FACT: Haiti exported half a billion clothing articles to the U.S. last year.

THE NUMBERS: Haitian clothing exports to U.S. (2021) –

~10% of GDP
~20% of wage-paying jobs

 

WHAT THEY MEAN:

A vivid passage from Pamela White, an Obama-era U.S. Ambassador to Haiti, testifying to the House Foreign Affairs Committee on life in Port-au-Prince in late September:

“No legitimate government, no judiciary, no parliament, and a weak police force incapable of stopping the gangs that now rule over 60% of the capital. … Haitians are living in hellish conditions — all social services were terminated months ago. Port-au-Prince has the highest number of kidnappings in the world.”

And a very careful State Department comment last Friday:

“[T]he question of a security presence is obviously an area where we are treading very carefully to make sure that we are doing the right things and not doing the things in the past that have not worked…”

In such circumstances, neither outsiders nor Haitians have easy ways to find the “right things”.  A relatively easy place to start, though, is to identify and preserve things that have worked. With this in mind, here is some opaque stuff about clothing trade, from the U.S. Commerce Department’s Office of Textiles and Apparel:

“Unlimited duty-free treatment for various apparel products [from Haiti], with certain restrictions regarding the source of the yarns and fabrics used in the apparel, and duty-free treatment for certain apparel products up to certain annual quota levels, known as trade preference levels (TPLs).”

The programs Commerce describes, designed in the late 2000s and known as “HOPE” and “HELP,”* mean in practice that a Haitian-made pullover shirt normally subject to tariffs of 16.5% (if cotton) and 32% (if polyester) is not only (a) duty-free but (b) in contrast to the intricate rules imposed on T-shirts arriving under free trade agreements, can be made of fabric from whatever country makes most economic sense.

The result is that each year up to this summer, Haiti’s clothing business has been a success and a factor providing some degree of economic stability. In brief, 29 factories in three industrial parks — Port-au-Prince, Cap Haitien, and Ouanaminthe — have been shipping about 475 million articles of clothing valued at $1 billion (279 million T-shirts, placing Haiti 6th in the world as a supplier to the U.S. last year, along with 93 million of the pullovers and sweaters, 730,000 track suits, 36 million pieces of women’s and girls’ underwear, 2 million face-masks, etc) to Americans via a 40-hour boat ride to the Port of Miami. At the individual level, these factories employ about 60,000 workers, which is about a fifth of all the formal-sector wage-paying jobs in Haiti. These start at a minimum wage of about $2000 per year (as against a national per capita income around $1,650 before this year’s crises). On the “macro” scale, clothing exports account for 6.8% of Haiti’s $20 billion GDP,** a figure roughly comparable in American terms to the Bureau of Economic Analysis’ combined figures for the U.S. agricultural, entertainment, automotive, air freight, and energy industries.

The clothing factories are pretty durable, equipped with their own generators and security services. After the 2010 earthquake, for example, they reopened in hours. But two of the three parks are closed; last month gangs began blocking factory-to-port roads, depriving the factories of fabric, fuels, or replacement parts, and making them unable to move finished products out to their customers. Looming up in 2025 is the statutory end to HOPE & HELP tariff waivers and TPLs. The combination of an immediate and indefinite interruption of trade, and the programs’ limited term, raises the prospect that this until-now healthy part of the Haitian economy will not recover from this crisis, and one of the ‘things that work’ will not return.

In these circumstances, whatever unpleasant security policy steps the outside world — the United Nations Security Council, the U.S./France/Brazil/Spain/Germany/EU “Core Group”, or something else — may take to stabilize the situation and restore public services will likely prove harder to sustain. Which is to say that Congress, thinking about possible trade bills this coming December, can do something very useful and valuable by extending, ideally permanently, the HOPE and HELP programs.

* Acronyms for “Haitian Hemispheric Opportunity through Partnership Encouragement” and “Haitian Economic Lift Program.”
** Using a 2021 World Bank estimate; link below. Take this figure as a well-educated WB guess, given the scarcity of statistics.

 

 

FURTHER READINGS:

Perspectives: 

Rep. Greg Meeks chairs September’s0 House Foreign Affairs Committee hearing, with testimony and video.

U.N. Secretary-General Guterres proposes a military mission last Thursday.

A very careful State Department response to a reporter’s question on this — “[T]he question of a security presence is obviously an area where we are treading very carefully to make sure that we are doing the right things and not doing the things in the past that have not worked…”

… and also from State, a grim advisory for visitors to Port-au-Prince.

HOPE and HELP:

Commerce Department’s Office of Textiles and Apparel “explains” HOPE/HELP rules.

Florida Reps. Frederica Wilson and Elvira Salazar propose extending the programs.

And some context on garment-sector jobs:

The World Bank’s databases say that before this year’s crises, Haiti’s labor force totaled about 5.1 million, with an unemployment rate of 15.7%. “In this case, we would expect about 760,000 unemployed workers and about 4.3 million with wage-paying or salaried jobs.

“Unemployment,” though, is a labor-market term designed for wealthy countries in which workers typically have wage-paying jobs subject to national laws and taxes.  Concepts and terminology like these aren’t easily applicable to least-developed country realities. An actual on-the-ground WB report from 2021 guesses that 86% of ‘employed’ Haitian workers, or about 4 million people, were in the “informal sector” — that is, doing irregular and spottily paid work in seasonal harvesting, maid and gardening work, occasional jobs on construction sites, and so on. This implies that a total of about 500,000 wage-paying jobs, such as those in the garment industry, which offer health and safety inspection, minimum wage laws, and so on.

