For more information or to schedule an interview, members of the press should contact Laura Osio at losio@cato.org or (202) 789-5263.
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In a period of less than five years, the U.S. steel industry has undergone an extraordinary and unprecedented transformation. What was, as recently as 2002, a fragmented, perennially money-losing, capital-starved industry that relied on government for subsidized loans, protection from creditors, and insulation from foreign competition has become one of America's strongest, most profitable, and most promising manufacturing industries.
In a new Cato Free Trade Bulletin, Daniel Ikenson describes the steel industry's reversal of fortune, and concludes that "in the span of just a few years, everything has changed for the U.S. steel industry--everything, that is, with the exception of the government's indulgence of the industry's sense of entitlement to trade restrictions." Ikenson argues that the "136 antidumping and countervailing duty measures that limit the access of steel-consuming industries to foreign steel," are no longer justified and should be revoked because, among other reasons, they are "serving only to bolster the market power of an emerging U.S. steel oligopoly." For the full version of the new Free Trade Bulletin please click here (or PDF version).
November 27, 2006
FREE TRADE BULLETIN
The New Iron Age: Steel's Renaissance Beckons New Trade Policies
by Daniel Ikenson
November 14, 2006
TRADE BRIEFING PAPER
U.S. Rice Program Hurts Americans and the World's Poor
Cato study recommends repeal of subsidies and tariff protection in the 2007 Farm Bill
WASHINGTON -- Current U.S. farm policy makes rice one of the most heavily supported commodities in the United States, with ramifications for U.S. taxpayers and consumers and rice producers abroad. Subsidies and trade protection have resulted in a "grain drain," according to a study released today by the Cato Institute.
In the new Cato Trade Briefing Paper, "Grain Drain: The Hidden Cost of U.S. Rice Subsidies," Daniel Griswold, director of Cato's Center for Trade Policy Studies, argues that government intervention has distorted the market for rice production and trade more than it has for any other commodity. As a result, "Americans pay for the rice program three times over--as taxpayers, as consumers, and as workers."
Direct taxpayer subsidies account for half of all income for U.S. rice farmers, while costing American taxpayers an average of more than $1 billion a year since 1998. These subsidies are projected to average $700 million a year through 2015.
Global tariffs on rice average 43 percent and, when combined with direct subsidies, account for three-quarters of the income of rice farmers in wealthy countries. Tariffs on imported rice drive up prices for American consumers and, along with rice subsidies, impose a drag on the U.S. economy through misallocation of resources. Griswold explains, "Consumers in countries with protected markets pay as much as four times the world price for rice, which reduces their standard of living," while rice payments tend to be concentrated among a small number of large producers.
U.S. rice policy depresses global prices by 4 to 6 percent, making it more difficult for rice farmers in developing countries to lift themselves out of poverty, which undermines the U.S. bargaining position in global trade talks and leaves the United States vulnerable to challenges in the World Trade Organization.
Griswold proposes that "Congress and the president should work together to adopt a more market-oriented rice program in the upcoming 2007 farm bill, including repeal of tariffs and a rapid phaseout of subsidies." Such reforms would not be "unilateral disarmament," but an appeal to national interest, regardless of what other countries may choose to do.
Griswold concludes: "The rice program is not an asset to be jealously guarded; it is a national liability to be jettisoned as soon as possible. By reforming the rice program unilaterally, the U.S. government would bolster our national economic well-being, create goodwill among less developed countries, and enhance our nation's role as a leader in the world economy."
November 9, 2006
TRADE BRIEFING PAPER
Dairy Consumers Could Benefit from a Reformed Farm Bill
Cato study documents the significant costs of the U.S. dairy program
WASHINGTON -- With Congress about to draft a new farm bill and world dairy market prices at record highs, U.S. policy makers have a unique opportunity to reform the costly and outmoded U.S. dairy program--to get government out of the business of farming and stop "milking the customers," according to a study released today by the Cato Institute.
In the new Cato Trade Briefing Paper, "Milking the Customer: The High Cost of U.S. Dairy Policies," Sallie James, policy analyst with Cato's Center for Trade Policy Studies, explains that the dairy program is one of the most expensive and labyrinthine programs in U.S. agricultural policy. James argues that the U.S. dairy program, through milk production subsidies and dairy price regulations, "costs taxpayers more than $4 billion per year in subsidies and adds millions of dollars to the grocery bills of American consumers and to the costs of food product manufacturers."
