Global Trade – Good or Bad For Nations – For Individuals — a Factor in Encouraging Greater Sustainability for Society?

by Hank Boerner – Chair, G&A Institute

“Trade” can be viewed in the macro-environment or the micro, with personal advantages and disadvantages for men and women in both developed and developing nations.

With a new administration coming to Washington DC in January 2017, the heated rhetoric of the 2016 presidential primaries and during the general campaign quickly moved “trade” as a loose-lip and often-un-informed talking point at rallies in the direction of possibly enacted national public policy.

Tear up NAFTA  – punish China – make cozy deals with countries one-at-a-time instead of multi-lateral agreements.  That’s seemingly the direction of the Trump Administration policy-making in 2018 — if we believe the rhetoric.

So — the question hangs — is global trade good or bad for U.S. workers…for the economy…for workers in both developed and developing nations…as a positive or negative in the quest for greater global sustainability?

As in all policy making, we must search for truth and evidence to help answer the questions — and guide public governance.

We do have help if we want to tune in to the source:  The independent, not-for-profit National Bureau of Economic Research (NBER) weighed in in April with a Working Paper: “How Large Are the U.S. Economy’s Gains From Trade?”

FYI – NBER (founded in 1920) is based in Cambridge, Massachusetts, and has a huge cadre of economists and researchers that work to provide us with “objective, quantitative analysis of the American economy.”

The scholars issue a steady stream of Working Papers for public consumption (and study and discussion by policy makers looking for “truth, fact, objectivity, reliable findings”  — my characterizations).

The name may ring a bell — NBER is the non-governmental organization that declares the official start and end of a U.S. recession, for example.  Their declaration is often separate of what is going on in the capital markets so it stands out.

In the current paper, the researchers examined “estimates of the economic benefits of a globally-open economy.”  And the impact plus or minus on the American economy.

Most likely results: they see a gain for the U.S. domestic economy of from 2% to 8% through open global trade, depending on certain assumptions about consumer and producer behavior.

What if we actually slammed the door shut on trade beyond our borders?  Authors Arnaud Costinot and Andres Rodrigues-Clare explain there is [surprisingly] little direct quantitative evidence on how the economy would react if we did begin to close the doors on global trade. (Note to policymakers: That’s why we don’t make hasty or dumb decisions on trade!)

Looking at such factors as labor and capital embedded in goods purchased from around the world, they estimated the gains from trade by comparing the size of a “counter-factual” U.S. economy that would depend entirely on domestic sources compared with a nation (like the USA) that has ready access to foreign services and goods.

While the dollar value of U.S. imports is large, as a percentage of national spending it is actually really small.

There are varying impacts of open trade on individual industries – and the enterprises and their workers.

For garment and apparel companies the demand for cheap labor is “in-elastic” in economic lingo. Not much wiggle room or flexibility. That is why the companies go to East Asia for labor inputs.

For an American automaker, the import of German-made transmissions for installation in Detroit’s models is somewhat lesser of an impact (there are always alternatives).  US manufacturers used to be more “integrated” and made most of the components for their trucks and cars. Now the industry is defined as a global sourcer.

For U.S. farmers, the impact depends on where else in the world wheat is grown and the ready availability and pricing for that wheat. Trade is critical to the American farm belt.

Think of rare minerals used in manufacturing — if vital minerals are only available in certain areas of the globe, and are needed (say for making cell phones or other electronic products), the dependency is greater for U.S. manufacturers (again, in-elasticity reigns).

Tradeoffs in global trade exist everywhere: Lower consumer prices are enjoyed (as designer-label garments flow to U.S. retailers’ shelves from cheap East Asian labor sourcing) — but too many American workers may lose jobs and/or work for lower wages.  And in turn, local communities suffer.  The 2016 elections showed one of the results of that suffering as voters signalled their discontent with trade policies.

Global Trade ESG Issues

NBER researchers looked at a different topic in the trade bucket for their Working Paper: the effects of Fair Trade Certification.

The movement began led by a church-affiliated NGO in Holland and quickly spread throughout Europe and to the U.S.A. and various groups coalesced in the Fair Trade Labelling Organization (“FLO”) in 1997.

In this research effort, NBER authors Raluca Dragusanu and Nathan Nunn examined the impact of the Fair Trade movement on coffee producers in the Central American nation of Costa Rica, in the heart of the global coffee belt (typically countries near the Equator).

They looked at FLO impacts on incomes of coffee growers, their neighbors and communities.