The World Bank’s look at Haiti’s pre-COVID, pre-“gang era” private-sector economy.

 

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 largest payers of 2018-2022 “232” and “301” tariffs appear to be U.S. manufacturers and construction firms.

THE NUMBERS: Extra tariff collection via “232” and “301” tariffs, 2021

Electrical equipment            ~$7.0 billion
Fabricated metal products   ~$4.0 billion
Steel & aluminum:               ~$2.5 billion
Auto parts                            ~$2.5 billion
Chemicals                            ~$1.5 billion

WHAT THEY MEAN:

Since the imposition of “301” tariffs on a swath of Chinese goods, and “232” tariffs on steel and aluminum, the U.S. has had a sort of two-part tariff system. One is the permanent “MFN” tariff system, which ranges from 0% (natural gas, computer, perfume) to 48% (cheap sneakers), and brings in most of its money from clothes, shoes, fashion accessories, silverware, and other consumer products. The other half is the administratively levied Trump-era tariffs, which draw their “232” and “301” nicknames from the two laws used to impose them, and include 25% on three “tranches” of Chinese goods and 7.5% on a fourth “tranche,” 25% on various steel items, and 10% on aluminum. The basic figures, with estimated 2022 figure drawn from the eight months of currently available trade data:

2021: $84 billion in tariff revenue, or just under 3.0% of $2.85 trillion in imports.
2017: $33 billion in tariff revenue, or 1.4% of that year’s $2.,35 trillion in imports.

In 2021, the two halves of this system raised more or less the same amount of money, $42 billion each.  So far in 2022 the pattern is the same, though a post-COVID import boom has pushed up the figures to a likely $100 billion in tariff payments on $3.4 trillion in imports.

If the MFN system is mainly a way of taxing clothes and other consumer goods, what does the 301 and 232 system look like? A list covering about three quarters of the roughly $42 billion in extra tariffs shows nine major sources:

And if families and retailers are the main payers of MFN tariffs, who are the main 232 and 301 payers?

Academic studies typically say that the higher costs of tariffs falls on “consumers”; the lay reader of these studies usually takes this as economics-profession vernacular for “people like me!” This works for the permanent “MFN” tariff system: for example, the Bureau of Economic Analysis’ intricate Input-Output tables for 2021 imports, which track buyers of different types of products, report that about 96% of clothes come in for personal use, and these “personal users” presumably bear the cost. The 301 tariffs on furniture, which make up about a tenth of the extra tariff payments, are much the same.

But families and shoppers are not the only “consumers” in the technical economic sense.  Another group is composed of businesses buying “intermediate goods” to produce finished products — say, wiring for home-builders, metals for ship-building, rubber for bicycle and truck tires. These latter industrial consumers, especially manufacturers, appear to be paying much more of the administratively imposed 232 and 301 tariffs than they do in the permanent MFN system.

“Electrical equipment, appliances, and components,” for example, is the category in which the “232” and “301” tariffs raised tariff payments most dramatically, from $1.2 billion in 2017 to $8.7 billion last year. These are things ranging from home appliances to industrial batteries, generators, switchboards apparatus, and power transformers.  Assuming that purchases of specifically Chinese-made electrical goods more or less mirrored overall U.S. import patterns, BEA’’s tables show that 26% of electrical equipment imports went via retailers and hardware shops to individuals and families; 63% went to businesses for intermediate goods; and 12% went to businesses for capital goods purchases. The “capital goods” imports regrettably aren’t broken out by industry buyers, but using the intermediate goods alone, BEA’s table finds manufacturers the largest single buyer at 21% of imports, followed by construction at 18%, and farmers at 4%.  Presumably the tariff payments split more or less the same way.

Likewise in “fabricated metal products” likewise, manufacturers appear to have bought 32% of imports, and construction firms 18%, and the two together would pay about half of the $4 billion or so in extra tariffs.  Etc., etc. for chemicals, metals, machinery, and so on.

A likely consequence of this is that the 232s and 301s have, at the margin, imposed costs on U.S. manufacturers that producers abroad don’t face. Thus they will likely cause some a loss of competitiveness vis-a-vis imports as manufacturers sell to American customers, and more difficulty succeeding as exporters abroad.  Something to consider as the Biden administration continues to think this over.

 

 

FURTHER READING

Some data sources: 

The Bureau of Economic Analysis’ input-output tables.

From the U.S. International Trade Commission, the MFN tariff schedule.

The U.S. Trade Representative’s 301 tariff search page (less so).

And the Census’ various lines of trade data.

And economic perspectives on 232, 301, and other administratively imposed tariffs:

The Bureau of Labor Statistics does some comparisons, through the lens of retaliatory tariffs on U.S. farm products in 2019, “safeguard” tariffs on automobile tires in 2009, and Bush-era steel tariffs in 2002.

A gloomy 2019 review from Federal Reserve staff finds that the “input-cost raising” effects of 232 and 301 tariffs on U.S. on manufacturing, with attendant loss of competitiveness and employment, overpowers “production-protecting” effects.

University of Chicago analysts view tariff incidence as “largely on the United States.”

