FACT: Trump campaign proposes the highest U.S. tariff since 1937.

THE NUMBERS: U.S.’ “trade-weighted average tariff”* –

2022	2.8%
2016	1.5%
1990	3.3%
1960	7.2%
1937	15.6%

WHAT THEY MEAN:

The 2024 election’s core questions are more basic than policy choices. Such as: Can a person who has attempted to overthrow a settled election and called for “termination” of unspecified parts of the Constitution live up to an oath to “faithfully execute the office of President of the United States” and “preserve, protect, and defend the Constitution”? Or: Does the American public endorse a campaign based, as PPI’s President Will Marshall memorably put it last week, on “slandering America as a chaotic hellscape only he can rule”? But this point made, policy choices still have consequences. So here’s one:

The Trump campaign proposes to create a 10% worldwide tariff and a 60% tariff on Chinese goods, probably through a sort of decree. What should we expect from this? A bit of a historic perspective, then a pretty definite result, a very unlikely rationale, and a worst-case scenario:

Context: Highest Tariff Rate Since the Depression: The U.S. International Trade Commission records U.S. trade-weighted tariff averages — that is, “revenue from tariffs divided by goods import value” — going back 134 years, to 1890 and the administration of Pres. Benjamin Harrison. Their most recent figure, for 2022, has $91 billion in tariff revenue and $3.23 trillion in imports for a 2.8% average. This is about twice the 1.2% to 1.5% range before the Trump administration’s “301” and “232” tariffs, imposed in 2018 and 2019. Earlier rates rise steadily as time flows backward, from 3.3% in 1990 to 7.2% in 1960 and higher further back, to a peak of 19.8% in 1933 as Herbert Hoover left office.  Rates began to decline as the Roosevelt administration cut tariffs through its Reciprocal Trade Agreements program, to averages of 16.8% in 1936 and 15.6% in 1937. Assuming the campaign’s 10% is (a) added on top of the existing tariff system rather than replacing it, and (b) that its 60% China tariff wouldn’t entirely wipe out U.S.-China trade but leave some continuing under very high taxation, the resulting rate would likely be somewhere around 15%. This would be the highest rate since sometime in the late 1930s.

1. Will Happen: Shift of Taxation Toward Goods-Buyers: One result is very clear. Tariffs are taxes on physical goods brought in from overseas and collected at the border. Tariff-payers are American companies and individuals who buy them. This means a U.S. tax system that relies more heavily on tariffs — in particular if, as campaign literature has suggested, they are used to “offset” revenue losses from lower taxes on corporate and individual incomes — would shift some of the tax burdens. Industries that earn money through financial transactions (e.g. real estate, law firms, financial services) would pay less, while families shopping for goods and businesses that buy and sell goods or use them to make things (e.g. retailers, manufacturers, restaurants, building contractors, repair shops, and farmers) would pay more. This latter effect is magnified, since tariffs generally enable competing local producers to raise their own prices as well.

2. Not Likely to Happen: Policy Rationale Unsupported by Experience: What is the purpose?  Essays by former Trump trade officials Peter Navarro in the Heritage Foundation’s “Project 2025” policy book in 2023 and Robert Lighthizer in the Economist this past February, assert that higher tariffs would do two things: first, raise manufacturing output and employment, and second, reduce U.S. trade deficits. Both individuals argued for Trump’s 2018 tariffs on the same grounds.  Their hopes did not materialize. To the contrary, with these policies in place manufacturing shrank as a share of GDP, factory employment growth slowed, and trade deficits grew sharply. Here are some data:

a. U.S. manufacturing sector share of GDP: Manufacturing, having been 10.9% of U.S. GDP in 2018, was down to 10.3% in 2021 and likely 10.2% in 2023 pending a final determination by the Bureau of Economic Analysis later this year.

b. U.S. manufacturing employment:  Manufacturing job growth averaged 103,000 net new jobs per year in the last five years of the Obama administration, and about half that — 54,000 per year — in the five years since 2018.  Note of course a large upheaval in 2020-21 during the Covid pandemic and recovery — a big employment drop in 2020, a big jump in 2021 — so the post-2018 average has some question marks around it.

c. Trade balance: The overall U.S. goods/services trade balance was $479 billion in deficit in 2016.  This deficit rose steadily throughout the Trump administration (again with a temporary downturn during the COVID pandemic) to $842 billion in 2021 and $951 billion in 2022 before dropping last year to $773 billion. The manufacturing deficit specifically rose from $0.65 trillion in 2016 to $1.1 trillion in 2022, then $1.05 trillion last year.

3. And a worst-case scenario: In sum, the proposal is to restore late Depression-era trade policy, and shift some taxation away from financialized sectors and upper-income services industries to households and goods-producing or goods-using sectors, in the probably unrealistic hope this would push investment and hiring into manufacturing. To speculate about likely economy-wide results:

Depression-like trade policies need not bring Depression-type outcomes. Modern economic historians tend to view 1930s tariffs as making the Depression somewhat deeper and longer, but root its main causes in other ill-starred ideas: central bank passivity in crisis, refusal to rescue failing banks and lack of deposit insurance, unambitious fiscal policy in the early years, international currency conflicts amplified by the gold standard. With this as a guide, a UK-post-Brexit-like result, with somewhat slower growth and somewhat higher inflation, may be the most likely “macro” outcome of a big tariff increase.  Those interested in really dire forecasts, though, can turn to a very well-placed observer on the spot in 1936. Here’s then-President Roosevelt at the “Inter-American Conference on the Maintenance of Peace” in Buenos Aires, reminding us that even if policy choices are not this November’s core questions, they can still matter a lot:

“[T]he welfare and prosperity of each of our Nations depend in large part on the benefits derived from commerce among ourselves and with other Nations, for our present civilization rests on the basis of an international exchange of commodities. Every Nation of the world has felt the evil effects of recent efforts to erect trade barriers of every known kind. Every individual citizen has suffered from them. It is no accident that the Nations which have carried this process farthest are those which proclaim most loudly that they require war as an instrument of their policy. It is no accident that attempts to be self-sufficient have led to failing standards for their people and to ever-increasing loss of the democratic ideals in a mad race to pile armament on armament. It is no accident that, because of these suicidal policies and the suffering attending them, many of their people have come to believe with despair that the price of war seems less than the price of peace.

“This state of affairs we must refuse to accept with every instinct of defense, with every exhortation of enthusiastic hope, with every use of mind and skill.  I cannot refrain here from reiterating my gratification that in this, as in so many other achievements, the American Republics have given a salutary example to the world. The resolution adopted at the Inter-American Conference at Montevideo endorsing the principles of liberal trade policies has shone forth like a beacon in the storm of economic madness which has been sweeping over the entire world during these later years. Truly, if the principles there embodied find still wider application in your deliberations, it will be a notable contribution to the cause of peace.”

FURTHER READING

The U.S. International Trade Commission’s record of U.S. imports, revenue, tariff rates (more precisely, “ad valorem equivalent” rates), etc. from 1890-2022.

Trump campaign tariff primary sources:

Navarro in Heritage’s “Project 2025” (Chapter 26).

Lighthizer in the Economist (subs. req.).

Tariffs and the Depression:

FDR in Buenos Aires.

Contemporary Dartmouth economic historian Douglas Irwin looks back at President Hoover, Sen. Smoot & Rep. Hawley, and the Tariff Act of 1930.

And Charles Kindleberger’s classic on the worldwide Depression economy.

And some statistics:

Trade balance: Both Amb. Lighthizer and Dr. Navarro emphasize trade balance, especially in manufacturing, as a rationale for higher tariffs.  Here are the relevant export/import/balance figures for 2016, 2021, and 2023, in total and for manufacturing (NAICS basis) specifically:

All Goods and Services Trade	Exports	Imports	Balance
2023	$3.054 trillion –	$3.827 trillion =	-$773 billion
2021	$3.409 trillion –	$2.567 trillion =	-$842 billion
2016	$2.241 trillion –	$2.720 trillion =	-$480 billion
Manufacturing Only
2023	$1.600 trillion –	$2.674 trillion =	-$1.074 trillion
2021	$1.403 trillion –	$2.459 trillion =	-$1.056 trillion
2016	$1.264 trillion –	$1.911 trillion =	-$647 billion

U.S. monthly trade data from the Census.

…  and for the big picture, the Census has U.S. exports, imports, and balances from 1960 to 2023 on one convenient page.

Manufacturing and GDP: BEA’s ‘GDP by Industry’ data series (to be updated a week from Thursday with an initial estimate for full-year 2023), has U.S. output and GDP shares for manufacturing, information, real estate and finance, mining and forestry, agriculture, etc. Try the second table in the Interactive Data Tables for GDP shares.

ABOUT ED

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

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

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

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

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FACT: U.S. carbon emissions fell by 190 million tons in 2023.

THE NUMBERS: Energy-related carbon emissions, 2023* –

World total:	37.8 billion tons
Change by country
China:	+565 million tons
India:	+190 million tons
World:	+410 million tons
Japan:	-100 million tons
United States:	-190 million tons
European Union:	-220 million tons

*International Energy Agency, 2024

WHAT THEY MEAN:

As the Biden administration’s energy and climate officials think through January’s “pause” on capacity expansion for the U.S.’ $34 billion in liquefied natural gas exports, some data on emissions trends and their causes:

Statisticians at the International Energy Agency calculate carbon emissions each year. This month they came in with a figure of 37.8 billion tons from energy production in 2023, up 410 million tons from their 37.4 billion ton estimate for 2022.  In a longer-term perspective, these figures compare to 0.2 billion tons in 1850 as Victorian steam, gears, and airships took off; to 6 billion tons in 1950 as the world recovered from the Second World War, and to 25 billion tons in 2000 at the millennium.  So, quite a lot of carbon, and a world a bit further away from “net zero” than it was in 2022. But beneath this overall rise, IEA’s experts reveal intriguing shifts, especially in wealthy countries, and perhaps a sense that change is coming:

“Advanced economy GDP grew 1.7% but emissions fell 4.5%, a record decline outside of a recessionary period. Having fallen by 520 Mt in 2023, emissions [in these ‘advanced’ economies] are now back to their level of fifty years ago. Advanced economy coal demand, driven by evolutions in the G7, is back to the level of around 1900. The 2023 decline in advanced economy emissions was caused by a combination of structural and cyclical factors, including strong renewables deployment, coal-to-gas switching in the US, but also weaker industrial production in some countries, and milder weather.”

