollywood, 45% of this year’s Oscar acting nominees, using the Best Actor/Actress and Best Supporting Actor/Actress nominations, are either immigrants or temporary visitors; in elite academia and culture, 43% of the U.S.’ Nobel Prize winners since 2000.

Labor-intensive Services: Blue-collar physical work seems very similar to the glamor jobs. At the peak, 50% of hired farmworkers (and 73% of crop pickers) are immigrants, and mostly non-citizens. Construction, and groundskeeping/building maintenance are a tier below, at 33% of construction workers and groundskeepers/building maintenance workers; next come food preparation workers, at 22% of the labor force.

Science and Technology: Immigrants, finally, play an outsize role in American science, technology and innovation. Overall, by the National Science Foundation’s count, 19% of America’s 36 million science and engineering workers, and 23% of the sci/tech workers with bachelor’s degrees and above, are either immigrants or work-visa holders, with India and China the top countries of origin. The peak, above even the farmworker platoons, comes in PhDs in computer science and engineering, where immigrants are respectively 60% and 57% of the workforce.

FURTHER READING

The Bureau of Labor Statistics’ most recent Labor Characteristics of the Foreign-Born Workforce brief, out May 2022.

And a quick table of the immigrant share of various U.S. occupations:

(Sources: Bureau of Labor Statistics for all workers, National Science Foundation for engineering and science workers; academic paper for patents, and MLB for baseball.)

Some historical data from the Migration Policy Institute.

And a concerned look ahead: Though attempted border crossings draw intense interest, Kansas City Fed researchers believe net immigration to the U.S. has actually dropped sharply since the mid-2010s — from about 1 million per year to 477,000 in 2020 and 245,000 in 2021 — under the combined pressure of COVID-related travel restrictions, reduced granting of work visas, and slower processing of naturalization petitions. Presumably the immigrant share of the workforce has dropped a bit; K.C. Fed staff worry about the implications for innovation, productivity growth, and inflationary pressure.

International perspective

The International Labor Organization counts 169 million “international migrant” workers as of 2019. This meshes imperfectly with the BLS count, as the ILO uses “all foreign-born workers” (including naturalized citizens) for countries which record these figures, but only “migrant” (i.e. non-citizen] workers for some other countries. This noted, the ILO report finds 32% of the world’s migrant workers in Europe, 27% in Canada and the U.S., 15% in the Middle East and 14% in Asia.

Top tier

MLB reports on the “internationally born” players of 2022.

… the Washington Nationals roster, with birthplaces and links to the depressing 2022 pitching and power-hitting stats.

… and a look at Dominican Republic baseball.

The NBA comparison.

Hollywood’s 2022 Oscar nominees.

And the 2021 Nobel Prize winners.

On the land

The USDA on America’s 1.2 million hired farmworkers.

Science and technology 

National Science Foundation on the native- and foreign-born sci/tech workforce.

And Stanford researchers Bernstein/Diamond/McQuade/Pusada on the immigrant role in patenting and innovation.

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 ProgressiveEconomy 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:

The U.S. trade deficit rose about 50% from 2016 to 2021.   

THE NUMBERS: 

Q1/2022    -4.9%
2021          -4.0%
2016          -2.7%
2005          -5.7%*

* Highest on record; GDP stats begin in 1929. Deficits for 1815-1816 may have been higher, but GDP for those days is guess-work. In dollar terms, the 2016 deficit (goods/services) has grown by about 80%, from $481 billion; to a 2021 deficit of $861 billion.

WHAT THEY MEAN:

The Trump administration’s first “President’s Trade Agenda” report, released in March of 2017, cited U.S. manufacturing trade balance data as an index of the failures of previous administrations:

“In 2000, the U.S. trade deficit in manufactured goods was $317 billion. Last year it was $648 billion — an increase of 100%.”  

The next “President’s Trade Agenda” report of 2018 used “bilateral” trade balance to assert a failure of the North American Free Trade Agreement and set a goal for the “USMCA” which succeeded it:

“Our goods trade balance with Mexico, until 1994 characterized by reciprocal trade flows, almost immediately soured after NAFTA implementation, with a deficit of over $15 billion in 1995, and over $71 billion by 2017.” … “USTR has set as its primary objective for these renegotiations to improve the U.S. trade balance and reduce the trade deficit with the NAFTA countries.”