 

 

ABOUT ED

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

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

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

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

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FACT: World patenting has quadrupled since the conclusion of the WTO’s TRIPs agreement.

THE NUMBERS: Research and development spending as share of world GDP –

2018-2020 3-year average:        2.39%
1996-1998 3-year average:        1.97%

*  World Bank database

WHAT THEY MEAN:

The 164 WTO members, having agreed in June on a five-year waiver of patent rules for COVID-19 vaccine production, are discussing a next question: should a similar waiver apply to a wider array of “therapeutics and diagnostics”? Their self-imposed decision point for this is December 17th.  As this date approaches, some background on the WTO’s intellectual property rules, their aims, and their possible effects:

Per the U.S. Constitution, the core goal of intellectual property laws is “[t]o promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.” U.S. laws on these topics date to the 1790s; international IP agreements and treaties, to 1883 for patents and 1887 for copyright. The WTO’s 73-article IP agreement, known as the “Agreement on Trade-Related Aspects of Intellectual Property Rights” or “TRIPs,” dates to 1995 and requires WTO members to adopt baseline IP patent, copyright, and trademark laws, enforcement procedures, and so on.  Subsequent decisions provide exemptions for patenting rules for least-developed countries, and note that TRIPS rules do not prevent WTO members from acting on public health emergencies. Two data points on the intervening 28 years:

Research and Development: R&D spending, according to a World Bank database, averaged 1.97% of world GDP* in the mid-1990s.  Between 2018 and 2020, R&D averaged 2.39% of world GDP. In practical terms, this now means about $2.5 trillion per year. Had the 1.97% figure remained constant, therefore, world governments, businesses, and universities would be spending about $400 billion less per year on science. By income group, high-income country R&D spending has risen from 2.3% of GDP to 2.8%. Low- and middle-income country spending has grown a bit faster, from 0.65% of GDP in 2000 (the first year in the World Bank’s database) to an average of 1.6% in 2018-2020. Based on the estimates in the table, about half of low-middle income country R&D spending growth was in China, and half in other countries.

Patenting: More research does seem to have meant more new inventions, or at least more patent awards. The World Intellectual Property Organization in Geneva reported 943,000 applications for patents around the world in 1994, 2.0 million applications in 2010, and nearly 3.3 million in 2020. The rise in actual patent grants has been faster, up four-fold from 450,000 patent awards in 1994 to 1.6 million in 2020: mRNA vaccines, touch-sensitive glass for smartphones, disposable satellite-launch rockets, biodegradable garbage bags, etc.

What to make of this? Causality is obviously hard to determine, and to some extent R&D investment likely rises with national wealth as well as responding to IP incentives. But the post-TRIPS world does appear to be one in which, as the Constitution’s references to incentives for useful Arts and Sciences” hoped, investment in science has grown (and grown especially rapidly in developing countries) and new inventions have cropped up.

Turning back to the WTO and its next steps, the June waiver for COVID vaccines is a highly specific one, and consistent with the existing 2005 “Declaration on TRIPS and Health,” on action during public health emergencies.  No country so far, however, appears to have used this waiver (and the U.N.’s voluntary Medicine Patent Pool has arranged voluntary production licenses for 14 COVID medicines and therapies). This seems to indicate that the major challenges in raising vaccination rates are related to logistics and delivery to patients in low-income countries rather than to IP rules. “Diagnostics and therapeutics” are less specific terms, suggesting that a waiver for these products could apply to a variety of multipurpose medical devices and medicines yet to be invented. The data on R&D and patenting, meanwhile, suggest that the TRIPs agreement has at least contributed to a long-term upturn in scientific research and invention, a public good well worth preserving; which makes this next decision one that raises some systemic questions.

* The World Bank reports R&D spending at 2.33% of GDP in 2019, and 2.63% in 2020. We’re using a recent average on the assumption that the large one-year jump in 2020 was not an actual R&D increase but a COVID-related anomaly, reflecting less a jump in actual R&D than the temporary GDP effect of closing restaurants, hotels, construction sites, etc. for public health reasons.

 

 

FURTHER READING

TRIPS: 

The World Trade Organization’s TRIPS page, with links to the agreement text, the 2005 Declaration on TRIPS and Health, and other matters.

… and the waiver for Covid-19 vaccine explained, with a link to text.

Medicines and COVID vaccination:

Tracking vaccinations by country and income level, ourworldindata.org reports 4.74 billion people fully vaccinated as of the WTO’s June Ministerial, and 4.95 billion now.

Alternate approach: The WTO waiver authorizes “compulsory licensing” of medicines. The UN’s Medicine Patent pool, based on voluntary licensing agreements with companies, government science agencies, and nonprofits, now covers 14 COVID-19 vaccinations and treatments.

Research and Development:

The National Science Foundation reports on R&D spending among the top 8 R&D countries (U.S., China, Japan, Germany, U.K., France, Korea, India). At 3.5% of GDP, the U.S. is the world’s fourth-most R&D intensive economy; Israel is first at 5.4%, followed by Korea.

The World Bank has figures worldwide, by country, and by country categories (“low- and middle-income”, “Latin America and the Caribbean”, “Arab states”, and so on).

Patenting:

The World Intellectual Property Organization — WIPO, which continues to oversee the descendants of the 1883 Paris Convention on patenting — maintains a database which tallies patent applications and grants worldwide. The trend for grants post-1994:

2020:        1,592,000
2010:           914,200
2000:           517,600
1994:           405,355

And direct to WIPO’s database.