The 41 “advanced economies” in IEA’s report are the U.S., Canada, the 27 EU members, the U.K., Switzerland, Norway, Israel, Japan, Korea, Australia, Taiwan, and Hong Kong and Macau, plus a few micro-states like the Vatican and Andorra. Together, the International Monetary Fund says they produce about 60% of world GDP ($60.9 trillion of 2023’s $104.5 trillion). Their 11.0 billion tons of carbon emissions, however, made up less than a third of the world total, and according to the IEA as a group they are back down to the emissions levels of 1973. Moreover, their 550-million-ton aggregate drop in emissions in 2023 came not during a recession or pandemic, but in a year of reasonably strong growth, which suggests a systemic reduction of emissions across the wealthy world rather than a cyclical blip.

The U.S. is a case in point. IEA estimates American emissions at 4.6 billion tons, a decline of 25% from the 6.1 billion-ton peak twenty years ago, and of 190 million tons from 2022’s 4.8 billion.  Per IEA, the largest part of the U.S.’ 2023 decline — 80 million tons, or about 40% of the total reduction — came not from falling output or changeable weather and hydro issues, but from switching from coal-powered electricity to natural gas.

What does this imply elsewhere? Worldwide, by source IEA believes that (on net) 270 million of last year’s 410 million tons of emissions growth, about two-thirds of the total, came from additional burning of coal for power.  Looked at by place, ‘developing Asia’ now produces half of all world carbon emissions, topped by China at 12.6 billion and then India at 3.5 billion; Chinese emissions grew by 565 million tons and India’s by 190 million tons last year.  Here too, at least in China, data suggest ways to reduce emissions.  China’s “emissions intensity” — the amount of carbon released per dollar of economic output — is down from 0.8 kilos of CO2 in 2013 to 0.5 kilos as of 2020 (the date of the last available estimate), which across China’s $18 trillion economy represents a savings of about five billion tons of carbon a year. Both these countries, and “developing Asia” generally, continue to rely heavily on coal-burning, making Asian coal power the largest “driver” of worldwide emissions growth.  IEA’s report therefore underlines the very large Asian opportunity (noted by PPI’s Paul Bledsoe in an August 2022 report) to cut world emissions by substituting gas, nuclear power, and renewables for Asian coal burning.

In sum, reducing emissions is a big task but not a hopeless one. The advanced economies that make up most of the world economy are now visibly succeeding, having (a) cut emissions substantially over the past five years, (b) done so last year during a period of economic growth, and (c) not by impoverishing themselves but through efficiency, switches from dirtier to cleaner fuels, and technological innovation. The large middle-income countries that are now the largest emissions sources can very much do the same. Where infrastructure allows, low-methane natural gas has a significant and useful part in this.

FURTHER READING

The International Energy Agency reports on carbon emissions in 2023 (executive summary with a link to full text).

Policy:

The White House’s “pause.”

PPI analysis & commentary:

Former Congressman Tim Ryan doesn’t mince words on this.

PPI energy and climate expert Elan Sykes outlines a path forward.

… and comments on Department of Energy policy developments.

Background and data:

NOAA summarizes worldwide surface temperature change since 1880.

Our World in Data tracks emissions by country, industry sector, etc.

And the Energy Information Administration’s International Energy Outlook 2023 looks ahead with projections by region and major country through 2050.

And some trade statistics:

Apart from the energy and climate side of gas debates, how large is LNG trade?  Having overtaken Russia and Saudi Arabia in 2021, the U.S. is the world’s largest energy exporter.  Depending on how you split things up, energy has a case for “top U.S. export” at $323 billion last year, which is about 15% of the U.S.’ $3.05 trillion in total goods and services exports. LNG makes up $34 billion of it. A table putting all this in context with some comparisons:

Total U.S. goods and services exports	$3.053 trillion
All goods put together	$2.051 trillion
All manufacturing	$1.600 trillion
Automotive (vehicles & parts)	$137 billion
Aircraft & parts	$113 billion
Pharmaceuticals & medicines	$108 billion
Integrated circuits	$44 billion
Medical devices	$36 billion
All services	$1.003 trillion
Intellectual property revenue	$126 billion
Student tuition	$40 billion
All energy	$323 billion
Liquefied natural gas	$34 billion
All agriculture	$175 billion
Soybeans	$28 billion

 

ABOUT ED

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

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

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

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

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FACT: Half of the world’s 3.51 billion workers don’t have regular pay or labor law protections.

THE NUMBERS: World labor force, 2024* –

Total labor force	3.70 billion
Employed	3.51 billion
Working for wages and salaries	1,780 million
“Self-employed”*	1,625 million
“Formal sector” workers with wage, inspection, & other rules:	1,660 million
“Informal” sector workers without these protections:	2,030 million

 

* Estimates from International Labour Organization, World Employment and Social Outlook 2024.
* The ILO’s term “self-employed” includes business owners, but also includes “own-account” workers such as day laborers, and “contributing family workers” working in small family businesses or farms without pay. The ILO views these two latter groups as comprised of workers who are “least likely to have formal work arrangements, [and] least likely to have social protection and safety nets to guard against economic shocks.”

WHAT THEY MEAN:

The International Labour Organization’s “World Employment and Social Outlook 2024,” out last January, says the world’s workforce has grown by 26 million this year and now totals 3.70 billion people. Subtracting the 191 million people currently unemployed, this means 3.51 billion people go to work daily in factories, on farms, in labs and offices, at home, in restaurants and hotels, and so forth. One perspective on them all, drawn from the ILO’s data, raises some uneasy questions about an ambitious new American “global labor” policy.

The ILO figures divide the world’s employed workers pretty clearly into two groups of about equal size. Those in the first group, about 1.7 billion people, work at “okay-to-good jobs” which feature regularly paid wages or salaries, and legal protections for health and safety, labor rights at work, minimum wages, and holidays.  Those in the second group have “pretty-bad-to-terrible jobs.” They earn money essentially through paid piecework rather than regular wages or salaries, and as workers holding “informal sector” jobs lack their peers’ legal protection for wages, health, and rights. (For a sense of where they work, earlier ILO research – 2019 – reports the highest rates of “informality” at 92% of all farm workers, 84% of domestic service workers such as maids and nannies, 74% of construction workers, 61% of accommodation and food service workers, and 60% of repair shops employees.) This second tier also features the vast majority of the world’s very worst jobs — that is, those involving abuses such as the world’s 160 million child laborers, and the 241 million extreme-working-poverty jobs paying $2.15 a day or less.

A “global labor” policy meant to fundamentally improve working life should try to help people in the “pretty-bad-to-terrible” second group get into the “okay-to-good” group. The most likely way to do this on a large scale is to help low- and middle-income countries improve labor laws and develop the professional civil services needed to implement these laws throughout their economies, and so change working life for very large numbers of people.

Now to the new policy: Last November, the White House launched a global labor standards strategy, explained in a 3,444-word “Memorandum on Advancing Worker Empowerment, Rights, and High Labor Standards Globally” along with supporting speeches and press releases. The Memorandum sets out a many-tiered array of policies and agency responsibilities to support worker rights abroad, fight child labor and forced labor, improve health and safety standards, and so forth.  In principle its policies cover the entire 3.7 billion world labor force.  But in practice the Memo’s content — and even more so the releases describing implementation plans — seem (a) to place workers in global “supply chains” employed by large international businesses at the center of policy, and (b) to focus on enforcement against ill-doers rather than on efforts to help workers move from bad to better jobs.  Here for example is Julie Su, Acting Secretary of Labor, describing the DoL’s view of its responsibilities at the Memorandum’s November launch event:

“[C]orporations are global. So workers, and worker power, and the way we think about workers have to be global, as well.  …  When global actors are allowed to evade labor laws in one country by exploiting workers in another part of the world, this undermines workers’ rights everywhere.  And when workers are harassed, discriminated against, and attacked as they produce things that are sold all around the world, we cannot simply look away and ignore the ways that our global economy brings with it global responsibility. … The Department of Labor is also expanding its work to combat forced labor and improve transparency and accountability from the top to the bottom of global supply chains.”

It’s certainly good for people and officials in rich countries to think about the lives of factory and logistics workers, and to find ways to reduce abuses in supply chains. But if these are the core focuses, policy is very likely to miss most of the workers in the “pretty-bad-to-terrible” jobs group. The 2023 edition of the “World Employment and Social Outlook” report, for example, drew on a study of 24 middle-income countries to conclude that workers in “global supply chains” (or at least those supply chains ultimately linked to wealthy countries) are more likely than their peers in purely domestic jobs to work in the “okay-to-good-jobs” group with regular pay and legal protection:

“[S]ectors with higher GSC [“global supply-chain”] integration tend to have a larger share of wage and salaries employment, a lower incidence of informality and a lower proportion of low-paid employment — and hence in principle a higher quality of employment.”

The implication is that while it’s easier for policymakers to focus on supply-chain workers connected to the wealthy world than on the “informal” sector maids, day laborers, and farm workers who are less visible to American eyes, the latter group is (on average, based on ILO’s finding) in worse straits and would often improve their lives by getting supply-chain jobs.  Likewise, it’s perhaps natural to think first about ‘enforcement’ on individual cases and only later about less glamorous but more systematic efforts to help improve laws and build professional civil service bureaucracies.  But the latter task is the main one, if the goal is to make labor standards meaningful for entire workforces.  If the next years’ policies are supply-chain and enforcement issues, then, the Memorandum’s achievements will be limited.  In some cases – if enforcement in supply chains is such a priority as to slow the flow of workers from “pretty-bad-to-terrible” work into “okay-to-good” supply-chain jobs, or in some cases even push workers out of these jobs altogether — they could have perverse as well as good effects. (See below for a sad 2014 example.)  So: probably time for some rethinking, some revisions, and a broader approach.

FURTHER READING

FACT: Americans buy 11 tons of Ukrainian honey daily.

THE NUMBERS: Sample U.S. imports from Ukraine, 2023 –

Sunflower oil	31,262 tons
Honey	4,075 tons
Apple juice	123 million liters
Hockey sticks	173,000
Electric coffeemakers	176,000
Pig iron	1.1 million tons

 

WHAT THEY MEAN:

Here’s Jonathan Swift praising bees three centuries back: “We have chosen to fill our hives with honey and wax, thus furnishing mankind with the two noblest of things, which are sweetness and light.” And here’s Alisa Koverda, translator and apiary expert at the Ukrainian Agriculture Ministry, writing in the autumn of 2022:

“Ukraine’s honey business is one of the largest in the world. Sadly, as a result of the war, dozens of apiaries and beehives are being destroyed every week. In some cases, beekeepers are able to get some financial support from the government, but it is not enough. Yet, the beekeepers remain optimistic. They share everything they have: their honey, knowledge and optimistic spirit.”

Peacetime Ukraine is the world’s second-largest honey producer, home according to her article to 220,000 commercial beekeepers with 2.3 million colonies, and probably another 200,000 part-time unregistered part-timers. They sold 58,000 tons of honey abroad in 2021.  Their top customers were neighboring Poles and Germans; Americans ranked third at 5,953 tons, making Ukraine the fifth-largest U.S. overseas honey source.

