mfioretti: free trade*

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  1. “The more data you have, the better the data products you can develop,” Professor Steven Weber said when discussing the link between data and development. “The better the data products you develop and sell, the more data you receive as those products get used more frequently and by larger populations.”

    But if all the world’s data flows back to a few tech powerhouses, without restrictions or taxes, this will further reinforce their monopolies, widen the privacy gap, and leave developing countries as passive consumers or data points, rather than participants in the digital economy.

    Those calling for liberalization use the rhetoric of creating opportunities for the poor — connecting the next billion — which sounds great, but only if we disconnect it from reality. Today, 60% world lacks even access to electricity. In the past, Spanish colonizers arrived in the Americas offering mirrors to the indigenous people in exchange for their gold. Is connectivity the “mirror” powerful actors are offering to the global poor today?

    Trade agreements eliminate the diversity of domestic policies and priorities, and impose costly restrictions on countries that want to address local inequalities and boost local industry. In the case of the digital economy, it will consolidate the position of few, to the detriment of the rest.
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  2. The EU Council guidelines on transition and trade, published the same day, make clear that there is a binary choice and the UK cannot have Norway-style benefits with Canada-style freedoms. Britain needs to choose.

    And it is time for the Government to accept that the Canada deal does not fit our country. As Frances O’Grady, General Secretary of the Trade Union Congress, pointed out, it “does nowhere near enough to protect workers’ rights and public services”.

    A Canada-style deal would not protect jobs, living standards, environmental rights or protect the Good Friday Agreement.

    Only staying in the Customs Union and Single Market will secure all of the rights we have come to rely on. Labour was right to call for continued membership during the transition phase and put continued membership back on the negotiating table.

    MPs must now go further: vote to ensure the Government cannot force us out of the Single Market without Parliamentary approval, as well as backing the vote to make sure there is a meaningful vote in Parliament at the end of the Brexit process. The future of our country depends on it.
    Tags: , , by M. Fioretti (2017-12-13)
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  3. The reason the Twitter-Eggs have got really upset isn’t really about Gravity or gravity models of trade. It is because they have implications for BREXIT.

    A lot of the BREXIT debate ignores the importance of distance and talks nonsense about replacing the EU with China etc. Distance matters, and it matters because it captures the existence of non-tariff barriers (things like borders and differences in regulations) which have a very negative impact on trade. Trade matters because it has a big impact on the economy. Non-tariff barriers matter (more than tariffs which are low now), but managing non-tariff barriers requires political compromise and sharing sovereignty.

    To put this in perspective, to understand how trade matters for the UK — roughly a quarter of our GDP is traded, with just under half going to the EU, and that would decline by roughly 40% if we went from being in the Single Market to just having a Free Trade Agreement. This is why the pound fell roughly 6% on the BREXIT vote.

    Then there are the more important longer-term dynamic effects. Trade isn’t just ice-cream, it is inter-industry trade where rather than selling cars for wine, the car industry trades components to the car industry in another country. This helps move technology around, which raises productivity. Damage to this, even if it is very small rapidly becomes large because it a compound effect (it is like the impact of a management charge on your pension, a 1% difference a year can halve your final pension).

    Distance matters — double the distance and halve the trade. Reduce trade reduce productivity growth. Even small reductions in productivity growth, have very big long term impacts.
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  4. by far the most important chart in explaining both the benefits and impact of globalization, free trade, and a changing economy to different constituencies. The greatest benefactors of the extension of the Bretton Woods System (free trade and globalization) following the end of the Cold War have been those who own capital and the poorest people in the world. Unfortunately, as money has moved from the Developed Economies to the Developing World in search of return and comparative advantage, the middle class in the United States and Europe have failed to benefit.
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  5. ccording to President Obama, “ W » e have to make sure the United States — and not countries like China — is the one writing this century’s rules for the world’s economy.”1 Along the same lines, economist Tyler Cowen says: “ E » ither this deal happens on American terms, or an alternative deal arises on Chinese terms without our participation.”2

    This rhetoric makes it appear as though we are in the midst of a “clash of civilizations” on trade policy. Chinese mercantilism and oppression are up against American free markets and liberty.

    The reality of how trade agreements function, and how they relate to one another, is much different. It is true that China is pursuing its own trade initiatives in the region. But China’s negotiations do not threaten American goals. A great thing about free trade is that it is something everyone can enjoy. If Chinese-led free trade helps Asian economies grow, Americans benefit, too. That becomes clear when you understand what China’s trade agreements actually do.
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  6. how economy works and doesn't work in words and pictures
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  7. Distributism, on the other hand, asserts that justice is not only a moral problem, but a practical, economic problem, and that without economic justice, you cannot reach equilibrium. When economics abandons justice, the government is constantly forced to intervene to insure stability, even though the interventions may only work in the short run.

    We have abandoned justice on a global scale, which has led to chronically unbalanced trade. When trade is chronically unbalanced, it is not really “a trade” at all. Rather, it is a system by which foreign producers finance our consumption of their goods, a system that impoverishes both parties.

    Does distributism have any basis in Catholic social teaching or the papal encyclicals like the recent Caritas in Veritate?

    Subsidiarity and solidarity are, of course, straight out of the social encyclicals, and distributism owes much to its Catholic founders, G. K. Chesterton and Hilaire Belloc.

    That being said, a distributist social order does not depend on the prior establishment of a Catholic social order. However, we believe that such a social order will thrive under a distributist system.

    the signature of a monopolistic market is constantly rising prices even in the face of declining services, and that is the reality of our health care market.

    Now, distributism would not be of much use unless it could solve practical problems like this, and it can.

    In brief, in the book I propose an expansion of the licensing authorities to increase the supply of medical personnel; it proposes a way of expanding research and development without resorting to monopolistic patents; and proposes the formation of cooperatives of doctors and other personnel which can serve as both “insurance” companies and health care delivery firms, thereby giving the firm the ability to ensure health rather than just treat diseases.
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  8. Like it or not, even a capitalist economy is a system in which your actions affect other people. Your freedom to swing your fist ends, famously, at the tip of my nose, and what you buy and don't buy affects other people.
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  9. You can read about the free trade controversy for months and never hear about it. But in the minds of real economists, it's there all the time, and it's big. I'm talking about the so-called theory of comparative advantage.
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  10. China and Russia have decided to renounce the US dollar and resort to using their own currencies for bilateral trade, Premier Wen Jiabao and his Russian counterpart Vladimir Putin announced late on Tuesday. Summit seeks a future for tigers
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