And for comparison, the U.S. Patent and Trademark Office’s tallies of patent awards by year and origin. They count 388,000 patent grants in 2020, including 183,000 to U.S.-based applicants, and 205,000 to applicants abroad. Over a quarter of the foreign grants, 53,770, went to Japanese applicants. PTO’s tables.

A sample: A Corning fiber-optic cable patent, granted in 2001 and expiring last May.

IP Income:

According to the Bureau of Economic Analysis, revenue from overseas use of U.S. inventions (including trade secrets as well as patents) was $56.4 billion in 2021, or about two-fifths of $125 billion in total U.S. overseas IP revenue. This is about equal to the U.S. export figures for automobiles or of microchips. Worldwide, WTO’s figures on IP revenue show a global total of $470 billion in 2020, with the U.S. accounting for $144 billion or 31%. The EU was next at $90 billion, followed by Japan at $43 billion.  By way of comparison, in 2020 top manufacturing exporter China had 19.7% of world manufacturing exports; the U.S. led in energy and agriculture, with respectively 8.6% and 9.4%. The WTO data here.

And the Bureau of Economic Analysis’ services database has U.S. IP receipts and payments, by country and type.

 

FACT: U.S. trade with Russia is down by 80% since February.

THE NUMBERS: American imports from Russia, 2022 –

January: 8.3 million barrels of crude oil, 35,700 carats of diamonds, 2,100 tons of Arctic crab
June: 0 barrels of oil, 0 carats of diamonds, 0 tons of Arctic crab

WHAT THEY MEAN:

Reporting on the impact of sanctions, war, and conscription on Russia now tends by force of circumstance to be anecdotal, sometimes hard to verify, and relate to larger systemic trends: A tank factory halting production in March as a result of parts shortages, retail chains and international auto manufacturers departing, 98,000 young Russian men leaving for Kazakhstan last week and lines of cars at Georgian and Mongolian border crossings, and so on. Macro forecasting provides some context for these individual stories but is very abstract: The International Monetary Fund’s World Economic Outlook update this July projects a contraction of -6.0% this year (comparable to the 2008 financial crisis experience) and -3.5% in 2023.

Visible trade flows also provide only a partial picture (and an unusually limited one since Russia has declined to publish monthly trade data since the invasion), and can perhaps bolster anecdotes and macro vistas with some of the information in between. Two international sources, and a more detailed look at the post-February trends in U.S.-Russia trade flows, seem to show (a) a significant, but far from total disengagement, from world goods trade, and (b) in the context of the IMF’s overall prediction, probably a sharp domestic-economy effect given that Russia’s energy revenue remains high:

(1) The IMF’s “Direction of Trade Statistics,” a standard source for top-line goods trade totals, has country-by-country data for exports through May of 2022. Their figure for “world exports to Russia” reports $23.6 billion in exports to Russia in January, and $14.6 billion — i.e. a drop of about 38% — in May. Reporting on individual countries suggests that this may understate the total decline in Russian imports, as the IMF database finds Chinese exports to Russia down from $7.3 billion in January to $4.3 billion in May, the EU’s from $8.1 billion to $4.2 billion, Japan’s from $600 million to $190 million, Korea’s from $813 million to $339 million. These trends are not universal; Kazakhstan’s and Turkey’s Russia export figures, though smaller than those of the big economies, were both slightly up. The database unfortunately does not seem to have 2022 figures for “imports from Russia.”

(2) Analysts at Bruegel, an economic think-tank in Brussels, carry this a bit further, collecting national trade data through June from 34 countries accounting for about 75% of Russian trade, and adding imports as well. This concurs with the IMF’s less up-to-date finding, with Russian purchases from the relevant countries dropping from $18 billion in January to a low of $8 billion in April, then bumping up to $12 billion in June. Bruegel finds Turkey the only major economy whose Russian exports are at or above pre-invasion levels. Russia’s sales to other countries have been less affected: Russian energy exports rose a bit as world prices rose (from $26 billion in January to $27 billion in June, with the other months in between), but non-energy exports dropped by slightly more, from $17.5 billion to $13.4 billion. This matches EU data, showing less purchasing of Russian manufactures and farm products offsetting higher energy prices.

(3) The U.S. data is complete through July and quite detailed, showing drops of 80% in both the export and import accounts. U.S. exports to Russia have dropped from $500 million to $83 million, with sales to Russian industrial buyers now close to zero: semiconductor sales, for example, fell from $8 million in January to $0.25 million in July, computer equipment from $8.3 million to $0.4 million, motors and generators from $6 million to $0.2 million. The remaining significant U.S. exports to Russia appearing to be mostly medicines and medical equipment.  Imports are likewise down by about 80%, from $2.5 billion in February to $484 million in July. The month-by-month figures looks like this, with energy-price related jumps in February and March followed by steady decline:

January:       $1.96 billion
February:      $2.56 billion
March:           $2.76 billion
April:              $2.08 billion
May:              $1.13 billion
June:              $0.66 billion
July:                $0.48 billion

Overall, energy and luxury-good bans have eliminated almost all U.S. purchases of Russian oil and gas, diamonds, and seafood. The remaining Russian exports to the U.S. are mostly metals (exempted in most cases from the import bans and also little affected by withdrawal of MFN tariff rates) and fertilizer. Aluminum imports in fact are up from $41 million to $89 million, and nickel from $9 million to $52 million.

