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Economic Reporting Review | Week of Apr 14-20, 01

by Dean Baker Friday, May. 18, 2001 at 3:19 PM

A weekly analysis of economic reporting in the Washington Post and New York Times. Excerpts relating to corporate globalization: Turkey & the IMF, FTAA, Drug Patents, Bangladesh & Sweatshops.

ERR_4_20_01

The Strawman's Revenge - IMC's E-zine Of Media Analysis
Economic Reporting Review  |  Week of Apr 14-20, 01
A weekly analysis of economic reporting in the Washington Post and New York Times. Excerpts relating to corporate globalization.

By Dean Baker, co-director of the Center for Economic and Policy Research and co-author of "Social Security: The Phony Crisis"
TURKEY

"Turkey Unveils Economic Program to Address Crisis," by News Services in the Washington Post, April 15, 2001, page A17. 

"Needing Cash, Turkey Plans More Sacrifice," by Douglas Frantz in the New York Times, April 15, 2001, Section 1, page 10. 

 

In the last 54 years, the IMF has designed seventeen failed economic programs for Turkey
 

These articles report on Turkey's plans to implement new economic austerity plans in coordination with the IMF, and the large protests against these plans. The articles note some of the protesters' criticisms of the negative effects of IMF policies. It would have been helpful to readers to point out that in the last 54 years, the IMF has designed seventeen failed economic programs for Turkey (see "In Turkey, a Quieter Day to Examine Core Problems," by John Ward Anderson, Washington Post, February 27, 2001, page A19), which suggests that it does not have a very good track record.
 

FTAA

"NAFTA Lite? Hemisphere-Wide Trade Pact Faces Opposition From Brazil to Capitol Hill," by Paul Blustein in the Washington Post, April 15, 2001, page H1.

 

The fact that U.S. economy has created a large number of jobs in the last seven years says nothing about the impact of NAFTA on employment growth.

 

This article previews the summit meeting in Quebec to discuss a hemisphere-wide trade agreement. The article repeatedly makes allusions to the history of NAFTA as a backdrop. Some of the allusions are of questionable appropriateness and accuracy.

For example, the article notes that Ross Perot's claim that NAFTA would cost millions of jobs has been proven false because the U.S. economy has created 20 million jobs since NAFTA. The fact that U.S. economy has created a large number of jobs in the last seven years says nothing about the impact of NAFTA on employment growth. The U.S. could have created 20 million jobs in spite of a very negative impact of NAFTA and, in fact, the U.S. trade deficit with the NAFTA nations (Mexico and Canada) has grown by more than billion since NAFTA was passed. This implies that the direct effect of increased trade with these nations was a net loss of close to 700,000 jobs.

It is also questionable whether Ross Perot is an appropriate spokesperson for opponents of NAFTA. While he is apparently popular with the media, there are large organizations who are working on this issue and they have spokespeople with far more grounding in economics than Mr. Perot.

At one point the article reports the predictions of Jeffrey Schott, an economist at the Institute for International Economics, about the potential for a new trade agreement to increase exports to Latin America. It would have been worth noting that Mr. Schott was the co-author (with Gary Hufbauer) of a 1993 study that predicted that NAFTA would lead to a large increase in the U.S. trade surplus with Mexico. In fact, the U.S. trade surplus quickly turned into a large deficit.

The article also asserts that Mexico's economy quickly recovered from its financial crisis in 1994. This is a questionable assertion. Many farmers and small business owners remain heavily burdened by debt as a result of the crisis, and the real wages of Mexican workers are just now coming back to their pre-crisis levels.

It is also worth noting that the article repeatedly refers to the trade pact as a "free trade" agreement. One of the major goals of the United States in these negotiations is to increase patent and copyright protection throughout the hemisphere, thereby reducing free trade. It would be more appropriate to refer to the pact as simply a "trade" agreement.
 

"Bush Says He'll Press Effort for Hemisphere Trade Pact," by Christopher Marquis in the New York Times, April 18, 2001, page A4.

"Bush to Talk Trade at Summit," by Dana Milbank and Paul Blustein in the Washington Post, April 20, 2001, page A1.

"Bush's Quebec Task: Push Case for Free Trade in Americas," by Anthony DePalma in the New York Times, April 20, 2001, page A16. 

 

Per capita GDP growth in Latin America slowed from an average of 2.8 percent annually in the 1960-1980 period to just 0.3 percent annually in the last twenty years.
 

All of these articles discuss President Bush's agenda for the trade negotiations in Quebec. At one point the article by Marquis notes that many Latin American nations oppose including labor and environmental rules in any trade agreement because they "do not want other nations dictating their domestic laws."

