Workers of the World Unite

Tim Harford has a great piece in the FT Magazine today explaining -- at a personal level -- why trade deficits are not necessarily a bad thing. Specifically, he shows how comparative advantage works for his wife and her babysitter. He uses this to point up the absurdity of the way US-China trade relations are portrayed.

Elsewhere in the FT is a piece about the Korean rice farmers, who want South Korea to be redefined as a 'developing' country. Seems reasonable to me because at least South Korea is developing. Perhaps we should also redefine the US, Australia, and the UK as 'developing' countries too. We can then redefine Zimbabwe and France as 'undeveloping'. Sadly, the Korean rice farmers reason for wanting the redefinition is so that it could then put in place restrictions on imports of rice without breaching WTO rules. Seems to me that this would take South Korea in the direction of being undeveloping, since it would keep the cost of rice high for consumers and slow down the inevitable shift in employment away from low value-added jobs such as farming rice to high value-added jobs such as making computer chips, LCD screens, etc.

Finally, a new study by the confusingly-named International Confederation of Free Trade unions, also mentioned in today's FT  claims that WTO entry has stalled the eradication of poverty in China. Of course it has done no such thing. As the FT report correctly points out, workers have continued to move to the cities. What it omits however is that the jobs in the cities are better paid than jobs in the countryside. And factories don't suffer from climate-related crop failure, either.

Trades union leaders from around the world oppose free trade because it makes economies more dynamic and diverse -- which is good news for workers but bad news for a business that relies on workers doing the same (boring) job their whole life. Workers of the world should unite against the ICFTU.

The same FT report also reports on an Oxfam study that apparently shows that imports of cheap US cotton is harming Chinese cotton producers. That may be so and it is deplorable that US tax-payers should be sponsoring this unfair cotton invasion. I'm also sure cheap cotton causes many sleepless nights among the textile workers in Shenzen. But at the end of the day, if US tax-payers choose to subsidize textile manufacturers in China, it is surely up to the US taxpayers to complain. Meanwhile, let's hope that the cotton farmers are able to adapt to producing other crops -- or to find themselves higher-paid forms of employment, such as textile workers.

Comments

[Dov]

Lets not forget who really gets harmed by US cotton subsidies: West Africa. The effect is doubled, first because African cotton producers can't compete and sell on world markets, secondly their own domestic markets are often flooded by cheaper US cotton imports.