As with the macro forecasts and anecdotal reporting, the goods-trade figures suggest an economy (a) contracting sharply though not in free fall, (b) continuing to raise money through energy sales, and (c) possibly seeing somewhat sharper industrial declines than the macro figure suggests.

 

FURTHER READING

Big Picture: 

The IMF (July) projects a contraction of Russian economic contraction of -6.0% this year.

Data:

Census’ basic month-by-month data on U.S.-Russian trade.

Bruegel analysts Zsolt Darvas and Catarina Martins review Russia import, export, and balance data for 34 countries. Sharp drop in imports, exports steadily more concentrated in energy, trade balance a secondary issue.

The IMF’s somewhat challenging “Direction of Trade Statistics” database.

And for comparison, the WTO’s stat portal.

PPI’s February reminder that non-MFN tariffs on the natural resource products that make up most of Russia’s exports are mostly low.

Sanctions:

Treasury Department’s Office of Foreign Assets Control oversees Russia sanctions.

Peterson Institute for International Economics has a timeline of sanctions by country.

Anecdotes:

Toyota plant, shuttered since March, closes for good.

And a report from the Mongolian border.

 

FACT: Per the International Labour Organization, “Uzbek cotton is free from systemic child labour and forced labour.”

THE NUMBERS: ILO estimates of forced labor worldwide –

2021:  27.6 million
2016:  24.9 million
2011:   20.9 million

WHAT THEY MEAN:

A grim series of statistics, drawn from last week’s International Labour Organization report on worldwide forced labor in 2021:

“49.6 million people were living in modern slavery in 2021, of which 27.6 million were in forced labour and 22 million in forced marriage. Of the 27.6 million people in forced labour, 17.3 million are exploited in the private sector; 6.3 million in forced commercial sexual exploitation, and 3.9 million in forced labour imposed by states.”

The 27.6 million total — up by 2.7 million from the 24.9 million estimated in the ILO’s 2017 report — combines several different conditions under the broad term “forced labor.” The most common of these, found in 36% of cases, involves workers trapped in jobs by withholding of pay; others involve debt bondage, entrapment of migrant workers, threats of violence by criminal enterprises, and in 1% of cases, chattel slavery. Reacting to this report, the U.S., European Union, and Japanese Trade and Labor ministers express joint commitment “to eradicating all forms of forced labour, including state-sponsored forced labour, from our rules-based multilateral trading system, and resolve to strengthen national and international efforts to meet this commitment.”

How exactly would they do this? Perhaps more fundamentally, would “removing forced labor products from international trade flows” also eliminate forced labor as such, or simply shift the destination of the products? In thinking through these questions, it might be useful to look at a recent example of large-scale success: the elimination of a state-run program of seasonal forced labor in cotton harvesting in Uzbekistan. Some background and tentative conclusions:

Background: Largest of the Central Asian republics at 34 million people, Uzbekistan is the world’s sixth-largest cotton producer, harvesting about 3 million tons per year in a global total usually around 25 million tons. Having served in the Soviet era as the provider of cotton for Russia-based textile mills, as an independent country since 1991 Uzbekistan now grows cotton both for local factories and for exports to clothing-producers elsewhere in the world.

According to a series of ILO surveys begun in 2016, about 2.8 million people worked in Uzbekistan’s annual autumn cotton harvest in the early 2010s. Roughly 14% of these harvesters — almost 400,000 people – were forced laborers required by local governments to leave school or jobs for unpaid fieldwork during harvest season until regional harvest quotas were filled. The 2016 survey reported that those “most ‘at risk’ of forced labour were medical and education staff, people employed elsewhere, and university/college students.” Five years later, the January 2021 report declared that “systemic forced labour and child labour has come to an end in Uzbekistan,” and the March 2022 report found no return.

Eliminating this system appears to have involved at least three factors:

(a) A large and sustained international activist effort through the “Cotton Campaign” involving businesses, labor unions, and human rights groups, which provided information on forced labor practices in the cotton harvest and pressured textile and apparel industry buyers worldwide not to use Uzbek cotton.

(b) International government pressures, in the U.S. case including human rights reports published by the State and Labor Departments, and a ‘review’ of the tariff waivers Uzbekistan received through the Generalized System of Preferences entailing possible revocation.

(c) Contingent factors, in particular the death in office of post-Soviet leader Islam Karimov and his replacement by a new leader, Shavkat Mirziyoyev, whose government hoped to avoid the reputational and potential economic damage associated with forced labor and was willing to put sustained effort, with ILO advice and monitoring, into reshaping the cotton industry.

Tentative conclusions: In drawing lessons from this experience, it’s likely important to be aware that the term “forced labor” covers many different forms of coercion, and these may require different approaches. The Uzbek cotton harvesting system appears an unusual, both as a state-run program and as one designed mainly for economic/industrial purposes. The policies that succeeded in eliminating it may be less useful with respect to state forced labor systems used by militaries or for other political purposes. State-required forced labor in turn is a relatively small part of forced labor generally, accounting in the ILO’s estimates for about 15% of the worldwide 27.6 million forced laborers. Most forced labor (see data below) appears to be in small-scale private businesses and criminal enterprises, where the policy challenge will often be effective law enforcement, often at local levels. But some general features of the effort to eliminate forced labor in Uzbekistan’s cotton harvest may be generally useful.

