"WTO Talks Push Past Deadline"
John Burgess and Steven Pearlstein
Washington Post, December 4, 1999, page A1
"WTO Negotiators' Reach Far Exceeded Grasp of Complexities"
Steven Pearlstein
Washington Post, December 5, 1999, page A47
"The Shipwreck in Seattle"
David E. Sanger
New York Times, December 5, 1999, Section 1 page 14
Each of these articles on the ending of the WTO talks in Seattle include assertions that the WTO's purpose is to remove restrictions on international trade. One of the main goals of the United States in previous rounds of WTO (or GATT) negotiations has been to increase international protection for patents and copyrights. These measures are restrictions on trade, since they provide a monopoly to a single seller of pharmaceuticals, books, or recorded music and videos. In the absence of patent and copyright protection, competition would lower the cost of these products enormously, in some cases by more than 90 percent. Since the extension of protection for patents and copyrights has been a major part of the WTO's work, it is inaccurate to assert that the organization exists only to remove barriers to trade.
The Times article is somewhat misleading in asserting that the protestors in Seattle actually wanted a stronger WTO, because they wanted it to be able to impose labor and environmental standards. The protestors in Seattle were a diverse group with a wide variety of demands. But the ones who supported labor and environmental standards, in most cases, primarily wanted the United States to be able to apply labor and environmental standards to its own imports. At present, if the United States applied such standards to its imports, it would be violating WTO rules. A large portion of the protestors would have been satisfied if the United States (and other nations) could apply labor and environmental standards to imports and the WTO stayed out of the issue altogether.
"U.S. Isolated on Key Issues at Trade Talks in Seattle"
Joseph Kahn and David E. Sanger
New York Times, December 4, 1999, page A6
This article discusses the deadlock in negotiations at the WTO. At one point the article notes the efforts of Internet companies to obtain rules prohibiting taxes on Internet commerce. It characterizes such a prohibition as a measure "the companies consider crucial to maintain the expansion of the Internet globally."
At present, most sales of goods over the Internet in the United States are not subject to the sales tax which would apply to goods sold in traditional retailers. By allowing Internet companies to escape their share of the overall tax burden, the government is effectively subsidizing them. Naturally this sort of subsidy contributes to the growth of Internet commerce. If the government decided to favor any group of stores by allowing them to evade taxes in a similar manner, it would also improve their sales.
Insofar as the growth in Internet commerce is attributable only to this tax subsidy, there is no economic reason to see it continue. Consumers would gain far more if the tax break were distributed evenly among all retailers. If the Internet offers real benefits to consumers, then Internet sales will continue to grow even without special tax treatment. If Internet companies believe that their sales can only grow if they maintain this special treatment, it means that they don't think they can compete with traditional retailers on a level playing field.
"WTO Talks Said to Send 'Grim Message'"
Steven Pearlstein
Washington Post, December 8, 1999, page E1
This article reports on attitudes towards the failure of the WTO talks in Seattle. The article asserts that the collapse of the talks could "cause the already burgeoning U.S. trade deficit to climb even higher." It characterizes this view as "the consensus of trade experts, economists and business leaders polled since the meeting of the World Trade Organization collapsed Friday night."
The article does not present the views of any economists that were associated with opponents of the WTO. Nor does it present any clear mechanism through which the trade deficit is likely to rise further. While some nations could impose greater barriers to U.S. exports, the United States currently has such a large trade deficit with most nations that any retaliatory measures it took would almost certainly have a larger impact on reducing imports; the net effect would therefore be to reduce the trade deficit. In any case, the prospect of U.S. retaliation should be sufficient to discourage nations from hastily imposing barriers to U.S. goods. (Most economists argue that the size of the trade deficit or surplus is not the correct way to measure the gains from trade in any case.)
It is also worth noting that several of the economists and experts quoted in the article have a record of being wrong about the impact of trade agreements on the U.S. trade balance. Fred Bergsten, who is the director of the Institute for International Economics, and Jeffrey Garten and Laura Tyson, both former high-ranking Clinton administration officials, were all prominent NAFTA proponents who claimed that the pact would improve the U.S. trade balance with Mexico. Since NAFTA passed, the U.S. trade surplus with Mexico has been reversed, resulting in a 1998 trade deficit with Mexico of more than $16 billion.
More about Europe.
"Jobless Rate Steady at 4.1 Percent"
John M. Berry
Washington Post, December 4, 1999, page E1
"234,000 New Jobs in November Kept Economy Humming"
Louis Uchitelle
New York Times, December 4, 1999, page A1
These articles discuss the Labor Department's release of employment data for the month of November. The Post article discusses at some length a new report from the President's Council of Economic Advisors, which finds that more than 80 percent of the jobs that have been created in the Clinton years are in categories that pay above the median wage.