Pulling back a bit, pre-war Ukraine’s exports combined a large agricultural trade, centered on wheat — the blue and yellow flag represents the sky and a grain field — sunflower oil and seeds, honey, and processed foods such as apple juice with heavy-industry products led by iron and steel. Altogether this made up about a third of Ukrainian GDP, or $68 billion of a $200 billion as of 2021.

Three years later, exporting is more important still — together with aid and remittances, foreign customers are Ukraine’s main source of hard currency, helping to finance the war effort, keep local fire and police services functioning, and supporting the living standards of civilian workers and families.  Markets abroad, though, are obviously now harder to reach.  Grains, metals, and vegetable oils are bulky and heavy goods requiring sophisticated logistics and safe sea lanes to move, but Ukraine’s eastern seaports are occupied, and the Dnipro river ports near the front are free but blocked. The national export total accordingly fell from 2021’s $68 billion to $44 billion in 2022, and continued to drop through the middle of 2023. Nonetheless, through military successes, logistical innovation, help from allies, and inventive diplomacy, Ukraine’s trade absorbed the shock, began a rebound in the second half of 2023, and is now rising again.

At the core of this revival is a remarkable naval achievement. Without capital ships of its own, Ukraine has used drones, missiles, and intelligence to sink a third of the Russian Black Sea fleet’s 75 ships – the most recent example yesterday, the three-year-old 1600-ton patrol cruiser Sergey Kotov – and forced the rest to shelter out of range in the east. This has opened a “grain corridor” near the Romanian and Bulgarian coasts, allowing 23 million tons of exports to flow out of Odesa, Chornomorsk, and Pivdennyi in the second half of 2023. In February 2024, the Kyiv Independent reports 8 million tons. To the northwest, meanwhile, support from the European Union and aid programs run by the U.S. State Department and Agency for International Development have helped redirect some of Ukraine’s outbound trade through new road crossings and Danube river ports via Poland, Slovakia, and Romania. The Economy Ministry’s creative diplomacy, meanwhile, has worked out a waiver of Trump-era steel tariffs with the Biden administration, negotiated a free trade agreement with southern neighbor Turkiye, and used WTO rights and rules to battle occasional grain blockages at western-border transit points.

Altogether, having stabilized in 2023, Ukraine’s trade is now rising, with IMF projections suggesting 11% export growth this year, supporting in turn national GDP growth of 3.2%.  U.S. Census figures on arriving goods provide a set of human-scale examples. Some products — sunflower seeds and steel, for example – remain sharply down.  Apple juice and sunflower oil shipments, on the other hand, are now above their 2021 levels and accompanied by a steady flow of light manufactured goods: 176,000 electric coffeemakers, 132,500 pairs of skis (fourth in the world, behind Austria, China, and Bulgaria), 19,600 archery sets, and 173,000 hockey sticks (third, following China and Mexico).

Honey, too, is holding up, justifying the ‘optimistic spirit’ of late 2022.  Over the course of 2023, the U.S. Census reports 4,075 tons arriving (mainly in USDA’s ‘extra light amber’ grade), valued at $11 million. December’s arrivals included 74 tons in Chicago, 38 tons in Philadelphia, and 15 tons in New York. So in the third year of war, Ms. Koverda’s beekeepers continue to provide some sweetness and light to both overseas customers and locals, and along with these things an an example of resilience and hope.

FURTHER READING

From PPI:

PPI’s New Ukraine Project, directed by Kyiv-based Tamar Jacoby, has in-depth research and regular reporting on Ukrainian daily life, public mood, economic policy and anti-corruption progress, and more.

Budget and tax expert Ben Ritz explains the low cost, and high return, of military aid to Ukraine.

Diplomacy and policy:

The Ukrainian Embassy to the U.S.

Ukraine’s Commerce Ministry.

USAID’s agricultural support programs.

48 WTO delegations on economic and trade support for Ukraine.

View from the European Union.

Black Sea: 

English-language Kyiv Independent reports on the Black Sea grain corridor.

Radio Free Europe/Radio Liberty on Ukraine’s naval success and the retreat of Russia’s Black Sea Fleet.

… and follows up with yesterday’s sinking of the Sergey Kotov.

And Logistics Cluster reviews the status of Ukraine’s ports.

“Sweetness and light”:

Agricultural specialist and translator Alisa Koverda explains Ukraine’s beekeeping culture and wartime adaptation.

… and Фундація Жінок Пасічниць (Fundatsiya Zhinok Pasichnish’ for non-Cyrillic readers; translated, Foundation of Women Beekeepers), with honey contacts and beekeeping tips.

ABOUT ED

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

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

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

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

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FACT: African American owned businesses export over $1 billion worth of goods per year.

THE NUMBERS: African American owned exporting businesses* –

2021	1,139 exporters, $1.12 billion in exports
2020	1,001 exporters, $1.10 billion in exports
2019	1,514 exporters, $0.81 billion in exports
2018	1,400 exporters, $0.83 billion in exports
2017	1,200 exporters, $0.62 billion in exports

* Census/BEA, most recent data available

WHAT THEY MEAN:

Here’s President Biden a week before Christmas, talking up Milwaukee’s African American business community:

“Black small businesses with the talent, integrity, and ingenuity are the engines and the glue that hold communities together. … You’re the ones that sponsor the Little League teams. You’re the one that spon- — involved in the church events.  You’re the ones that hold the community together, and you keep it going.  You keep it moving. And every new business opening is a — is a vote for hope — just hope.  Hope.  You know, you’re making the American economy stronger and our nation more competitive.”

Biden’s enthusiastic remarks go on to report a lot of good news: the fastest growth in African American business formation since the 1990s; a doubling in the “share of Black households owning a business,” and a 60% rise in household wealth since 2019. Underneath these data are many stories — some of community collaboration, some of individual enterprise and inspiration, many of hard work, some of policy, many with some of each. Here’s one of the latter, in U.S. trade agencies’ effort to support African American exporting firms as they recover from a calamity:

Background: Each year since 2017, the Census and the Bureau of Economic Analysis have published a statistical picture of American exporting businesses. These include counts by size, race/ethnicity/gender of the owners, top markets and export earnings, employment, and payroll. These reports are labor-intensive projects requiring lots of detail work, and their data usually trail real-world events by three years. But they offer the most detailed description of exporting communities available anywhere in the world. The 2019 survey reports, for example, 1,514 African-American businesses selling over $800 million worth of goods to 60 countries — $43 million to China, $12 million to Ghana, $111 million to Canada, and so on. These (like exporters generally) are generally good employers. In 2021, they averaged 21 workers apiece, at a payroll of $64,600 per worker, whereas across the full list of ‘classifiable’ U.S. businesses — i.e., all privately-owned U.S. firms whose owners the Census and BEA could identify, exporters or not — the comparable averages were 11 workers at a payroll of $54,520 per employee.

COVID Impact: As we noted last summer, the COVID-19 pandemic hit this community very hard. By 2020, the Census/BEA count had fallen from 1,501 to 1,014 exporters — a 34% drop, seven times the 5% loss among all exporters, and well above the 8% of white-owned exporters and the 6% of Hispanic exporters. This is consistent with broader experience, as (for example) Federal Reserve economists reported that African American businesses closed at much higher rates than average in the spring of 2020. A closer look finds the number of medium-sized and large exporters — defined as businesses employing 100 workers or more — pretty stable; Census and BEA report 47 to 49 such businesses in 2019, 2020, and 2021, with exports between $200 million and $400 million per year.  Though there are some gaps in the data among smaller firms, the drop in their exporter total appears to be concentrated in small firms with fewer than 20 workers each.

Policy Since: Over the past three years, the government’s trade bureaucracy — Biden’s political appointees and civil servants at Secretary Raimondo’s Commerce Department, Reta Lewis’ Ex-Im Bank, and other agencies; career loan officers and regional export promotion specialists at 107 Commerce Department sites around the United States, U.S. Commercial Services officers at 146 overseas missions — have been trying to help the community repair the damage. A quick snapshot of one:

The Department of Commerce’s International Trade Administration’s Global Diversity Export Initiative creates an array of support programs ranging from webinars to high-level overseas missions: an on-line training session last Thursday for African-American businesses on opportunities and frequent challenges overseas; a South Africa mission for personal-care product manufactures this spring; eight “Bridges to Global Markets” events around the country for diverse companies hoping to find foreign customers this year, in the Mississippi Delta, Detroit, Los Angeles, Las Vegas, Atlanta, and other sites. Here’s GDEI lead Terri Batch, enthusiastically looking back at last year’s National Black Business Summit:

“We met with Black business owners from every corner of the country to promote ITA’s resources to support Black entrepreneurs – particularly those who haven’t previously engaged in international trade – discover new international markets for their products and services. During this event, I had the opportunity to moderate a Pan African Diaspora lunch panel that featured the services of the U.S. Commercial Service, Export-Import Bank of the United States (EXIM), the Minority Business Development Agency (MBDA), the U.S. Patent and Trademark Agency (USPTO), as well as entrepreneur and founder of Eminent Future, Isaac Barnes. This dynamic panel offered practical advice and support for black businesses pursuing business opportunities in Africa and beyond. Throughout the conference, we were also joined by speakers from other federal agencies including U.S. Department of State, the U.S. Census Bureau, and Prosper Africa. This whole-of-government approach to provide support for black-owned businesses to grow and scale into international markets is essential to carry out an inclusive and equitable economic agenda.”

And here are her Milwaukee colleagues, at work today a few miles west of Biden’s speech site and trying to help.  The data from BEA and Census are so far available only for 2021. But they do show an early rebound from the 1,001 exporters of 2020 to 1,139, and pretty substantial export growth, from the pre-Covid $806 million to more than $1 billion in 2021. All helping to underline and vindicate Biden’s Christmastime enthusiasm.

FURTHER READING

Biden in Milwaukee.

And his hosts at the Wisconsin Black Chamber of Commerce.

Government and policy:

The Commerce Department’s Global Diversity Export Initiative.

… DoC Assistant Secretary Arun Venkataraman explains the GDEI in Houston.

… Los Angeles-based ITA trade specialist Terri Batch reports from last summer’s National Black Business Summit.

… and reflects on her own public service for Commerce’s Black History Month observance last year.

Ex-Im Bank has options for African-American businesses hoping to begin exporting.

… and works with the Congressional Black Caucus on strategic planning.

And the Small Business Administration’s export center.

Data: 

From Census and BEA, the world’s best statistical portraits of exporting communities by ownership, markets, export value, employment and payroll from 2017 to 2021.

… and Census’ annual report on exporters and importers by large/medium/small size, known as “Profile of Importing and Exporting Companies,” with totals, state-by-state figures, and 25 overseas markets.