The study finds that artificially high prices, guaranteed income supports, and insulation from international competition encourage U.S. dairy farmers to produce beyond what the market demands, which puts a higher burden on taxpayers to maintain the price support system. The price support system itself results in above-market prices for consumers of dairy products and food processors who use dairy products as inputs.
James points out: "In order to preserve domestic prices above the world prices for dairy products, the U.S. government maintains prohibitively high tariffs on imported dairy products. That invites scorn and retaliation from our trade partners and is one more agricultural program that exposes the United States to charges of hypocrisy as it seeks to paint itself as a country in favor of free markets and opportunity for all."
Current dairy policy aggravates trade partners and contributes to the rancor over global trade liberalization and therefore, as James argues, "is a burden to U.S. consumers and industries that would benefit from freer and more open markets in other sectors."
James proposes significant reform of the Depression-era U.S. dairy policy by allowing milk prices to be set by the market rather than by impenetrable bureaucratic formulae and concludes, "Given historically high world dairy prices, now is an opportune time to implement fundamental reforms with a relatively small political and taxpayer cost of adjustment."
November 6, 2006 U.S. Response to Gambling Dispute Reveals Weak Hand A WTO panel is set to rule this month on whether the United States has complied with its obligation to provide access to foreign entities to the internet gambling market. Antigua and Barbuda have argued that the United States has failed to comply with a 2005 ruling that gave the United States until April 2006 to amend its policies. If the WTO panel of experts agrees, U.S. companies may be subject to retaliatory moves, such as tariff increases or a deliberate failure to enforce intellectual property rights. In a new Cato Free Trade Bulletin, Cato trade policy analyst Sallie James finds that, "The recently signed Unlawful Internet Gambling Enforcement Act does not appear to amend the problem that started the dispute in the first place." After outlining the causes of the dispute and recent U.S. policy changes, the author concludes, "The ban on internet gambling is a policy that is not in the interests of the United States. It over-reaches into the private lives of citizens, and will likely push internet gambling underground, where fraud and other crimes are more likely to occur. More broadly, failure to comply with global trade rules undermines those rules and paints the United States as hypocritical." For the full version of the new Free Trade Bulletin please click here (or PDF version).
FREE TRADE BULLETIN
by Sallie James
September 25, 2006
Schumer-Graham Tariff Proposal is a Colossal Policy Blunder
A vote, in the U.S. Senate, could happen this week on the Schumer-Graham bill to impose punitive tariffs of 27.5 percent on all goods of Chinese origin. Daniel Griswold, Cato's director of the Center for Trade Policy Studies, calls the tariff proposal colossal policy blunder: "Tariffs on imports from China would amount to a direct tax on tens of millions of U.S. households that buy those $200 billion in consumer goods we imported from China last year." He adds: "A tax on imports from China would mean higher prices for shoes, clothing, toys, sporting goods, bicycles, TVs, radios, stereos, and personal and laptop computers." He is available for interviews.
Please contact the Cato media relations department at pr@cato.org or 202-789-5200 to arrange an interview.
In the Cato Trade Briefing Paper, "Who's Manipulating Whom? China's Currency and the U.S. Economy," Griswold challenges the prevailing consensus that imports from China are hurting the U.S. economy and that China's fixed currency is largely to blame. He finds that the sharp rise in imports from China is not primarily driven by China's currency regime, but by its emergence as the final link in an increasingly intricate East Asian manufacturing supply chain.
In the paper, Griswold argues for freer trade between the world's two most dynamic major economies, cutting through the mercantilist fog to document that Americans benefit from imports from China as well as exports to China. "If China were to move toward a more freely floating currency, evidence and experience suggest it would not have a noticeably positive effect on U.S. manufacturing, employment, or the bilateral trade balance with China," Griswold concludes.
Feel free to check out the following statement by Daniel Griswold regarding punitive tariffs on Chinese goods:
"Before Congress considers punitive action against America's no. 3 trading partners, members should consider the following facts:
- A fixed or managed exchange rate is not a violation of international trade rules. Half of IMF members maintain fixed exchange rates. IMF rules allow members broad latitude in determining their exchange-rate policies.
- America's manufacturing sector as a whole has not been harmed by trade with China. Since 1994, real output in America's factories has increased by 50 percent. Rising imports from China have typically displaced imports from other countries rather than U.S. production. Those sectors that compete most directly with imports from China--such as shoes, clothing, and toys--have been in decline for decades.
- Manufacturing employment has trended downward in the United States not because of falling production but because of soaring productivity. Imports from China account for a tiny fraction, about 1 percent, of annual job displacement in the United States.