Publicity: The Cotton Campaign’s work, and the publication of credible data and reports by the U.S. government and ILO, appear to have had a major impact on both international opinion and Uzbek government policy. The U.S.’ GSP review likely added to this; its economic importance was modest — in the mid-2010s it applied to $2.5 million in imports of dried peppers, apricots, and other agricultural goods, out of $100 million to $300 million in annual Uzbek exports to the U.S. — but the reputational impact of the case and potential loss of benefits may have been high. This is especially relevant since, as our January report on GSP notes, the system lapsed almost two years ago and is not now available for the six Ministers’ efforts on forced labor, but can be restored whenever Congress acts.

Patience and persistence: The Cotton Campaign began working in 2007, and remained focused specifically on Central Asian cotton harvesting for a decade before the change of government in Uzbekistan and the subsequent relatively rapid abolition of forced labor in cotton harvesting.

Optimism: In this case, some combination of government policies, activism, and changing perceptions within the Uzbek government worked. Different circumstances elsewhere may require different methods, but the fact of one success means others are also possible.

 

 

FUTURE READINGS:

The ILO on forced labor worldwide as of 2021.

And via the Uzbekistan Embassy in D.C., remarks from Tanila Narbaeva (Chair of National Commission on Combatting Human Trafficking and Forced Labor) on the abolition of forced labor and next steps in labor reform.

Forced labor commitment from U.S./EU/Japan Trade and Labor Ministers.

And the U.S. Customs and Border Patrol explains forced labor-product interdiction.

Data:

Over the last decade, the world labor force has grown from 3.20 billion to 3.45 billion, and the ILO estimates of forced labor has risen from 20.9 million in 2011, to 24.7 million in 2016, to the 27.6 million cited in last week’s report. Basic statistics from last week’s report:

Industries: About two thirds of forced labor, totaling 17.3 million people, is in the “private sector.” This includes 5.5 million in a broadly defined “services” sector, and an additional 1.4 million in domestic work; 3.2 million in manufacturing, 2.8 million in construction; 2.1 million in agriculture; 0.2 million in mining and quarrying; and 0.1 million in fisheries. Child forced labor is most common in services, especially for domestic maid work.

Prostitution and pornography: 6.3 million forced laborers appear to be performing forced sex work (which in the ILO report is considered separately from ‘private sector’ industries). Of this total, 4.9 million are female and 1.4 male. Over a quarter of the 6.3 million people, 1.7 million, are children.

Government: 3.9 million people are held in labor camps or forced to work by governments. (Not including prisoners required to work as part of legitimate sentences for crimes). This total is nearly double the 2.2 million the ILO estimated for 2011, but slightly lower than the 4.1 million estimate for 2016. The ILO does not cite specific governments involved.

International trade: The report offers no guess at how much forced labor production enters international trade flows, but notes that the sectors where the risk of forced labor is “highest in severity and scale” are “informal micro- and small enterprises operating at the lower links of supply chains in high-risk sectors and locations”.

Geography: Forced labor estimates appear roughly consistent with shares of the world labor force, except that Africa’s share of forced labor is relatively low and the “Europe/Central Asian” share high. About half of all forced labor — 15.1 million people — is in Asia. Elsewhere, the ILO estimates 3.6 million people in forced labor in the Western Hemisphere, 0.9 million in Arab states, 3.8 million (and the lowest rate relative to population) in sub-Saharan Africa, and 4.1 million in Europe and Central Asia.

Case history in success: Uzbek cotton 2015-2022:

ILO’s 2016 report (first in the series, covering the 2015 harvest), with analysis on the nature of forced labor in cotton harvesting seven years ago.

And the March 2022 report announces an end to “systemic forced labour and child labour” in Uzbek cotton harvesting.

The Cotton Campaign lifts its boycott of Uzbek cotton, March 2022.

And historical Central Asia perspective:

Sadriddin Aini’s Sands of Oxus (1954), recounting childhood in the Emirate of Bukhara in the 1880s (conquered by imperial Russia in 1865 and no longer independent, but still a “protectorate” and locally self-governing), includes recollection of a temporary forced-labor recruitment episode for road-building.

 

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: 42 of the world’s 195 countries are monarchies.

THE NUMBERS: 21st century monarchies –

Western Hemisphere: Canada, Antigua, the Bahamas, Belize, Grenada, Jamaica, St. Kitts, St. Lucia, St. Vincent.

Middle East: Bahrain, Jordan, Kuwait, Morocco, Oman, Qatar, Saudi Arabia, and the United Arab Emirates.

Europe: Andorra, Belgium, Denmark, Liechtenstein, Luxembourg, Monaco, the Netherlands, Norway, Spain, Sweden, United Kingdom.

Asia: Bhutan, Brunei, Cambodia, Japan, Malaysia, Thailand.

Africa: Lesotho and Swaziland.

Pacific: Australia, New Zealand, Papua New Guinea, Solomon Islands, Tonga, Tuvalu.

 

WHAT THEY MEAN:

Economist editor and poli. sci. pioneer Walter Bagehot explained in 1867 that monarchies hold public support better than republics because, being personal and symbolic rather than abstract and confusing, monarchies are more fun:

“Royalty is a government in which the attention of the nation is concentrated on one person doing interesting actions. A Republic is a government in which that attention is divided among many, who are all doing uninteresting actions.”