While these nations may not want other nations dictating their domestic laws, they have been willing to tolerate exactly this practice in a wide range of areas that are being discussed in recent trade talks, including rules on investment restrictions, copyright and patent protection, and even environmental regulations (some types of  environmental regulations have been ruled as unlawful trade restrictions by the WTO). So these nations are clearly willing to let other nations dictate their domestic laws under some circumstances.

At one point, this article also refers to comments by Chile's president, Ricardo Lagos, who argued that there was a need for Latin American governments "to show the connection between trade and growth on one hand and greater well being for ordinary citizens on the other." It would have been appropriate to note that the expansion of trade in Latin America in the last two decades has not been accompanied by increased economic growth. According to World Bank data, per capita GDP growth in Latin America slowed from an average of 2.8 percent annually in the 1960-1980 period to just 0.3 percent annually in the last twenty years. It may be possible to show a link between growth and greater well being for ordinary citizens, but the data indicate that it will be far more difficult to show a positive connection between trade and growth.

The Post article refers at one point to an argument from the White House, that U.S. exports to the rest of the western hemisphere would increase dramatically if a new trade agreement was reached. It would have been appropriate to note that the Clinton administration made the exact same argument about NAFTA prior to its passage. Since NAFTA went into effect, imports have increased far more than exports, which means that the direct effect of the agreement has been a loss of jobs.

Both of the Times articles refer to the trade pact being negotiated as a "free trade" pact. As noted above, since the pact will likely also include the extension of protectionist measures such as copyrights and patents, it is more accurate to refer to it simply as a "trade" pact.
 

DRUG PATENTS

"Global Issues Dog South Africa on AIDS," by Jon Jeter in the Washington Post, April 20, 2001, page A1.

"Clash Over Patents," by Andrew Pollack in the New York Times, April 20, 2001, page A16.

 

Most bio-medical research is actually not supported by patent protection
 

Both of these articles present overviews of the future of drug patents in the developing world in the wake of a decision by 39 drug companies to abandon a lawsuit against South Africa over patent enforcement. Both articles note that the lack of patent protection could have a negative impact on drug research by the pharmaceutical industry. It would have been appropriate to note that most bio-medical research is actually not supported by patent protection. The U.S. government, together with universities, foundations and private charities, supports considerably more research than does the pharmaceutical industry. If it proves difficult to support industry research through enforcing patent laws, then expanding these alternative sources of research funding would seem to be a promising option.
 

BANGLADESH

"Lives Held Cheap in Bangladesh," by Barry Bearak in the New York Times, April 15, 2001, Section 1, page 1.

 

At one point [this article]attributes these conditions to the fact that "consumers want bargains."
If workers produce one shirt an hour, doubling their wages would raise the price of a shirt by an average of 6 cents
 

This informative article examines the working conditions in sweatshops in Bangladesh. It points out that workers toil often long hours, at low wages, in dangerous workplaces. At one point it attributes these conditions to the fact that "consumers want bargains." The difference that eliminating the worst labor abuses would make in the price that consumers pay for clothing would in most cases be minimal. According to the article, wages for adults are in the range of 6 cents an hour (children earn less). This means that if workers produce one shirt an hour, doubling their wages would raise the price of a shirt by an average of 6 cents (0.3 percent on a shirt). The article provides no evidence that a price increase of this magnitude would have a noticeable effect on demand.

The article also reports on the impact of efforts by "do gooders," who have tried to block imports of goods produced with child labor. The article reports that these do-gooders are "suspected of shallow thinking," because the result of these restrictions was the mass firing of children under fourteen. It claims that many of these children were hired as a favor to impoverished parents, and that it actually did no harm to the factory owners to lose them as workers.

It seems implausible that these factory owners would be so altruistic in hiring children as a favor to the poor, but so unwilling to provide their workers with safe and humane working conditions. It is also worth noting that any child labor law that actually has an impact results in the firing of children whom their parents would like to be employed (unless the children are working against their parents' will). In other words, what the article has identified as the result of "shallow thinking" by do-gooders is the inevitable result of effective child labor legislation.

The term "do gooder" is pejorative. It does not belong in a news article.
 

You can receive ERR via email every week by sending a "subscribe ERR" email to cepr@cepr.net.  You can find the latest ERR at TomPaine.com.  All ERRs since August 2000 are archived at http://www.tompaine.com/news/2000/10/02/index.html.  For earlier archives, go to http://www.cepr.net/columns/subbaker.htm.
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