This figure is completely meaningless. A worker experiences no benefit whatsoever because his or her job is placed by economists in a high-paying job category. Workers only benefit if their job is actually high-paying. There is considerable research showing the movement in wages over the course of the Clinton years for workers at various points along the income distribution. This research shows that the real wages of all but the highest-paid workers had fallen during the first years of the Clinton administration, but have been rising since 1996. The wage of workers at the middle of the income distribution have just recently passed their 1992 level. (See the Economic Policy Institute's Quarterly Wage and Employment Series, http://www.epinet.org .)
The Times article includes the assertion that "labor shortages must eventually become inflationary," because the unemployment rate stayed at 4.1 percent. Prior to 1994, virtually all economists had argued that inflation would accelerate if the unemployment rate fell below 6 percent. It has been below that level for more than five years and inflation has actually declined somewhat during this period. Having been shown wrong, most economists subsequently argued that inflation would accelerate if unemployment fell below 5 percent. It has been below this level for more than two years, and inflation has continued to remain stable. Given this recent history, there is no reason for believing that the inflation rate will necessarily accelerate if unemployment remains at its current level.
More about Labor.
"Panel Advises Adding to Life Expectancies"
Robert Pear
New York Times, December 7, 1999, page A8
"Longevity's Growth May Have Price"
John M. Berry
Washington Post, December 7, 1999, page A8
These articles discuss a report of a technical panel that analyzed and evaluated the economic and demographic assumptions used by the Social Security trustees to evaluate the health of the program. Both say that the panel recommended raising the projected rate of wage and productivity growth.
This is slightly misleading. The panel did recommend assuming a slightly faster rate of wage and productivity growth than appeared in the 1999 Social Security trustees report. However, the rate of annual real wage and productivity growth they suggested is still 0.3 percentage points lower (when adjusted for measurement changes) than the rate suggested by the last expert panel, which issued its report in 1995. In the four years since that report was issued, real wage and productivity growth far exceeded the rates projected in the 1995 report.
More about Social Security.
"Economic Debate Emerging in Race"
Richard W. Stevenson
New York Times, December 5, 1999, Section 1 page 39
This article, describing the positions that major presidential candidates have taken on various economic issues, comments that Vice President Gore has "made clear that he would emphasize the same themes as President Clinton in economic policy: allocating the non-Social Security surplus to a variety of programs, from the military to Medicare and education."
It is worth noting that the baseline from which this surplus is calculated assumes large cuts in most areas of government spending. In this baseline, discretionary spending (which includes the military and most education spending) would be cut by 25 percent, measured as a share of GDP, by 2009. While Gore may be proposing increases in spending against this baseline, it is not clear that his budgets would led to increases in spending compared with recent levels.
"Health Care Promises"
Howard Kurtz
Washington Post, December 9, 1999, page A30
This box analyzes a 30-second television commercial by Democratic presidential candidate Bill Bradley, which presents the basic points of his health care plan. The analysis notes that the commercial does not give the cost of the plan, which it asserts is "$650 billion, by his [Bradley's] estimate."
The analysis does not point out that this is the projected cost over a 10-year period, not a single year. GDP is projected to be approximately $120 trillion over this period, and total federal revenue is projected to be approximately $25 trillion. This means that the Bradley plan is projected to cost approximately 0.5 percent of GDP or 2.6 percent of federal revenue. These figures would probably be more meaningful to most readers.
[Note: Dean Baker is circulating an economists' letter in support of the Bradley health care plan.]
"African AIDS Victims Losers of a Drug War"
Karl Vick
Washington Post, December 4, 1999, page A1
This informative article discusses the plight of people with AIDS in sub-Saharan Africa. The article notes that many victims are unable to afford medicine because the nations of the region are obligated to pay the patent-protected price for these drugs as a result of recent trade agreements. At one point the article refers to the patent-protected price as "the market price." The market price is the price that would be prevail in the absence of patent protection, which is effectively a state-imposed monopoly.
"More and More Malaysians Question Economic Policies"
Wayne Arnold
New York Times, December 4, 1999, page B2
This article reports on alleged unhappiness among foreign investors and Malaysians over the economic policies of Malaysia's Prime Minister Mahathir Mohamad, who has refused to follow the policies recommended for Malaysia by the IMF. As evidence of this unhappiness, the article reports the comments of several individuals connected with financial institutions. It also notes a decline in support for Mohamad among middle-class Malaysians in recent elections. It is at least as plausible that this drop in support was attributable to opposition to repressive political policies as to Mohamad's economic policies.
At one point the article comments that Malaysia's recent economic upturn "has less to do with Mr. Mahathir's policies than with a cyclical rebound generated by a demand for Asian exports from the United States and Europe." While this assertion is probably true, the fact that there can be a strong rebound lends credence to the view that there are no major structural barriers to Malaysia's continued growth.