Recent TV statistics illustrate his thought in practice: 13.4 million Britons are said to have watched Queen Elizabeth II’s Platinum Jubilee ceremony last year, while a modest 1.3 million watched the 2019 Parliamentary debate on Brexit.  Barbara Tuchman’s famous Guns of August introduction evokes the same mood with a bit less cynicism:

“So gorgeous was the spectacle on the May morning of 1910 when nine kings rode in the funeral of Edward VII of England that the crowd, waiting in hushed and black-clad awe, could not keep back gasps of admiration. In scarlet and blue and green and purple, three by three the sovereigns rode through the palace gates, with plumed helmets, gold braid, crimson sashes, and jeweled orders flashing in the sun. After them came five heirs apparent, forty more imperial or royal highnesses, seven queens—four dowager and three regnant—and a scattering of special ambassadors from uncrowned countries. Together they represented seventy nations in the greatest assemblage of royalty and rank ever gathered in one place and, of its kind, the last. The muffled tongue of Big Ben tolled nine by the clock as the cortege left the palace, but on history’s clock it was sunset, and the sun of the old world was setting in a dying blaze of splendor never to be seen again.”

Fifteen decades later, as the U.K. prepares for a similar event for his great-granddaughter next Monday — a  moment of “sunset on history’s clock”, with attendant reflections on a life stretching from the Second World War, through the transition from Edward’s empire to Elizabeth’s Commonwealth, 15 Prime Ministers, etc., across seven decade of public service to the third decade of the 21st century — monarchy still seems to catch national and global imagination. Of the world’s 195* independent countries, 42 are monarchies — 15 Commonwealth realms including the U.K. itself, along with eight in the Middle East, one (Tonga) in the Pacific, two in sub-Saharan Africa, six in Asia, and 10 in continental Europe. R.I.P to a unique figure, and our sympathy with U.K. and Commonwealth friends this week.

* Using the State Department’s count of countries.

 

 

FUTURE READINGS:

Some looks back:

Then-Princess Elizabeth’s Children’s Hour broadcast during the Blitz in 1940 (pictured above).

The Platinum Jubilee weekend.

More highlights on the life of Queen Elizabeth II from The Commonwealth.

Two takes:

Walter Bagehot explains the populist appeal of monarchy.

And Tuchman’s The Guns of August, in which after the intro the Kaiser takes a lot of interesting actions but non-royals do so as well.

Eight current monarchies:

The British royal household.

The Japanese monarchy is the oldest in the world, predating the fall of the Roman Empire by at least 70 years: Japan’s Imperial Household Agency.

Thailand’s King Rama IX reigned from 1946 to 2016, equalling Elizabeth’s 70 years. Thailand’s Royal Office.

King Letsie of Lesotho marks his 25th year this October 13.

King Tupou IV of Tonga.

King Abdullah II of Jordan.

Oman’s Sultan Haitham bin Tariq.

And Danish Queen Margarethe, who marked 50 years last January, traces her antecedents back to a Viking named Gorm the Old (~ 900 A.D.)  She is also queen of Greenland and the Faeroes Islands, technically autonomous realms “under the Danish crown.”

Also:

The current global count of monarchies is a bit less clear than the “42” figure suggests, since many countries retain hereditary ruling kings and queens of regions and ethnic groups incorporated in larger countries. Three examples:

• New Zealand’s Maori kingship
• Ghana’s Asantehene
• Yogyakarta’s Governor/Sultan Hamengkubowono XI

 

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 Trade Adjustment Assistance program expired June 30.

THE NUMBERS: TAA beneficiaries by sector, FY2021 –

Total	107,454
Manufacturing	80,588
Wholesaling	3,422
Information	2,227
Mining/energy	1,801
Retail	701
Agriculture	71
Accommodation/food service	0

 

WHAT THEY MEAN:

As 158 million American workers return from the Labor Day break to shops, offices, restaurants, factories, labs, grocery and retail checkout registers, construction sites, and bedside computer terminals, the Bureau of Labor Statistics abounds with good news. Businesses are hiring 6 million workers per month. Layoffs, contrariwise, are running about 1.3 million per month, 400,000 per month below pre-COVID levels. And the tally of unemployed workers, at 5.67 million last July, was the lowest since the golden summer of 2000 and barely half the 11.23 million currently open jobs.

Against this September’s blue and sunny labor-market skies, a policy cloud: the expiration June 30th of Trade Adjustment Assistance (“TAA” for short), a 60-year-old program dating to the Kennedy Administration which offers job training and other benefits to workers displaced by trade competition or job shifts abroad.  The end of these benefits is a challenge. But it is also an opportunity for fresh thinking, laid out in a joint piece today by PPI’s Ed Gresser and Workforce Development Policy Director Taylor Maag, which suggests going beyond simple renewal to make TAA benefits more widely available to displaced workers regardless of the cause of job loss. A couple of quick descriptive points, and then a thought on the reason for a fresh approach:

Scale and Coverage: Over the past decade TAA served an average of 91,000 displaced workers per year. Coverage is nationwide; of the 107,454 workers in the 2021 TAA cohort, 12,638 are in Texas, 11,012 in Oregon, 3,112 in Minnesota, 1,420 in Connecticut, 1,231 in Kentucky, and so on. By sector, about 75% of last year’s TAA beneficiaries (80,588 of the 107,454) were in manufacturing, as compared to 1,809 in mining and energy, 61 in agriculture and 24,966 in variety of services industries (e.g., 701 in retail, 3,422 in wholesaling, 2,227 in information industries, none in accommodation and food service, and so on).  Demographically, the 2021 beneficiaries have a median age of 51; two-thirds are men; half have high school degrees, GEDs or less; ethnically they are 65% white, 13% African American, 11% Hispanic, 9% Asian and 2% Native American.