- China represents America's most dynamic export market. Since 2000, exports to China have grown by 158 percent, making China the fourth largest market abroad for U.S. goods. When goods exports are combined with services exports and sales of U.S. affiliates in China, U.S. companies now enjoy more than $100 billion in annual sales in China's market.
- Any tariff on Chinese imports to the U.S. would be a direct and regressive tax on tens of millions of American families. Tariffs would result in higher prices for the low- and middle income families who by shoes, clothing, toys, sporting goods, household appliances, furniture, and consumer electronics made in China.
August 28, 2006
Prospects for Reform of U.S. Agricultural Policy -- With or Without Doha
Secretary of Agriculture to discuss new farm bill at Cato forum
WASHINGTON -- On Thursday, August 31, U.S. Secretary of Agriculture Mike Johanns will discuss the Administration's plans for the new Farm Bill at the Cato Institute forum, Prospects for Reform of U.S. Agricultural Policy – With or without Doha. The Secretary's address will begin at 11:00 AM in the Cato Institute's F.A. Hayek auditorium.
As a prominent member of President Bush's economic team, Secretary Johanns has visited rural communities across the country to get a first-hand view of the effects of farm policy.
Also speaking at the forum will be former Congressman Cal Dooley, who is currently President and CEO of the Food Products Association, and University of Illinois professor Robert Thompson, one of America's foremost agricultural economists and a member of the Agricultural Policy Advisory Committee.
To register for the event, please visit http://www.cato.org/event.php?eventid=3163.
August 1, 2006
Commerce Secretary Gutierrez Addresses Cuba and Comprehensive Immigration Reform
In a major address at the Cato Institute today, U.S. Secretary of Commerce Carlos M. Gutierrez argued that immigration reform must include a temporary worker program and a "hard-earned path to legalization" for undocumented workers already in the United States. He also offered the administration's most positive comments yet on the Pence-Hutchinson compromise plan, calling it an "intriguing proposal" that "provides for strong border security, while also recognizing our economy's need for temporary workers."
In opening remarks on the evolving situation in Cuba, Secretary Gutierrez pledged economic and other aid "when a transition government committed to democracy is in place." He also delivered a warning that "we pledge to discourage third parties from obstructing the will of the Cuban people." The entire event can be viewed here.
July 31, 2006
Comprehensive Immigration Reform for a Growing Economy
U.S. Secretary of Commerce Gutierrez to deliver major address at Cato
WASHINGTON -- In a major policy address on immigration at the Cato Institute on Tuesday, U.S. Secretary of Commerce Carlos Gutierrez will explain why reform must include a temporary worker program and a "hard-earned path to legalization" for undocumented workers already in the United States.
The secretary's address, "Comprehensive Immigration Reform for a Growing Economy," will begin at noon, August 1, 2006, in the Cato Institute's F.A. Hayek Auditorium.
As a prominent member of the president's economic team and an immigrant himself, Secretary Gutierrez has called on Congress to pass an immigration bill that not only protects our borders but also "recognizes the needs of a growing economy."
For news media inquiries, please call (202) 789-5200.
For more information on the event, please visit http://www.cato.org/event.php?eventid=3131.
July 21, 2006
FREE TRADE BULLETIN
Blowing Exhaust: Detroit's Woes Belie a Healthy U.S. Auto Market
by Daniel Griswold and Daniel Ikenson
U.S. automakers Ford and General Motors continue to struggle with declining market share, rising costs, and massive operating losses. Their woes have prompted headlines about the decline of the U.S. automobile industry and calls for Washington to come to its rescue.
In a new Cato Free Trade Bulletin Daniel Griswold and Daniel Ikenson find that, "Despite the news from Detroit, the U.S. automotive industry is healthy."
After examining shifting production and market share in the U.S. market, the authors conclude, "Over the past few decades, the U.S. automobile market has been transformed for the better, from what was the preserve of an underperforming domestic oligopoly into a thriving, globally competitive, consumer-driven marketplace."
For the full version of their new Free Trade Bulletin please click here (or PDF version).
July 10, 2006
TRADE BRIEFING PAPER
Who's Manipulating Whom?
Cato study documents benefits of trade with China despite currency fears
WASHINGTON -- Imposition of punitive, unilateral trade sanctions by the United States against imports from China in response to China's fixed currency regime would be "a colossal policy blunder," according to a study released today by the Cato Institute.