And for context, the New York Fed (2020) studies the disproportionate impact of the COVID-19 pandemic on African American business.

ABOUT ED

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

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

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

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

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FACT: American steel output lower in 2023 than in 2017; aluminum about the same as 2017.

THE NUMBERS: U.S. steel use* –

2023:	93 million tons
2022:	96.9 million tons
2021:	98.9 million tons
2012-2017 average:	100 million tons

* U.S. Geological Survey, annual ‘apparent consumption’’

WHAT THEY MEAN:

Six years later, how have Trump-era metals tariffs worked out? Did the U.S. wind up making more steel or aluminum? If so, did the tariffs damage metal-users like auto companies or machinery makers? And if so, how did they respond?  Some perspectives on these questions, drawn from the U.S. International Trade Commission’s modeling estimates along with recent data on metal output and consumption:

The Basics: In the first week of March 2018, the Trump administration decided to impose tariffs of 25% on most imported steel products, and of 10% on most imported aluminum. These were added on top of pre-existing tariffs, mostly in the range of 2% to 5.7% for aluminum and 0% to 3% for steel. (Note: The pre-2018 rates oversimplify, as many steel and some aluminum products also have additional “anti-dumping” and “countervailing duty” tariffs. See below for a bit more.) The legal basis was a little-used U.S. trade law clause — “Section 232” — dating to 1962, which authorizes presidents to indefinitely “adjust” imports on grounds of national security. The Department of Commerce, which administers this law, argued for limiting imports in two Jan. 2018 reports on the grounds that ready access to these metals has security implications and rising imports had cut U.S. output. The resulting tariffs have mostly stayed in place since, with changes such as the substitution of quotas for tariffs for Korea and the EU and exemptions for Canada and Mexico.

What has happened since? Abstract economic logic suggests that a large new tariff should create a four-phase chain of events something like this:

(i)    Tariffs raise prices for the relevant imported good, in this case the two metals.
(ii)    U.S. buyers — in this case, industries such as machinery and auto factories, construction firms, and canning industries — shift purchasing to local varieties.  Imports therefore fall and the “domestic” share rises.
(iii)    As “consumer” industries pay more for the good, they lose some competitiveness vis-à-vis imports at home and in export competition abroad, and therefore risk also losing some production and employment.
(iv)    They respond by trying, to the extent possible, to use less.

The Commerce Department’s 2018 reports admitted that phase (iv) was theoretically possible, but said it probably wouldn’t materialize in reality because strong GDP growth and higher federal spending on metal-using products would offset higher prices. Thus capacity utilization would rise, and U.S. mills and smelters would grow more stable and profitable. Here’s their steel prediction:

“By reducing import penetration rates to approximately 21 percent, U.S. industry would be able to operate at 80 percent of their capacity utilization. Achieving this level of capacity utilization based on the projected 2017 import levels will require reducing imports from 36 million metric tons to about 23 million metric tons. If a reduction in imports can be combined with an increase in domestic steel demand, as can be reasonably expected [with] rising economic growth rates combined with the increased military spending and infrastructure proposals that the Trump Administration has planned, then U.S. steel mills can be expected to reach a capacity utilization level of 80 percent or greater. This increase in U.S. capacity utilization will enable U.S. steel mills to increase operations significantly in the short-term and improve the financial viability of the industry over the long-term.

In sum, the administration’s hope and prediction was that the U.S. would be producing more metals, since the policy “would enable U.S. steel producers to operate at an 80 percent or better average annual capacity utilization rate based on available capacity in 2017.” The analogous goal for primary aluminum was a rise in production to 1.45 million tons, and of smelter capacity utilization to 80%.

Phase i: Imports Fall, 2018-2019: U.S. statistical agencies such as the Census and the U.S. Geological Survey publish regular data on metal trade, use, and production. The trade figures show that after the tariffs went on in early 2018, imports of metals did in fact drop. Steel imports fell from the 36 million tons mentioned in the Commerce report to 25 million tons in 2019, quite close to their 23-million-ton goal. Aluminum imports went down from 6.2 million tons in 2017 to 5.3 million tons in 2019. Both declines seem to have lasted, though with some volatility and fluctuation; 2023 imports were 25 million tons for steel and 4.8 million tons for aluminum.

Phases ii & ii: Metal Output Up But “Downstream” Industries Contract, 2020-2021: The U.S. International Trade Commission’s formal five-year report last March estimated that in 2020 and 2021, the tariffs had raised U.S. steel and aluminum output by about $2.2 billion, as compared with a hypothetical case in which the administration did not impose tariffs. Meanwhile, they cut the output of U.S. metal-using manufacturers (mainly machinery, auto parts, and tools and cutlery) by about $3.5 billion. So overall, ITC’s estimate was that between 2017 and 2021, the tariffs had increased the metals production relative to a no-tariff scenario, but left the overall U.S. manufacturing sector a bit smaller.

Phase iv?: Output and Metal Use/2023: No such formal estimate yet exists for 2022 and 2023. However, according to the U.S. Geological Survey’s annual “Mineral Commodity Surveys”, by 2023 Americans were using less steel and aluminum than they had before 2018. These reports show that from 2012 to 2017, the U.S. economy used an average of 100 million tons of steel and 5.23 million tons of aluminum per year. (Using USGS’ “apparent consumption” metric.) The 2023 U.S. economy, though about 10% bigger in constant, inflation-adjusted dollars than that of 2017, used only 93 million tons of steel and 4 million tons of aluminum — respectively 7% less and 20% less than before. Put another way, where in 2017 the U.S.’ $20.2 trillion GDP used on average 5100 tons of steel and 290 tons of aluminum per real $1 billion in output, the $22.4 trillion 2023 economy needed only 4,156 tons of steel and 179 tons of aluminum per $1 billion.

Thus, though imports remain close to the levels the Commerce Department’s 2018 reports envisioned, U.S. metal production has fallen back to pre-tariff levels. According to USGS, steel mills poured out 81.6 million tons of metal in pre-tariff 2017, and got up to 87.8 million tons in 2019.  In 2022, though, they were back to 80.5 million tons; in 2023, a slightly lower 80.0 million.  Primary aluminum smelters likewise, having raised output from 741,000 tons in 2017 to 1.09 million tons in 2019, had fallen back down to 750,000 tons in 2023. Nor did the Department’s prediction of higher capacity utilization prove realistic. The Federal Reserve’s “FRED” statistical service reports 74.2% in 2023, statistically about the same as 2017’s 73.6%. And actual capacity is down from 111 million to 104 million tons in steel, and from 2 million to 1.36 million tons in aluminum.

Analysis of this should be a little cautious, as metal use (especially in aluminum) can be volatile. But it’s unusual to see a sustained decline in use during periods of strong economic growth like that of 2021-2023. And it may be that (setting aside international reactions and retaliations, and impacts on metal users like the auto parts and machinery factories) we are now in Phase (iv), and the tariffs’ main current effect is “lower use of metals.” Not really what the DoC was advertising six years ago.

FURTHER READING

Analysis:

USITC analysis and estimates of the ‘232’ tariffs (see pp. 124-133).

Academics Kadee Russ & Lydia Cox forecast in February 2018 that metals tariffs could raise metal output, but likely at the cost of jobs and production in other manufacturing industries.

… and they look back from 2021.

Data: 

FRED (“Federal Reserve Economic Data”) has steel capacity utilization trends from 1970 forward.

The U.S. Geological Survey’s mineral commodity statistics have annual reports on steel and aluminum output,  imports and exports, capacity, and employment back to the early 1990s.

… and for real enthusiasts, a spreadsheet with data back to 1900.

And references:

The “Section 232” site for the Commerce Department’s Bureau of Industry and Security, with links to the 2018 reports on steel and aluminum.

… or direct to the 2018 steel report.

… and the 2018 aluminum report.

And some tariff explanation:

Steel and aluminum typically have “MFN” tariffs in ranges from 2% to 5.7% for aluminum and from 0% to 3% for steel. Real-world policy is complex, though, as steel in particular is often also covered by “anti-dumping” and “countervailing duty” tariff penalties outside the regular tariff schedule. The Commerce Department reports that of the 685 AD and CVD “orders” currently in place, 309 cover steel and steel products, and a more modest 32 cover aluminum.

Here’s the U.S. tariff schedule, with steel in Chapters 72 and 73, and aluminum in Chapter 76.

And the Department of Commerce’s tally of AD and CVD “orders” by country, industry, date, and product.

ABOUT ED

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

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

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

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

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FACT: Each January, the U.S. imports 11 million roses a day.

THE NUMBERS: Top sources of roses, January 2023 –

Colombia	177 million stems
Ecuador	137 million stems
Guatemala	4 million stems
Ethiopia	2 million stems
Mexico	1 million stems
Kenya	0.4 million stems

 

WHAT THEY MEAN:

Geoffrey Chaucer’s 699-line Parliament of Fowls (1382) makes the first English-language link between flowers, romance, and Valentine’s Day. The relevant passage:

“I]n a launde, upon an hille of floures,
Was set this noble goddesse Nature;
Of braunches were hir halles and hir boures,
Y-wrought after hir craft and hir mesure;
Ne ther nas foul that cometh of engendrure,
That they ne were prest in hir presence,
To take hir doom and yeve hir audience.
For this was on seynt Valentynes day,
Whan every foul cometh ther to chese his make.*

* “When every bird comes to choose his mate.”

Seven centuries later, the National Retail Federation guesses Americans will spend about $25.8 billion on Valentine gifts this year.  A tenth of the money, $2.5 billion, goes to flowers. Before this evening’s candles light up, here’s a quick look at the four-step network of agriculture and farm labor, truckers and and pilots, policy professionals and front-line civil service workers, and small businesses that get the long-stemmed reds from tropical farms to florist storefront to you:

Growing and Picking: Worldwide flower trade totals about $10 billion annually. The Dutch are the top importers, with Americans second at about $2 billion per year. Colombia was last year’s top U.S. source at $1.1 billion, followed by Ecuador at $500 million. U.S. domestic floriculture, a $6.5 billion industry, supplies about a quarter of U.S. flowers, and centers more on garden and potted plants than cut stems.

By bloom type, 2.7 billion roses accounted for half the value of U.S. imports. Colombia provides about 1.5 billion stems, grown on about 8600 hectares of farmland near Bogota and harvested by about 100,000 rural workers. Next door Ecuador’s 1.0 billion are not far behind. The remaining 200 million roses arrive variously from Guatemala, Mexico, Ethiopia, and Kenya; among other flowers, Thailand is the top orchid source and Costa Rica places near the top in lilies.