The subhead of this article is: "A Longing for Good Medicine, Even if Bitter." Malaysia's per capita GDP has grown at more than a 4.0 percent annual rate since 1960, far faster than any country which has followed the IMF model. While few doubt that the IMF's policy recommendations would be bitter, the economic record of Malaysia and other countries in the region makes it questionable whether they would be good medicine.
More about Asia.
"Clinton Remarks on Child Labor Irks Brazil"
Roger Cohen
New York Times, December 7, 1999, page A12
This article reports on responses in Brazil to Clinton's comments at the WTO about the use of child labor in the show industry in Brazil. At one point, the article asserts that Brazil's opening to the world has secured "huge benefits...including a booming Internet business."
Brazil's economic growth in the period since it has pursued this path of increased openness has actually been slower than during earlier decades when it was pursuing a policy of import substitution. Over the last decade its per capita GDP has grown approximately 2.0 percent annually; by comparison, it grew at a 4.7 percent annual rate from 1960 to 1980. It also is not clear that Brazil had to pursue its openness policy to benefit from the Internet. China, which still has a relatively closed economy, also has experienced huge growth in Internet usage.
"Argentina's Lost World: Rush Into the New Global Economy Leaves the Working Class Behind"
Anthony Faiola
Washington Post, December 8, 1999, page A1
This very informative article examines how working-class Argentineans have fared as the country has removed barriers to imports, and privatized and deregulated large sectors of its economy. At one point the article asserts that Argentina's GDP has "more than quadrupled in less than a decade to $8,970." According to data from the IMF, Argentina's per capita GDP rose by 20.4 percent from 1987 to 1997. It has fallen slightly since 1997. The U.N.'s Human Development Report estimated Argentina's per capita GDP in 1997 at $4,021.
More about Latin America.
"Europe Undeterred by Sliding Euro"
Anne Swardson
Washington Post, December 4, 1999, page E1
This article reports on the benefits that Europe's economy is experiencing as a result of the fall in the value of the euro against the dollar. Specifically, it notes the impact that this decline has had in improving Europe's trade position.
It is worth noting that the relatively beneficent view of the decline in the euro presented here contrasts sharply with earlier reporting on the topic. (See, e.g., "Slide in Currency Is Chilling Europe," by Edmund L. Andrews, New York Times, 7/10/99, page A; and "Euro's Value Slips to Near Parity With U.S. Dollar," by Anne Swardson, Washington Post, 7/13/99, page E1; see also ERR, 7/19/99.) Both articles suggested that the decline in the euro was an indication of the weakness of the European economies, and the latter article characterized the euro's decline as "humiliating."
"German Leader Gets Boost From Party"
William Drozdiak
Washington Post, December 8, 1999, page A25
Reporting on a meeting of the German Social Democratic Party, this article comments on Chancellor Schroder's budget cutting plans as an effort to streamline Germany's "bloated welfare state." The article does not indicate how it determined that the welfare state is bloated.
More about Europe.
"Health Industry Sees Wish List Made Into Law"
Robert Pear
New York Times, December 6, 1999, page A1
This article notes many of the clauses that were put into a budget bill passed at the end of the Congressional session, which provide windfalls for various parts of the healthcare industry. Since Congress was in a rush to pass the legislation before adjoining, it was relatively easy for lobbyists to get pet items included without being subjected to public scrutiny.
"INS Raids Follow Union Organizing"
Nurith C. Aizenman
Washington Post, December 6, 1999, page A3
This article reports on the use of the Immigration and Naturalization Service (INS) by employers of low-wage workers as a weapon against union organizing. According to the article, it has become increasingly common for employers to deliberately hire undocumented workers, and then call in the INS if the workers begin to organize a union. These workers have no protection under the National Labor Relations Act, and often face deportation.
"New Left Rises in Gap Between Rich and Poor"
Anthony Faiola
Washington Post, December 9, 1999, page A1
This article, the second in a two-part series, examines how the growing income gap in Latin America, along with the spread of democracy, has led to a rebirth of left-wing political parties across Latin America.
"Monsanto Campaign Tries to Gain Support for Gene-Altered Food"
Melody Peterson
New York Times, December 8, 1999, page C1
This article reports on the efforts of the Monsanto Company to build public support for gene-altered food. According to the article, this effort is increasingly focused on trying to create the appearance of grassroots support, which in at least one case led to paying people to take part in a protest.
Dean Baker is an economist and the co-director of the Center for Economics and Policy Research (CEPR). His latest book (co-authored with Mark Weisbrot) is Social Security: The Phony Crisis (University of Chicago Press). ERR is a joint project of FAIR and CEPR.
ERR is edited by Jim Naureckas.
Recent articles can be found on the websites of the New York Times and Washington Post.
You can sign up to receive ERR via email every week at www.preamble.org/columns/subbaker.htm. ERR is archived at www.fair.org/err/.
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