The two assertions’ use of trade-balance data as a way to judge policies have well-known logical,* data,** and economic theory*** problems. This duly noted, how do they look on their own terms five years later? By 2021, U.S. exports had dropped from the 11.9% share of GDP they held in 2016 to 10.8%; imports, meanwhile, had grown a bit from 14.6% to 14.8% of GDP. Here then are the same two trade-balance statistics for 2021 and (very tentatively, based on one quarter’s worth of trade data) so far in 2022:

1. The U.S. manufacturing deficit in 2021 was $1.07 trillion. The last four months’ data suggest a 2022 total somewhere around $1.3 trillion. If this ends up about right, the 2016 manufacturing deficit noted in the 2017 “President’s Trade Agenda” would have doubled in five years.

2. The trade balance with Mexico (again, goods only) was $108 billion in 2021, a year after USMCA implementation. It looks likely to top $125 billion in 2022, with tariffs on Chinese consumer goods still shifting some purchasing of TV sets, auto parts, etc., to Mexico.

* The “post hoc, ergo propter hoc” fallacy.
** Comparison of nominal-dollar balance in 2000 to the nominal-dollar balance in 2016, unadjusted for inflation.
*** Global trade balance will always equal national investment minus national savings; if tax cuts and large fiscal-stimulus programs reduce savings, trade balances will automatically go into deficit unless investment collapses for some reason. So the 2017 comment is not a useful comment on trade agreements, and the 2018 objective likely not one achievable through policy. 

FURTHER READING

Data

The Census Bureau’s U.S. monthly trade data, through April 2022.

… and the U.S./Canada/Mexico balances.

…  and for the big picture, U.S. exports, imports, and balances from 1960-2021 on one convenient page.

What happened? 

Trumpism leaves a larger deficit overall, and more concentrated in manufacturing than the 2016 figures. Why the jump?

Tax policy, followed by heavy COVID-era fiscal stimulus, are the obvious suspects. Three of the four upward ratchets in U.S. trade deficits since the 1970s followed tax-cut bills — one in the first Reagan term, another in the second Bush administration, and the third in 2017.  With higher fiscal deficits, and without an offsetting rise in family or business savings, overall U.S. savings will fall.  All else equal, the “savings – investment = trade balance” identity means higher trade deficits. The Trump-era tariffs, though not likely the cause of the overall deficit growth, have two likely balance effects:

(a) Shifting import sources: Imports from China, though above pre-tariff levels in dollar terms, were 21.6% of goods imports in 2016, and about 17% in 2021. With clothes, consumer electronics, etc., from Vietnam, Mexico, India, Taiwan, and so forth replacing about $100 billion in Chinese-origin goods, the higher USMCA deficit reflects this shift.

(b) Shifting sectoral composition: Trump-era tariffs on steel, aluminum, and Chinese goods are concentrated in industrial inputs such as metals, auto parts, electrical converters, etc. As U.S. manufacturers — automotive, machinery, beer and soda canners, tool-makers, etc. — absorb these costs, they are likely to lose some marginal competitiveness whether in exporting or competing against imports. This likely pushes more of the U.S deficit into manufacturing.

The two reports:

The 2017 “President’s Trade Agenda.” 

… and the 2018 followup (with a wildly wrong claim that the 2017 tax bill “has the potential to reduce the U.S. trade deficit by reducing artificial profit shifting).

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 ProgressiveEconomy 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:

There are no shortages of infant formula in Europe, Canada, Australia, or New Zealand.

THE NUMBERS: 

130,000 tons    New Zealand infant formula exports to world, 2021
0 tons               New Zealand infant formula exports to U.S., 2021

WHAT THEY MEAN:

A cautionary tale this spring, as White House officials and Congress consider hopes and plans for supply-chain “reshoring,” “resilience,” and import management: In the U.S., dairy vies with sugar as the most tightly policed trade product. According to the White House, 98% of formula in the U.S. is locally manufactured from milk from American dairy cows. The remaining 2% is mainly from Mexico, otherwise, about 2,000 tons come from Ireland, 1,300 tons from Chile, and 600 tons from the Netherlands. The result is a plausible claim to be America’s most completely on-shored, “post-neoliberal,” localized supply chain.