Transport: Roses arrive year-round, but the large import pulses in late January/early February and late April/early May — just before Valentine’s Day and Mother’s Day — include about half of annual deliveries. The short life of a blossom means that flower trade is mainly an air cargo business.  Once picked and boxed, roses travel in chilled trucks from farms to El Dorado airport near Bogota and Mariscal Sucre in Ecuador, with most Valentine’s roses — about 90% — arriving at Miami International Airport via (according to USDA) 30-35 daily chartered wide-body flights. Likewise in early May, orchid farms around Bangkok connect via Tokyo to deliver most U.S. prom-night corsages.

Transit: Customs and Border Protection officers inspect the incoming flowers for phytosanitary health on arrival at Miami. CBP reports inspecting 1.23 billion flowers at the airport last year and intercepting 1,975 pests — mostly nursery-threatening thrips, moths, and caterpillars rather than customer-intimidating scorpions or tarantulas.

Policy: Though technically assigned a 6.5% tariff, most flowers arrive in the U.S. duty-free under free trade agreements and “preference” programs. The U.S.-Colombia FTA waives the tariff for roses (and chrysanthemums, lilies, etc), saving florists and their customers about $65 million a year. The African Growth and Opportunity does the same for Ethiopian and Kenyan blossoms. Florists buying Ecuadoran roses and Thai orchids, though, must wait for Congress to revive the Generalized System of Preferences to get the same benefit.

And last: Having landed at the airport about a week ago, flower shipments move by refrigerated truck or domestic cargo flight to wholesalers and warehouses. By Monday, they have reached the roughly 12,000 American florists (mostly small businesses, employing about 64,000 people this year according to the Bureau of Labor Statistics); and from them to you.

So that’s the business side. Last word to Chaucer, also from the Parliament:

The lyf so short, the craft so long to lerne,     / The life so short, the art so hard to learn.
Th’assay so hard, so sharp the conquering,  / The attempt so hard, the conquest so sharp
The dredful Ioy, that alwey slit so yerne,       / The fearful joy, that ever slips away so fast
Al this mene I by love.                                   / By all this I mean love.

FURTHER READING

Chaucer’s Parlement of Foules:

The original Middle English; Seynt Valentyne shows up in lines 305-312.

A modern-English translation.

Chaucer was a trade professional as well as a romantic poet, having spent the years 1374-1386 tallying wool exports and wine tariff revenue as Richard II’s Controller of Customs. They paid him 10 pounds a year plus a gallon of wine per day, and he wrote the Parliament in off hours.  The U.K.’s National Archives looks at Chaucer’s trade policy career.

From flower-bed to florist: 

The Colombian Flower Growers Association, ASCOLFLORES, recalls its first U.S.-Colombia FTA shipment.

Air cargo firms manage Colombia-to-Miami charters.

Miami International Airport (2023) explains flower transit.

Customs and Border Protection on letting flowers in while keeping thrips out.

The National Retail Federation’s 2024 Valentine forecast.

V-Day stats from the Society of American Florists.

… and also from the SAF, an appeal for GSP reauthorization.

Elsewhere:

The Netherlands is the world’s largest flower buyer at about $5.4 billion a year, or half of the value of flower trade. Most of this transits the gigantic Aalsmeer flower market just outside Amsterdam, which serves as the center for European flower trade and the main market for growers in Kenya and Ethiopia. Royal Flora Holland has the facts and figures.

And last:

How did roses become the Valentine’s Day standard? It’s likely no one really knows, but one theory traces the tradition to a series of letters sent to U.K. friends in 1718 by Mary Wortley Montagu from the Ottoman court, and published in book form a half-century later in 1763. (The Ottoman nobility were rose and tulip enthusiasts; roses are Persian by origin.) Letter #42 records a ‘flower language’ in which seraglio ladies assigned emotional meanings to different flowers and luxury products, and used them to send coded notes to friends and outside admirers.  Nineteenth-century French and Brits then built this into a gigantic “flower language” (“floriography”); an 1819 book by Charlotte Delatour cataloged meanings for 713 flowers (including 29 separate rose varieties), nursery plants, and other garden products such as fruits and tree branches.

People with deep gardening expertise and memorization powers could use this to convey signals pretty far beyond modern candy-heart romance — all the way (at least to a modern eye) from “platonic affection” and “romantic love” to “alternative life-style” and “stalker”.  For example, while a generic rose means “love,” and a white rose means “I am worthy of you,” a dog rose conveys an eyebrow-raising “pleasure and pain” message, and a maiden blush rose a frankly menacing “if you lose me, you will find it out.”

The need to keep these hundreds of definitions straight, and to be very sure you know which rose is which, must have put amateurs at constant risk of embarrassing blunders and awkward misunderstandings.  Modern flower association lists are much shorter and PPI trade staff think it’s probably better that way. Some more examples from Delatour, though, for those interested:

Cypress branch:          “Death and eternal sorrow”
Daffodil:             “Deceitful hope”
Daisy:                 “Beauty and innocence”
“Grass-leaved goosefoot”     “I declare war against you”
Jasmine:             “Sensuality”
Meadow saffron:        “My best days are past”
Potato                “Benevolence”
White poppy            “Sleep”

Lady Mary’s Turkish Embassy Letters.  See Letter 42 for the flower language, also Letter 25 for brief nudity, Letter 9 for a rant against Viennese fashion (“monstrous and contrary to all reason”), and Letter 35 for pioneering vaccination advocacy.

Delatour’s original Artistic Language of Flowers.

And a modern essay on the origins and practice of floriography, with a list of known flower messages.

ABOUT ED

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

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

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

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

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FACT: U.S. Geological Survey: 33,000 tons of gold out there under the hills.

THE NUMBERS: Quantity of gold “above ground” worldwide – 

2024:	212,582 tons*
2000:	144,000 tons?
1950:	70,000 tons?
1900:	30,000 tons?
1500:	~5,000 – 15,000 tons?

* World Gold Council estimate.

WHAT THEY MEAN:

Previewing the betrayals, the shattered dreams, and the body count as The Treasure of the Sierra Madre opens, author B. Traven has some look-homeward-angel, be-content-with-what-you’ve-got advice:

“The treasure which you think not worth taking trouble and pains to find, this one alone is the real treasure you are longing for all your life.”

Still: The August U.S. Geological Survey reports last week in its 2024 Gold Commodity Summary that as much as 33,000 tons of gold is lying around under rocks and hills in the U.S. alone. (Including 3,000 tons of currently recoverable reserves, 12,000 tons of known but currently unrecoverable ore, and another 18,000 tons of undiscovered lodes.)  This in turn is “only a small portion” of total global reserves. With a price this week above $2,000 per ounce, the U.S. share alone would be worth about $2.2 trillion.

Should you quit your job and buy a shovel?

The sages of economics join Traven in loudly saying “No!” Here’s 18th-century econ. pioneer Adam Smith condemning speculators, amateur treasure-hunters, and professionals alike as “destined to bankruptcy and ruin,” in the appropriately titled Chapter 11 of The Wealth of Nations: 

“Of all those expensive and uncertain projects which bring bankruptcy upon the greater part of the people who engage in them, there is none perhaps more perfectly ruinous than the search after new gold and silver mines. … [W]hen any person undertakes to work a new mine in Peru, he is universally looked upon as a man destined to bankruptcy and ruin, and is upon that account shunned and avoided by everybody.”

From another tradition entirely, 14th-century Tunisian polymath ibn Khaldun scornfully rejects persistent rumors that sixth-century Byzantines, or alternatively djinns and wizards, had buried huge lots of gems and precious metals in caves.  He says the only ones who get rich on gold are con men swanning about the Maghreb selling phony maps and shares in non-existent mines. As to their dupes:

“Trying to make money from buried treasure is not a natural way to make a living.  Many weak-minded persons hope to discover riches under the earth and profit from them … Their motive is their inability to earn money normally, through commerce, farming or crafts.  They trust instead that they can grow rich without effort or trouble.”

In practice, ibn Kh. may have been basically right about get-rich-quick dreamers, but Smith was off-base on professional mining. The World Gold Council (a trade association of 32 of the world’s big gold-mining companies) reports 4,899 tons of gold ‘used’ in 2023, the largest annual total they have on record. About two-fifths of this, 2,168 tons, went to jewelers; investors bought about the same amount, with 1,040 tons going to central banks and 1,190 to private buyers. The rest divides between 298 tons to tech businesses for semiconductor wire bonding, infrared sensors, thermal protection for aerospace technologies, photovoltaics and solar cells, reflective satellite mirrors, etc.; 40 tons or so to dentists, and the rest to miscellaneous buyers. The WGC says that 1,800 of the 4,899 tons came from recycling, and the other 3,100 tons from mines.

Therefore, Smith is incorrect and lots of professionals make money digging up gold. The Council’s figures imply that a third of all currently circulating gold has been dug up since 2000, and the total — “about 212,852 tonnes” by their count — rises about 1% each year.  Production is pretty diffuse by country: the Council and the USGS disagree slightly on totals, but concur that four countries produce more than 200 tons a year (China, Australia, Russia, and Canada), and another 10 or so are above 100 tons:  the U.S. at 170 tons (124 tons from Nevada, 20 from Alaska), joined by Burkina Faso, Ghana, Indonesia, Mali, Mexico, South Africa, and Uzbekistan.  USGS has the Peruvian mines Smith scoffed at 250 years ago producing 90 tons a year.  Gold trade comes to about $450 billion per year — not far behind the WTO’s figure of about $625 billion in iron and steel exports, and about 2% of world goods trade — as metal flows through the London Bullion Market, the slightly smaller New York, Zurich, and Tokyo exchanges, Swiss metal refineries and financial institutions, Indian and Hong Kong investor portfolios and so forth. Switzerland is the largest trader, often both importing and exporting $90 billion worth in a year.

Could you, realistically, get a bit of this? Well, there’s still lots more gold beneath the ground than above it. World “reserves” in the technical sense of “recoverable without loss under current technology and mining and other costs” are 3,000 tons in the U.S. and 59,000 tons worldwide; adding in veins and lodes too expensive to get at, and extrapolating the USGS’ figure for currently unrecoverable and unknown lodes in the U.S. to the world suggests a world total above half a million tons.

But even the ore everybody knows about is hard and expensive to dig up. As an extreme but illustrative example, the Mponeng mine near Johannesburg is a hole 4 kilometers deep. The World Gold Council puts the current AISC (“All-In Sustaining Cost,” the average cost of digging up an ounce of gold) at $1,276. This allows substantial profits given a $2,076/oz. market price, but you’d need lots of capital to keep going, as well as very high up-front capital for opening a mine. So even if you could find one of USGS’ 33,000 tons, it might not pay to try for it.

Still, even Traven is equivocal. If his first sentence tells you that you’ll regret trying, his second wistfully suggests that you might want to make one last try:

“The glittering treasure you are hunting for day and night lies buried on the other side of that hill yonder.” 