In the Cato Trade Briefing Paper, "Who's Manipulating Whom? China's Currency and the U.S. Economy," Daniel Griswold, Cato's director of the Center for Trade Policy Studies, directly challenges the prevailing consensus that imports from China are hurting the U.S. economy and that China's fixed currency is largely to blame. The study argues for freer trade between the world's two most dynamic major economies, cutting through the mercantilist fog to document that Americans benefit from imports from China as well as exports to China.
Griswold points out: "Tariffs on imports from China would amount to a direct tax on tens of millions of U.S. households that buy those $200 billion in consumer goods we imported from China last year." He adds: "A tax on imports from China would mean higher prices for shoes, clothing, toys, sporting goods, bicycles, TVs, radios, stereos, and personal and laptop computers."
The study finds that the sharp rise in imports from China is not primarily driven by China's currency regime, but by its emergence as the final link in an increasingly intricate East Asian manufacturing supply chain. As Griswold concludes, "If China were to move toward a more freely floating currency, evidence and experience suggest it would not have a noticeably positive effect on U.S. manufacturing, employment, or the bilateral trade balance with China."
On Wednesday, July 19, at 12 p.m., Nicholas Lardy, Frank Vargo, and Daniel Griswold will discuss the status of reform in China, the impact of U.S.-China trade and exchange rates on our economy, and what change, if any, should be made in U.S. economic policy toward China at a Cato Policy Forum. For details, please click here.
June 19, 2006
TRADE POLICY ANALYSIS
Beyond Doha
Why Unilateral Liberalization Makes Sense
WASHINGTON -- While the world frets over the possible failure of the Doha trade talks, U.S. negotiating objectives remain achievable even in the absence of an agreement, according to a study by the Cato Institute.
In the study, "Leading the Way: How U.S. Trade Policy Can Overcome Doha's Failings," Daniel Ikenson, associate director of the Center for Trade Policy Studies, dismisses the assumption that increased trade requires new trade agreements. As Ikenson argues: "Through unilateral liberalization, policymakers can achieve the U.S. objectives of the Doha Round: better opportunities for American businesses, more affordable products for consumers, improved prospects for farmers and producers in developing countries, alleviation of poverty, and greater international receptivity to U.S. policies."
Ikenson exposes the fallacious premise at the heart of reciprocal negotiations by pointing out that "U.S trade barriers are not assets to be relinquished only in exchange for better foreign market access," but are in practice, "liabilities that raise the costs of production for U.S. producers and the cost of living for American consumers."
Ikenson acknowledges that "at 1.4 percent in 2005, the average applied tariff rate in the United States is relatively low," but he points out that "that average obscures the fact that duty rates on many products are in double-digit percentages, which discourages importation of those products and keeps domestic prices higher than they would be otherwise."
Abolishing U.S. trade barriers and subsidy programs would improve access of foreigners to the U.S. market and simultaneously enhance access of U.S. producers to imported raw materials and components. Through the trade that ensues, U.S. producers would have lower material costs, enabling them "to sell more competitively abroad to foreigners who have higher income," on account of their greater U.S. sales revenue.
On Wednesday, June 21, at 11 a.m., Dr. Jagdish Bhagwati and Daniel Ikenson will address the issue of unilateral trade liberalization as a path for U.S. trade policy at a Policy Forum at the Cato Institute. For details, please click here.
May 11, 2006 The Cato Institute is pleased to announce the addition of Dr. Sallie James as a trade policy analyst with Cato's Center for Trade Policy Studies James previously served as an executive officer in the Office of Trade Negotiations in the Australian government's Department of Foreign Affairs and Trade in Canberra and as a senior policy adviser in the Australian Department of Agriculture, Fisheries and Forestry. She holds a Ph.D. in Agricultural Economics from the University of Western Australia. James has joined the Cato Institute as a well-qualified scholar to contribute to its expanded effort to examine the full cost of U.S. agricultural programs as Congress begins to write a new farm bill. Her articles have been published in the Australian Journal of Agricultural and Resource Economics and the European Review of Agricultural Economics. "Dr. Sallie James is superbly qualified to examine the real economic cost of America's farm subsidies and trade barriers," said Daniel Griswold, Cato's Director of the Center for Trade Policy Studies. "As an experienced trade negotiator, she thoroughly understands the real-world impact of these programs, on Americans as well as on people and markets around the world." Sallie James can be contacted at (202) 789-5264 or sjames@cato.org. For her recent comment on the stalled Doha negotiations, please see her op-ed in The Washington Times.
Dr. Sallie James Joins Cato as Trade Policy Analyst