Distinctiveness: After its 18 renewals and revisions, with especially significant ones in 1974, 2002, and 2015, TAA has become a sort of pilot program in active labor-market policy.  Its services go well beyond between-jobs income support to include self-help options for workers with widely differing career goals and local opportunities. Workers certified as TAA-eligible receive a menu of benefits: two years of job training for those interested in new career paths; temporary wage insurance for older workers taking lower-paying jobs; health care tax credits; and relocation support for workers planning a move to areas with more employment opportunities.

A comment on results: Examining the results in 2018, New York Fed researcher Ben Hyman found a strong though temporary benefit: “Ten years out, TAA-trained workers have $50,000 higher cumulative earnings, driven by both higher incomes and greater labor force participation. Yet annual returns fully depreciate after ten years. … Returns are further concentrated in the most disrupted regions.”

Where to now? The original argument John F. Kennedy made for TAA, as a complement to the Trade Expansion Act of 1962, provides a useful point of departure. His case, made with the standard New Frontier clarity and force, is that reducing tariffs and opening foreign markets promotes growth, fights inflation, helps new industries grow, and raises consumer living standards; but can also increase competition and stress at home. In such cases, he says:

“[C]ompanies, farmers and workers who suffer damage from increased foreign import competition [should] be assisted in their efforts to adjust to that competition. When considerations of national policy make it desirable to avoid higher tariffs, those injured by that competition should not be required to bear the full brunt of the impact. Rather, the burden of economic adjustment should be borne in part by the Federal Government. …  Just as the government met its obligation to assist industry in adjusting to war production and again to return to peacetime production, so there is an obligation to render assistance to those who suffer as a result of national trade policy.”

Kennedy’s logic held up for six decades and could be used again for a simple renewal. But it has a couple of weaknesses that suggest the need for a bolder approach. One relates to the particular circumstances of 2022 as opposed to those of 1962, 1974, 2002, or 2015. The other is more basic and troubling.

First, Kennedy and his successors argued for TAA as part of a national trade-liberalizing policy, in which the various benefits of an open market and export growth should be balanced with support for dislocated workers in previously sheltered industries. But with the U.S. at least for now not trying to cut tariffs, trade-related dislocation appears more likely to come from the opposite direction – trade lawsuits of the type that destabilized the solar power industry this spring, the costs that Trump-era tariffs on industrial inputs impose on U.S. machinery and automotive manufacturers, or (indirectly) retaliations against U.S. exporters. In these circumstances the case for a special program for import-related job loss is probably weaker than it was in the past.

Second, Kennedy’s case for special help for trade-displaced workers has always had an unspoken and troubling corollary:  some workers in distress, particularly in the manufacturing sector, get more help than others. Specifically, the manufacturing sector accounted for 7.0% of layoffs in 2021, and 6.2% of layoffs over the last decade.  Meanwhile, displaced manufacturing workers made up 75% of TAA beneficiaries in FY2021 and 72% over the past decade.  Retail, construction, and food service/accommodation workers who make up larger shares of annual U.S. layoffs typically make do with standard unemployment insurance. In more individual terms, TAA’s self-help policy options are much more open to a displaced auto plant worker than to a displaced auto shop worker, or to a textile worker than to a waitress or a gas station attendant.

With these facts in mind, Gresser and Maag suggest that Congress should consider something new: not removing TAA benefits as options for trade-dislocated workers by simply letting the program expire, but making them more broadly available to displaced workers, regardless of sector or cause of job loss. This is a complex question, requiring some budget thinking and possibly some reorganization of job-training and displaced-worker support more generally. But as they note in their post-Labor Day piece today, there is no better time to think about reforming and revising old labor policies than a sunny year in which jobs are plentiful and layoffs rare.

FUTURE READINGS:

TAA data and status

DoL’s TAA database, with counts of petitions and worker certifications from 2010 forward.

The DoL’s Annual Reports on TAA, FY2009 through FY2021.

And a comment on program expiration from Secretary of Labor Marty Walsh.

Policy goals and outcomes, 1962-2021 

JFK on tariff-cutting and Trade Adjustment Assistance, January 25, 1962.

Sen. Max Baucus, D-Mont., on renewal and options for reform, 2004.

An evaluation from Ben Hyman of the New York Fed, 2018.

And a Ways and Means Committee renewal hearing featuring workers, firm owners, and state officials, 2021.

 

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: 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 –

2021 total	107,500*
Opioids	73,400 deaths among 9.5 million users
Psychostimulants	32,500 deaths among 2.6 million users
Cocaine	26,000 deaths among 5.2 million users
Heroin/other opiates	8,000 deaths among 0.9 million users

* 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:

2021	107,500
2020	92,500
2019	71,100
2016	63,600
2012	41,500
2000	17,400

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:

 

Sweden	884%
Belgium	588%
Spain	394%
Italy	357%
France	352%
Poland	347%
Lithuania	274%
Netherlands	175%
U.K.	155%

 

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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