FURTHER READING

Data:

The U.S. Geological Survey’s 2024 gold report.

The U.S. Geological Survey has U.S. production, world production, trade, and price data for gold and eight-three other minerals — everything from platinum-group metals and gemstones through iron and tin and on to salt, gravel, and peat — from the early 20th century to 2023.

All the gold in the world: 

USGS says there are 59,000 tons of currently recoverable gold “reserves” worldwide underground, including the 3,000 tons in the U.S. Gold being resistant to tarnish, it stays around, except for the fraction hidden in booby-trapped tombs, buried in pirate chests, or dropped down manholes. The World Gold Council helpfully illustrates their “around 212,852 tonnes” estimate with a picture of a 212,000-ton solid gold cube 73 feet on each side. It would be worth about $15.5 trillion.  One ton of gold would be a cube with sides about 15″ long.

A counterpoint, attempting to estimate the total gold available to kings, sultans, pirates, merchants, &c. from 1492 to the present, guesses pre-1900 stocks were quite low.

The Swiss news service looks at Switzerland’s gold vortex, human rights compliance, money laundering, and policy.

And the Mponeng mine, deepest in the world.

Nothing new under the sun:

Ibn Khaldun’s Muqaddimah.

Smith’s Wealth of Nations.

Ibn Khaldun’s con men have modern descendants: the Nevada Mining Commission warns a gullible public to steer clear of get-rich-quick schemes and “dirt pile swindles.”

And last:

If you must — The U.S. Geological Survey has advice on where to go to find gold, and how to do it.

But be warned — B. Traven’s Treasure of the Sierra Madre.

ABOUT ED

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

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

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

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

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FACT: WTO members will decide whether to preserve “duty-free cyberspace” by February 29.

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

2024:      67%
2018:      49%
2012:      34%
1998*:       3%

The WTO membership approved ‘duty-free cyberspace’ in May 1998.

WHAT THEY MEAN:

In PPI’s latest policy paper, Tech Policy Director Malena Dailey and Ed Gresser urge the World Trade Organization members to support music lovers, heed Taoist policy advice, encourage teenage influencers, and help small businesses participate in trade, by continuing their 25-year practice of not taxing flows of information over the internet. By way of background:

On February 26, the WTO will meet in Abu Dhabi for “MC-13” (the group’s 13th Ministerial Conference; the first was in 1996). Their docket extends from the seas (fisheries subsidies), to the land (agricultural stockpiling), the lab (medicines and medical technology intellectual property post-COVID pandemic), and the law (revival of the Dispute Settlement system).  The sky is not absent: one of the marquee MC-13 decisions is whether the members will extend the “moratorium” they imposed on applying tariffs to electronic transmissions, “duty-free cyberspace” for short, at “MC-2” in the spring of 1998. The 14-word moratorium is one of the simplest and most easily understood of all trade agreements, reading as follows:

““Members will continue their current practice of not imposing customs duties on electronic transmission.”

Dailey and Gresser call up Taoist sage Lao Tzu, not always a perfect guide to policymaking, but quite right in this case:

“Those who would gain all under heaven by tampering with it — I have seen that they do not succeed. Those that tamper with it, harm it; those that lose it.”

Translating this into data-flow and taxation, internet transmissions are fundamentally ways to exchange information. Allowing people and businesses to exchange information without taxing them for it will encourage them to exchange more.  Taxing this flow of ideas and knowledge, meanwhile, will mean they exchange less of it. The analogous if more prosaic present-day economist’s saying about this sort of situation is “don’t just do something, stand there.”

That’s essentially what WTO members have done for the last generation. Over their 25 years of refraining from grabbing and tampering, benevolently standing there, and maintaining the “duty-free cyberspace” principle, trade has visibly ‘democratized’ as electronic commerce has boomed and barriers to small business and individual participation in exports have diminished. Some figures illustrate:

* Massive growth in internet access and use: The world internet user population has grown from 150 million, mostly in the U.S. and other wealthy countries in 1998, to a third of the world’s people by 2012, half by 2019, and 5.4 billion or two-thirds of the world’s people (and 79% of the world’s young people, according to the International Telecommunications Union).

* High-tech infrastructure boom: The infrastructure necessary to serve this large number of users has grown, in the case of submarine fiber-optic cables from 84 in the late 1990s to 574 of much better quality as 2024 begins; in the case of satellites, from under 1,000 birds then to nearly 8,000 now.

* Data flow: The volume of data traversing these wires and beams, as calculated by Cisco in their fondly remembered “Visual Networking Index,” had by 2017 risen from the trillions of bytes to the quintillions before it became too hard to count.

* Electronic commerce: Much of this data has commercial as well as intellectual or entertainment purposes: the value of electronic commerce just within the United States, according to the Commerce Department, has risen 50-fold from $700 billion to $36 trillion, about 40% above the U.S.’ $26 trillion GDP.

* “Democratization” of trade and small business exporting (U.S.):  As the price of finding overseas customers has dropped, the Census Bureau’s count of exporting American small businesses has grown from about 170,000 to 250,000. This is likely a large understatement, as the Census counts only “goods” exporters of things like farm products and manufactured goods. They are not yet able to tally services exporters such as musicians, Instagram influencers, clinics supplying telemedicine, artists and comedians, distance educators, and other large and active Internet users.

* “Democratization” of trade and small business exporting (developing countries): And similar booms spring up around the world. Dailey and Gresser cite Indonesian musicians, Bangladeshi web-site designers, Albanian social media account managers, and more, as examples of the way the falling costs of communications help small firms and entrepreneurs find potential partners, suppliers, and customers around the world.

In sum, the ‘foundational’ WTO decision 25 years ago to leave the Internet tariff-free, refrain from tampering and grabbing, stand there, etc.,* has worked very well. Good job. Keep it up.

* Asterisk: Note of course that this approach isn’t always best. Lao Tzu points out after all in Chapter 1 that “the Way is not an unvarying way.” Per Dailey and Gresser, while it’s best to refrain from taxation and tariffs, it’s also important to have active policies for privacy protection and law enforcement, to have appropriate content moderation, and to ensure access for the 2.5 billion people worldwide, including about 25 million Americans, who don’t now have the connection they want.

FURTHER READING

Dailey and Gresser on duty-free cyberspace.

PPI’s digital policy project.

At the creation:

Then-U.S. Trade Representative Charlene Barshefsky set out digital trade policy in 1998. Core graph, with the foundational value of duty-free cyberspace the “do-something” policy agenda in privacy, security, access, and so forth both still very current:

“Moving on from the foundational commitment we won from the WTO members in 1998 on the principle of “duty-free cyber-space” – that is, ensuring that electronic transmissions over the Internet remain free from tariffs – we are moving on to a longer-term work program. Its goals include ensuring that our trading partners avoid measures that unduly restrict development of electronic commerce; ensuring that WTO rules do not discriminate against new technologies and methods of trade; according proper application of WTO rules to trade in digital products; and ensuring full protection of intellectual property rights on the Net.  At the same time, we are working with individual trading partners on a series of related questions – for example, on privacy issues where we have worked closely with the European Union to create a model that both protects consumer privacy and prevents unnecessary barriers to transatlantic economic commerce.”

… and now: 

The White House’s “Declaration for the Future of the Internet,” signed by the U.S. and 61 other countries, sketches out an agenda for privacy, law enforcement and public-interest regulation, universal access, and encouragement for growing data transfer.

The WTO on digital trade as a development tool.

The Joint Initiative on electronic commerce.

… and on this topic, a highly concerned & critical PPI look at the U.S.’ sudden and mysterious loss of direction on data flow and related issues.

Data:

ITU counts Internet users, end 2023.

And a counterpoint:

Why, with all this in mind, would someone want to breach the moratorium? Proposals, mainly from India and South Africa, rest on the idea that refraining from tampering and grabbing means that developing countries lose tax revenue. A UNCTAD staff paper of 2018 to this effect argues current tariff rates in developing countries, if imposed on digital products, could yield about $10 billion in tax money is a frequent point of reference. (India is the paper’s top hypothetical tax recipient at about $400 million.) Dailey and Gresser note (a) that this sort of thing — taxing music downloads? who pays? the artist? the platform? the submarine cable or fiberoptic owner? — not only may fail in practice, but (b) that the money involved in UNCTAD’s speculation is pretty trivial, and (c) the arithmetic almost certainly works against governments considering this sort of thing:

*    For India, the $400 million high-end estimate would be about 0.1% of that year’s ~$324 billion in Indian government revenue. This is almost certainly well below the losses the Indian Finance Ministry would incur as other governments tax and shrink India’s services export industries, and VAT and other income tax receipts accordingly fall.
*    For “developing countries” generally, also about 0.1%.

Not at all a good exchange. See pp. 8-12 on the folly of putting small revenue gains above large GDP, technological, and employment advances.

The UNCTAD staff paper is here.

And the India/South Africa submission.

And last:

Lao Tzu (Waley translation); see Chapter 29 for the grabbing and tampering piece, and Chapter 1 as a caution against over-reliance on policy minimalism.

ABOUT ED

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

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

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

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

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FACT: Senegal is the U.S.’ fourth-largest source of wigs.

THE NUMBERS: U.S. imports of wigs from Senegal – 

2022:	23.5 million
2020:	19.2 million
2017:	0.1 million
2012:	0.2 million

 

WHAT THEY MEAN:

A sad prediction by an eminent economist, about a decade ago – In The Bottom Billion: Why the Poorest Countries are Failing and What Can Be Done About It (2008), Paul Collier says the poorest countries — over 50 of them, with a combined population of 1 billion — had entered a development trap.  The light-manufacturing-export success of Asia and Latin America had blocked the “trade rout” out of poverty for others, particularly in Africa. Geography, regional conflicts, and resource dependence made economic growth difficult and domestic economic reform often futile. Absent major unexpected change, their future looked bleak:

“In the modern world of globalization, there are some fabulous ladders; most societies are using them.  But there are also some chutes, and some societies have hit them.  The countries at the bottom [ed. note: about 58 in his count, with a population of a billion] are an unlucky minority, but they are stuck.”

The alternative book, Charles Kenny’s Getting Better: Why Global Development is Succeeding (2012), proposed the contrary: basic domestic-policy measures in the poorest countries were visibly succeeding, incomes were rising and social indicators improving, and life at the “bottom” was not stuck:

“[T]hose countries with the lowest quality of life are making the fastest progress in improving it across a range of measures including health, education, and civil and political liberties.  The progress is the result of the global spread of technologies and ideas – technologies like vaccinations, and ideas like ‘send your daughter to school.’”

