Tag Archives: trade

U.S. recyclables sent to China

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I had no idea this was going on, but it turns out a lot of what I put in my curbside recycling bin has been sent to China. According to Bloomberg it works something like this: Because of the large trade imbalance between the U.S. and China, container ships that bring manufactured goods from China to the U.S. would end up going back to China empty. Rather than doing that, they are willing to take recyclable trash back to China to next to nothing. And Chinese factories are very happy to have it as raw materials to manufacture more things to send to us. An interesting implication, to me, is that the volume of trade between the two countries must be roughly equal, but the weight and dollar amount must be very unequal.

Another interesting factoid is the top export categories (from the U.S. to China) by dollar amount:

The U.S last year exported more than 37 million metric tons of scrap commodities valued at $16.5 billion to 155 countries, said Adler of the Institute for Scrap Recycling Industries. China accounted for almost one-third of that total—about $5.2 billion.

By comparison, the top two export categories to China in 2016 were miscellaneous grain, seeds, and soybeans ($15 billion) and aircraft ($15 billion).

The focus of the article is actually that China is changing its rules to require cleaner materials before it will accept them, and that could disrupt this market. How dare they! I also heard on the fake news that giant killer hurricanes are actually a hoax created by the Chinese government.

pounds, ounces, and teaspoons

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An interesting possible consequence of Brexit – the UK could go back to the Imperial measurement system. I can’t help gloating just a bit as an American, but overall I think it is bad idea. The U.S. should eventually give it up and go metric. Except for the imperial pint glass of course, long live the empire!

Brexit

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Well, I suppose I have to write a Brexit post. The main argument seems to be that the combined UK-EU economy, with free trade and movement of people and money, was larger than either the UK or EU will be separately, and that is going to hurt both while also emboldening Russia. It seems to me that they could just negotiate some treaties to keep most of that in place, at least free movement of trade and capital if not people, but it sounds like politics may get in the way of that because some in the EU will think if they do that, it will embolden others to leave. But there is at least an argument that it could strengthen the EU in the long term.

In the immediate future, the EU will face a serious dilemma. If it allows Great Britain to withdraw from common structures only to a limited extent, it would signal to all Euroskeptics that they can do as they please. But if EU leaders impose high costs on the UK – namely, by restricting its access to the single market – Europe could end up cutting off its nose to spite its face.

The tragedy of today’s situation is that the EU could still save itself and come to its senses. It could compensate for the losses caused by Brexit by transforming the current crisis into an opportunity for true integration – something that up until now had been blocked by the UK. Such an exercise in renewal would demand that EU institutions be granted real authority to create common fiscal, defense, and energy policies, while at the same time pursuing democratization (along the lines of “one citizen, one vote”).

Under this scenario, Europe could finally emerge as a strong actor in international affairs. It could be the world’s third-largest country, with English, ironically, as its administrative language – the United States of Europe. But, sadly, the political will to achieve such an outcome is unlikely to emerge – if it ever does – until conditions in Europe become considerably worse than they are now.

free trade

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I just thought I would counter yesterday’s discussion of “blowback economics” with a typical pro-trade argument from a mainstream economist, in this case Kenneth Rogoff at Harvard:

The rise of anti-trade populism in the 2016 US election campaign portends a dangerous retreat from the United States’ role in world affairs. In the name of reducing US inequality, presidential candidates in both parties would stymie the aspirations of hundreds of millions of desperately poor people in the developing world to join the middle class. If the political appeal of anti-trade policies proves durable, it will mark a historic turning point in global economic affairs, one that bodes ill for the future of American leadership…

The right remedy to reduce inequality within the US is not to walk away from free trade, but to introduce a better tax system, one that is simpler and more progressive. Ideally, there would be a shift from income taxation to a progressive consumption tax (the simplest example being a flat tax with a very high exemption). The US also desperately needs deep structural reform of its education system, clearing obstacles to introducing technology and competition.

Indeed, new technologies offer the prospect of making it far easier to retrain and retool workers of all ages. Those who advocate redistribution by running larger government budget deficits are being short sighted. Given adverse demographics in the advanced world, slowing productivity, and rising pension obligations, it is very hard to know what the endgame of soaring debt would be.

Like I said, I am still thinking these things through. I find the mainstream economic arguments very elegant and appealing, but clearly they haven’t led to the promised gains for everyone in either the developed or developing countries. I am suspicious of the trickle down claims, although I have spent time in so-called “middle income” countries in Asia and I can’t deny that even the relatively poor have made huge gains in areas in health, nutrition, and life span, even if monetary incomes are lagging. The fact that things are better than they used to be doesn’t mean they are as good as they could be. I would like to hear more details about these training technologies and education reforms that are going to make everyone competitive in the global economy – when are they going to be rolled out, how and by whom? Or if there is not a plan yet, who exactly is working on one?