New Zealand, meanwhile, is (likely) the world’s most dairy-centered country. It is second only to Uruguay in cows-to-people ratio; first in the world for total dairy exports; and second to the Netherlands as an infant formula exporter, sending 130,000 tons per year to China, Australia, Hong Kong, Southeast Asia and other destinations.

New Zealand has a lot of formula.  With American stores suddenly short of it after the recall at the U.S. plant in Sturgis, Mich., we don’t have enough. Here, though, is what grocery store managers hoping to restock with New Zealand formula would need to do:

(1) Fit your purchase, by weight, within an annual global quota limit of “4,105 tons”* “other dairy products.” Most of this is already filled by formula and other non-cheese products from Ireland, Chile and the Netherlands; and in any case, to apply you would need to USDA quota regulations as follows: “A person may annually apply for a nonhistorical license for articles other than cheese or cheese products (Appendix 2) if such person meets the requirements of paragraph (b)(1)(ii) of this section.”

Paragraph (b)(1)(ii) in turn, related to purchases “where the article is not cheese or cheese product,” says you must be:

“(A) The owner of and importer of record for at least three separate commercial entries of dairy products totaling not less than 57,000 kilograms net weight, each of the three entries not less than 2,000 kilograms net weight;

“(B) The owner of and importer of record for at least eight separate commercial entries of dairy products, from at least eight separate shipments, totaling not less than 19,000 kilograms net weight, each of the eight entries not less than 450 kilograms net weight, with a minimum of two entries in each of at least three quarters during that period;

“(C) The owner or operator of a plant listed in the most current issue of “Dairy Plants Surveyed and Approved for USDA Grading Service” and had manufactured, processed or packaged at least 450,000 kilograms of dairy products in its own plant in the United States; or

“(D) The exporter of dairy products in the quantities and number of shipments required under (A) or (B) above.

“(2) Succeeding in this, you must make sure your supplier meets the Food and Drug Administration’s rules for labeling, ingredients, and preparation, which FDA inspectors verify factory-by-factory. Reasonable in itself, though New Zealand’s child health and food-borne illness statistics compare quite well to America’s.

“(3) Pay a 17.5% tariff. (Or a much higher one, “$1.035/kg + 14.9%”, if you’re trying to buy product that exceeds the quota.)”

In practice, at least on short notice, no one seems able to do all this.  So the fully on-shored, non-global supply chain turns out to be very brittle. With the Sturgis factory down and import quotas already filled, there’s no alternative, the shelves quickly go bare, and Air Force planes fly around the world trying to scrape up whatever they can find in Europe. A tactful comment from Jan Carey of New Zealand’s Infant Nutrition Council:

“I think it does show weakness in their policy. … We can speculate that [this crisis] might make the Food and Drug Administration consider why they make it so difficult for, other entrants to come into the market. Why can’t they make it a bit easier to get it in? We have such fantastic products in New Zealand, our products are highly regulated under the Food Standards code for Australia and New Zealand and they meet all of the nutritional requirements of an infant.”

What do we draw from this? Probably a lot of lessons for formula policy specifically. Also, a case study in “localized” supply chains with tight controls over sourcing, which may have some general relevance.

* Mexico is outside this limit with essentially unlimited rights under NAFTA and its successor the USMCA, and provided 12,000 of the 16,800 tons of formula entering the U.S. last year. Canada, in theory, gets a bit more under the USMCA than it did under NAFTA, but hasn’t used it.

FURTHER READING

We don’t have enough

The FDA explains its regulatory system.

… and announces some easing of import rules.

… while the USDA scrambles to find formula for WIC (Women, Infants, and Children) program users.

… and the Air Force ferries back 35 tons.

President Biden announced actions to address the formula shortage.

They have lots 

The U.S. Department of Agriculture examines the New Zealand dairy industry, with data on infant formula production and trade.

New Zealand’s Infant Nutrition Council on formula shortages in the U.S.

And New Zealand government’s child health and safety stats.

Formula trade policy

Tariff rates from U.S. International Trade Commission, the Harmonized Tariff Schedule. See Chapter 19, heading 190110, for infant formula.

Apply for a “dairy import license” from USDA, here.

… but read up on the regulations first.

And also…

“If you want to scare a room full of [economists], talk about breastmilk” — UC-Davis’ Kadee Russ on inadequate U.S. support for breastfeeding moms.

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 ProgressiveEconomy 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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