With the intervening decade’s experience, Kenny’s optimistic side of the debate has gained some strength.  Anecdotally, cases like Senegal’s sudden bloom as a wig exporter to the U.S. — 200,000 wigs ten years ago for $4 million, nearly 24 million wigs in 2022 for $44 million, and just a bit fewer in 2023, fourth in the world as a wig supplier behind only China, Indonesia, and fellow-LDC Bangladesh — suggest that the trade route is not blocked.  Rather, unique local industries like Dakar’s inventive hair-sculpting salons and wig factories can, with a bit of luck and advertisement, quickly attract international attention, scale up, and become large export earners and employers.  (See below for a few mini-case studies: coffee from Timor-Leste, clothes from Cambodia and Haiti, and diamonds from ex-LDC Botswana.)  More generally, the World Bank’s estimate of the actual number of poor people in the “bottom” tier — those in absolute poverty, scraping out a living on $2.15 a day or less — has fallen by about 40%, from 1.13 billion in 2010 to 690 million in 2022, as their (real-dollar) per capita income has risen from $896 to $1,117.

From a different angle, the suddenly rapid shrinking of the United Nations’ official list of “least-developed” countries (“LDCs”), suggests a similar national-level trend.  The UN has been keeping this list since 1971, with updates every three years to add new countries or remove ones that have grown out of LDC status. (More detail on how it works below.)  An observer studying the list 15 years ago would have to conclude along with Dr. Collier that it had a flypaper-like quality of almost never releasing anyone – in the 35 years from 1971 to 2006, only Botswana “graduated” (the U.N.’s term), having managed a surge of diamond wealth particularly well.

In the 18 years since, though, six countries have exited the list – Cabo Verde in 2007, the Maldives in 2011, Samoa in 2014, Equatorial Guinea in 2017, Vanuatu in 2020, and Bhutan last December. A cautious person might be still skeptical that this signifies a trend. The six recent graduates are all quite small, combining for 4.7 million people or 0.5% of the worldwide LDC population; four are tropical island countries able to tap tourism revenue; and the fifth, Equatorial Guinea, has a lot of oil, and the number of people living in LDCs remains above 1.1 billion people and an eighth of the world’s population.  But this noted, the U.N. has already scheduled five more graduations in the next three years — Sao Tome e Principe this December; Bangladesh, Laos, and Nepal in December 2026; the Solomon Islands in December 2027 — which will not only shrink the list but reduce the global LDC population by over 200 million.

Looking only slightly further ahead, the U.N.’s spring 2024 “Triennial Review” of the LDC list will consider nine more potential graduates with 110 million more people for 2027 and 2028, including Cambodia, Comoros, Djibouti, Kiribati, Myanmar, Timor-Leste, Tuvalu, and Zambia.   Senegal, with its suddenly booming wig industry, is also on the possible-graduate list, with a Senegal’s figures mirror this, with the same GNI per capita up from $1,117 to $1,410, literacy up ten points, life expectancy three years longer, and the count of Senegalese people in deep poverty down from 42% to 9%.

Not all are likely to go through — Myanmar’s economy has spiraled downward since the coup d’etat late in 2020, and Tuvalu and Kiribati have extreme climate-change vulnerability. But the list by 2028, along with the count of  looks likely to be a lot smaller.  To borrow Kenny’s phrase, it does seem that things are getting better.  And not slowly.

FURTHER READING

The UN’s Least-Developed Country list.

… its explanation of LDC graduation and Triennial Reviews.

… its most recent graduate, the Himalayan monarchy Bhutan, six weeks ago (Dec. 13, 2023).

And the World Bank’s poverty-reduction data-snapshot for Senegal.

Some more explanation:

By “least-developed country,” the UN does not mean “poorest relative to other countries” — say, the twenty poorest as against the 20 richest of the world’s 197 countries.  Rather, the term “LDC” is meant as an objective descriptor, using a stable set of three metrics for income, health and education, and economic and environmental “vulnerability” to describe a country in difficult straits.  The metrics as of the 2021 “Triennial Review” are:

(a)     A national per capita income below $1,088, essentially $3 per person per day;
(b)     A low “Human Assets Index” number which combines three health indicators (maternal mortality, under-five mortality, stunting) and three education indicators (middle school graduation, adult literacy, and gender parity in middle-school-level education); and
(c)     An “Economic and Environmental Vulnerability Index” similarly calculated from a set of five economy-related topics (the agriculture + fisheries + mining share of GDP, “remoteness and landlockedness,” high export reliance on single products or industries, and export volatility), and four environmental or geographical issues (share of people in low-lying coastal areas and arid zones, instability of farm production, and number of disaster victims).

To get off the LDC list, a country must exceed the indicators in two of these three areas. This can involve bringing GDP per capita up above $1,388 and reaching designated above-LDC scores on one of the two indexes, or meeting the indexes without the GDP growth.  (Though this latter option seems quite rare.) Having done it once, the country gets a second review three years later.  If it passes this second exam, it can “graduate” (in the U.N.’s phrasing) and leave the list. A quick table of the list’s extent since its first edition 53 years ago, and the beginnings of dramatic change around 2020:

2028:	33-40?
2027:	42
2024:	45
2020:	47
2010:	48
2000:	51
1971:	52**

* Note that the numbers in this list are anachronistic, as over half of the current LDCs were colonies or parts of other countries in 1971. The original list had 24 countries at the time, and tended to grow larger for about 40 years as countries became independent.  For example, the U.N. added Eritrea, Timor-Leste, and South Sudan after their official independence dates in 1993, 2002, and 2011. 

Trade routes out:

Cambodia: Congress reopened normal trade with Cambodia in 1992. A generation later, Cambodia is the U.S.’ seventh-largest source of clothing, at $11 billion for about 1.25 billion articles of clothing weighing 240,000 tons. Better Work Cambodia, the International Labour Organization’s flagship garment-industry monitoring and training program, is the brainchild of former Commerce Minister Cham Prasidh and negotiations with the Clinton administration in the garment industry’s early 1990s days. Launched in 2001 and replicated in seven other countries, it provides safety inspection and training, rights on the job, and skill development for women workers in 703 garment factories around Phnom Penh.

Timor-Leste: Independent since 1999, Timor-Leste sells Americans about 1700 tons of top-tier coffee each year. The U.N’s look at Timor-Leste’s potential graduation later this decade worries about the possible loss of special LDC trade benefits (in this case the EU’s “Everything But Arms” duty-free program), as the EU oddly applies a 7.5% tariff to roasted coffee (though zero for non-roasted). The U.S. is zero-tariff all the way down for coffee and tea.

Botswana: The Diamond Technology Park just outside Gaborone looks to help Botswanans add value to the stones before they leave Africa. Space for cutters, jewelry-makers, gem and mineral research, and more.

Haiti: The U.S.’ HOPE & HELP programs provide duty-free treatment for about $1 billion in Haitian-made clothing each year, supporting most of Haiti’s industrial jobs and about 7% of GDP.  The program is set to expire in just over a year. PPI’s take last summer.

Senegal: Not much written on Senegal’s wig-export boom so far, but QZ has an in-depth and prescient look at Dakar’s very large domestic hair-sculpting, wig-making, and salon industry just before the international takeoff.

And some data and intellectual background on the “bottom billion”:

Paul Collier is worried (2008).

Charles Kenny thinks it’s going better than many realize (2012).

… and a 2023 data update from the World Bank, estimating the number of people in absolute poverty through 2022 and assessing the impact of the COVID-19 pandemic as three lost years for poverty reduction.

ABOUT ED

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

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

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

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

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FACT: 55 countries have ratified the WTO’s 2022 fishery subsidies agreement. They need 55 more by late February.

THE NUMBERS: ‘Capture fisheries’ annual tonnage by country, 2021 –

Country	Total	Ratified WTO Fisheries Agreement?
World:	92.2 million tons	—
China	13.1 million tons	Yes
Indonesia	7.1 million tons	Not yet
Peru	6.6 million tons	Yes
Russia	5.2 million tons	Not yet
India	5.0 million tons	Not yet
U.S.	4.3 million tons	Yes
European Union*	3.7 million tons	Yes
Vietnam	3.5 million tons	Not yet
Japan	3.1 million tons	Yes
Norway	2.6 million tons	Not yet
All other	~34.5 million tons	26 yes, 104 not yet
Non-WTO members**	~1.5 million tons	n/a

* Represents itself and the 27 member states.
** Among countries and territories outside the WTO, top capture fisheries include Iran at 0.8 million tons, Micronesia 0.2 million tons, North Korea 0.2 million tons (World Bank’s estimate), Marshall Islands 0.10 million, Nauru 0.1 million tons, and a group of smaller fisheries countries – Ethiopia, South Sudan, Somalia, Tuvalu, Kiribati, Bahamas – collectively at about 0.3 million tons.

WHAT THEY MEAN:

It’s been sadly difficult to get countries to agree on good things in this century, but as the 164 members of the World Trade Organization prepare for their 13th Ministerial Conference at the end of February, they have a chance.  It has to do with fish:

Fish, Boats, and Money: The world’s fishing fleet — 45,000 big factory-style vessels and 4.1 million small boats — hauls in 80 million tons of “capture” on the high seas and off the world’s seacoasts, and 10 million tons from lakes and rivers. To put this figure in context, all humans put together weigh about 500 million tons (~60 kilos per person x 8 billion people). Various gloomy studies report the consequences: About 100 million sharks are taken each year, declines of up to 90% in counts of large fish, and more than a third of the world’s fishing grounds are unsustainably depleted.

What to Do? In a world of 8 billion humans and their need for protein, shrinking forests and land habitat, and limited new farmland options, no single solution for pressure on marine life seems likely. Aquaculture, limits on particular species, bycatch reduction, bans on especially destructive fishing technologies, etc. all have their part. For the last 25 years, though, the WTO members have been circling around a partial solution, which at least in principle is among the simplest and easiest of all: stop paying people to fish more than they should.

Subsidies: One reason fish counts fall is that governments are paying fishing fleets to get bigger and catch more of them. A widely used count of world subsidies to fishing fleets, done in 2019 by a group of academics at the University of British Columbia (Sumaila et al), yields a figure of $35.4 billion. This is about a tenth of the world’s $400 billion annual fishing industry, and a quarter of the $150 billion in annual fish trade. About $28 billion goes to large boats — pretty easily identified as the least needy recipients; by purpose, $22 billion goes to make fishing fleets larger, and another $7 billion to give them cheap fuel.  By region and top eight countries (counting the EU as a single economy), their rundown of subsidies looks like this:

World Total	$35.4 billion
Asia	$19.5 billion
China	$7.5 billion
Korea	$3.2 billion
Japan	$2.9 billion
Thailand	$1.1 billion
Indonesia	$0.9 billion
Europe	$6.4 billion
EU members	$3.8 billion
Russia	$1.5 billion
U.S./Canada/Mexico	$4.4 billion
U.S.	$3.4 billion
South/Central America	$2.0 billion
Africa	$2.1 billion
Pacific countries	$0.8 billion

 

The WTO: The WTO is well-placed to do something about this, given its mission and since its members includes 49 of the world’s top 50 capture fishery countries, and account for about 97% of world fishing. (The one big fishing country not in the WTO is Iran, whose fisheries account for 0.8 million tons annually or 1% of the total.)  Having debated fishery subsidy controls since 1998, they took a big first step at the 12th Ministerial Conference in June 2022, which “prohibits support for illegal, unreported and unregulated (IUU) fishing, bans support for fishing overfished stocks, and ends subsidies for fishing on the unregulated high seas,” and now have two opportunities this February:

(a) Bring the 2022 agreement into force. So far, this remains an agreement on paper rather than something that is actually starting to bring down subsidies.  Its entry into force requires ratification by two-thirds of the WTO’s 164 members, or 110 in total.  As of mid-January, 55 have done so. Another 109 — including five of the world’s ten largest fishery countries – have not. Five of the top ten capture fishery countries including the U.S., China, EU, Japan, and Peru have ratified; the other five so far have not. India, Vietnam, Russia, Norway, and Indonesia — and a bit further down the scale, the Philippines, Bangladesh, Thailand, and others — you have 40 days left before the Ministerial.

(b) Finish the work left incomplete last year: The 2022 agreement did not include limits on subsidies contributing to “overcapacity” in national shipping fleets, or to overfishing.  The WTO members (or at least the right-minded ones) hope to complete this by the Ministerial conference in February, working from a text that requires members (with exceptions for least-developed countries and countries such as small islands whose fishing tonnage is very low) to abandon eight kinds of subsidies contributing to overcapacity — ship construction; machinery and technology purchases; fuel, ice, and bait; subsidies for required benefits; salaries and income support for crew; fish prices; at-sea support; and vessel loss or damage — and regular notifications to the WTO of all subsidies with justification for sustainability.

As a final exclamation point, the 2022 agreement — if actually brought into force — lasts only four years and self-terminates if the WTO members can’t agree on the overcapacity limit. If successful, the fisheries subsidy agreements will be something people remember quite a long time into the future, as an example of governments willing to make modest political sacrifices for the general good. If not, well, that would also be something to remember about this generation of political leaders.

FURTHER READING

The WTO:

The WTO’s 2022 agreement on fishery subsidies reduction.

… Director-General Ngozi Okonjo-Iweala takes recent ratifications from the U.K. and Gambia.

… and Fisheries Committee Chairman Gunnarsson updates on progress toward a broader agreement.

Subsidy counts:

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

… while NGO Oceana reports that $5.4 billion worth of subsidies, or a fifth of the world total, goes to support fleets operating in other countries’ water, and $800 million for high-seas operations.

… and UNCTAD looks at subsidies and sustainability.

Fish & boats:

The World Bank has ‘capture’ fishery totals by country, in tons.

The UN Food and Agricultural Organization’s State of World Fisheries and Aquaculture 2022 reports on fish take, fleets and employment, sustainability, and more.  The 80 million tons of ocean capture looks like this:

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

It concludes that “the fraction of fishery stocks within biologically sustainable levels decreased to 64.6% in 2019” from nearly 90% in 1974, and that 35.4% of world fisheries are overfished — take the dead Atlantic cod grounds off New England and Canada as an example — while 57.3% are at “maximum yield” and only 7.2% are “underfished.”

UNCTAD’s World Maritime Review 2023 tracks the world’s merchant fleet.

ABOUT ED

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

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

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

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

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FACT: PPI’s Trade Fact of the Week: A quarter of Ohio’s manufacturing workers work for international businesses.

THE NUMBERS:

U.S. private-sector employment, 2021:	124.38 million
… at foreign-owned businesses:	7.94 million
… U.K.-owned:	1.22 million
… German-owned:	0.92 million
… Canadian-owned:	0.87 million
… Japanese-owned:	0.96 million
… all other countries:	3.97 million

 

WHAT THEY MEAN:

Anxiety-filled comment from Sen. J.D. Vance, an Ohio Republican, last month in response to U.S. Steel’s acceptance of a $14 billion purchase offer from Tokyo-based Nippon Steel:

““Today, a critical piece of America’s defense industrial base was auctioned off to foreigners for cash …”

In fact of course the company was not at “auction” as a sort of estate sale or distressed asset, Japan is not a random group of unknown foreigners but a core U.S. ally, and Nippon Steel is a long-term participant in U.S. metals production. A more temperate comment from Lael Brainard, running the White House’s National Economic Council, says these sorts of transactions can have implications beyond the capital markets, and that the U.S. government has a well-established process for examining them:

“This looks like the type of transaction that the interagency committee on foreign investment Congress empowered and the Biden Administration strengthened is set up to carefully investigate. This Administration will be ready to look carefully at the findings of any such investigation and to act if appropriate.”

Here’s some background:

Steel Output: The world’s steel mills pour about 1.9 billion glowing tons of metal a year.  The World Steel Association’s “World Steel in Figures 2023” summary places China’s 1.018 billion tons at more than half of 2022’s 1.885 billion-ton total, with India a distant second at 125 million tons, Japan third at 89 million tons, and the U.S. fourth at 80.5 million tons.  Six of the world’s 10 largest producers are Chinese; the remaining four include two Japanese firms, one Korean company, and the equivocal Arcelor-Mittal, which is based in Luxembourg but Indian by origin and management. Nippon Steel’s 44.4 million tons of output placed it fourth in the world.  U.S. Steel’s 14.5 million tons ranked 27th worldwide and third in the U.S. after Nucor’s 20.6 million tons and Cleveland-Cliffs’ 16.8 million.

Foreign Investment in the United States: The Commerce Department’s Bureau of Economic Analysis, meanwhile, tracks U.S. business investment abroad and foreign investment here. Its most recent annual tally, out last August and covering the year 2021, reports that international businesses employed 7.94 million American workers in 2021 – that is, a modest 6.2% share of that year’s 124.3 million private-sector workers. The international role in U.S. manufacturing is a lot larger, though: 2.81 million American manufacturing workers — about 23% of 2021’s 12.35 million total — go to work daily for international businesses. This includes 153,000 of Ohio’s 675,000 manufacturing workers, mirroring the national 23% employment share and the fourth-largest total of any state.  In Ohio as nationwide, Japanese firms are the top employer and Germans second. By country of origin, the largest groups are:

All manufacturing workers:	12.35 million
U.S.-based firms:	9.54 million
International firms total:	2.81 million
Japanese firms:	0.54 million
German firms:	0.32 million
British firms:	0.24 million
French firms:	0.21 million
Swiss firms:	0.18 million
Canadian firms:	0.15 million

 

By industry, the single largest group of workers at international manufacturers — 512,000 — are in automaking, followed by 426,000 in chemicals and 334,000 in food production.  In “primary metals” (which in BEA’s reports are combined as a group – steel, copper, aluminum, lead, etc.) BEA finds international firms producing $7.1 billion of 2021’s $74 billion in value-added U.S. output and employing 62,000 of the 357,000 total American metal workers. As an example, the Calvert mill in Alabama, with a 5.3 million ton annual capacity, has operated as a joint venture by Nippon Steel and Arcelor-Mittal since 2014, after its 2010 launch by German industrial conglomerate Thyssen-Krupp.

BEA’s “primary metals” employment figure is actually a bit low in historical terms — noticeably down from the 95,000 workers of 2000 and the 92,000 of 2019.  The post-2019 decline appears mainly to reflect Arcelor-Mittal’s 2020 sale of most of its U.S. steel assets (but not the Alabama site) to Cleveland-Cliffs. This event wasn’t especially unusual for FDI transactions, in which ownership occasionally shifts back and forth among the U.S., Canada, Europe, and Japan.  In autos, for example, Fiat’s current ownership of the venerable Chrysler Motors factories — now operating under the name “Stellantis”, with French producer Peugeot also a partner – followed a period of sole U.S. ownership from 2007-2014; and this in turn succeeded the company’s 1998-2007 incarnation as DaimlerChrysler.

U.S. Policy & Institutions: With all this in the background, (a) international participation in U.S. heavy industry in general, or metals specifically, isn’t new, and (b) some purchases, of course, are sensitive by the nature of the industry or the prospective buyer.  To examine and answer the questions they raise — for the defense industry, critical infrastructure, intellectual property, and research, or other reasons — and take such action as might be necessary (if any is needed), the U.S. government uses the long-functioning interagency group Dr. Brainard’s comment cites.

Known as the Committee on Foreign Investment in the United States, “CFIUS”, this is a permanent executive-branch expert group composed of nine agencies — the Treasury Department as the chair, along with the Departments of State, Justice, Commerce, Homeland Security, Energy, and Defense, plus the U.S. Trade Representative and the White House’s Office of Science and Technology Policy. CFIUS reviewed 154 FDI deals in 2022 (some easily decided to be non-controversial, others requiring more investigation), a total slightly below the 164 reviews of 2021 and a bit above the 120 of 2020.  These involved facilities and enterprises ranging from auto parts, metalworking, pharmaceuticals, and boat-building through the information sector such as software publishing and data processing to telecommunications, financial services, and medical labs.

In sum: International businesses are a large and lively part of the U.S. economy, particularly in manufacturing. They carry on lots of research, make lots of cars and a significant amount of metal, and employ about a quarter of the American factory workforce. It’s perfectly reasonable nonetheless to examine new purchase proposals.  And given U.S. Steel’s unusually evocative history — sepia-tinged images of Carnegie, Morgan, and Schwab; mid-20th-century black-and-white reels tagged “Rooting for the Yankees is like …” — emotional reactions aren’t surprising. But neither the basic issues, nor Nippon Steel as a particular company given its significant participation in U.S. metals production over time, are novelties. As Brainard suggests, the government has a perfectly functional way to examine any questions the transaction might raise, and a hyperventilating response probably isn’t very useful.

FURTHER READING

Perspectives on metals:

Sen. J.D. Vance worries.

National Economic Council Chair Brainard suggests a review.

The World Steel Association’s most recent stat summary, with top producing and consuming countries, companies, and trends.

And the Alabama Department of Commerce on international steel investment at Calvert.

Data:

BEA’s summary of foreign multinationals’ U.S. affiliates.

… and data back to 2007.

Looking the other way, U.S.-based multinationals produced about $5.1 trillion worth of goods and services in the U.S. in 2021, and $1.5 trillion abroad, while employing 28.9 million workers in the U.S. and 14.0 million overseas.

And UNCTAD’s World Investment Report has global context.

And CFIUS explained:

U.S. Treasury Department’s background and foreign investment policy guidance.

… and CFIUS’ annual reports with stats and investigation summaries back to 2008.

ABOUT ED

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

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

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

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

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