Fair Trade policies, they assert, is a positive as it raises prices for local growers, to begin with, high enough to cover the cost of production. The higher prices are typically intended as well to raise the quality of life in the coffee-growing region.

Premium prices paid by buyers above the set minimums are used to build schools and establish scholarships, create local health care facilities, and various infrastructure, and to help improve growing practices.

Through fair trade practices, income rises in Fair Trade growing areas, for both certified growers and many of their non-growers neighbors.

Income levels were on average 3.5% higher for growers and as much as 7.5% for “skilled” coffee growers (when the “intensity of fair trade increases in an area).

The researchers found that price premiums for growers increased school enrollments (2%-to-5%) for children ages 13-to-17 — critical ages for young men and women preparing for their adult lives.

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We found this and other NBER research interesting. We have “cold, hard facts” about the economy and trade and the “what-ifs” if present trade policies and practices are messed with, and the results are in the main “unknown”.

And we see that global trade is lifting people and their communities in a Central American country where coffee growing is an important agricultural pursuit.  And a benefit of open and fair trade.

Like climate change and many other public issues, there are plusses and minuses in trade affairs — and no easy answers!

Therefore, we can argue, let reason reign, common sense be applied — and science and facts and evidence-based research be the foundations of good public sector decision-making!

Thanks to NBER researchers for their efforts (in producing more than 1,000 Working Papers a year) to continue to produce research and surface evidence that can add to be leveraged to develop both public and private sector strategies.

You can learn more at:  www.nber.org

Good News: Solar & Wind Emerge in Global Search for Renewable Energy Sources

Guest Commentary  – Alison Crady      Marketing Specialist, CDF Distributors and Fast Partitions, United Kingdom

On Planet Earth there are numerous resources we have learned to utilize to enhance our work and private lives. Through the work of brilliant inventors and engineers, our cities come alive day and night powered by reliable electricity.

From the cars we drive to the light bulbs that illuminate our desktop, we steadily use the planets’ natural resources without giving much thought to the power source.
But in recent years, in addition to our increasing usage of these resources and supplied power, there comes our greater awareness of their limitations.

Today, with the societal emphasis on greater sustainability in all areas of our lives, environmentalists and technicians eagerly search for renewable energy sources.

Options like hydropower, solar power, wind energy and geothermal plants are being tested around the world… the good news is, with increasing success, worth noticing.

Here are some good news stories to share about renewable energy successes around the world:

In Costa Rica
Perhaps one of the “brightest” examples, the nation of Costa Rica in Central America has managed to use 100 percent renewable energy for 76 days straight. This was the second test-run of the length of sustainable power this year, which adds up to over 150 renewable energy days. Being a smaller country, Costa Rica is the perfect testing grounds for replacement energy sources. The length of the country’s use of renewable power is astounding.

Throughout the project, the Costa Rican government depended on these primary replacements:
• Hydro/geothermal/wind/solar energy— 80. 27%
• Geothermal plants— 12.62%
• Wind turbines— 7.1%

In the Nation of Portugal
The Portuguese quest for clean energy has achieved some important milestones. Recently, this small European country on the Atlantic shoreline managed to provide power for four days straight using only renewable energy sources. For the entire 107 hours, the nation of Portugal was sustained only by wind and solar power. This 4-day streak was the recent peak of their increasingly-promising clean power journey. Last year renewable sources provided 48% of Portugal’s total energy needs. Zero harmful emissions release is the goal.

In the United Kingdom
In the UK, governmental leaders and renewable energy industry leaders are hard at work to identify sustainable clean energy solutions. Researchers have seen some dramatic changes in solar power and wind energy usage. Unfortunately, the UK government has decided to halt the spread of onshore windfarms, primarily because of how expensive these installations were becoming.

Experts predict at least a one gigawatt — enough to light up 660,000 homes — loss in renewable energy generation within the next five years. After the ground-breaking investment in wind energy last year, several proposed construction projects will come to a halt.

That is the disappointing news. Investment in solar power, on the other hand, has slowly but steadily been increasing. Perhaps with the coming drop in government wind energy subsidies, the renewable energy finances will be redirected to encourage greater solar energy funding.

In Spain
If you visit the colorful lands of Spain, Portugal’s neighbor on the Iberian Peninsula, you’ll soon learn that electrical power is expensive. The country’s lack of natural resource blessings — such as deposits of oil, natural gas or coal — has spurred policymakers and industry leaders forward in the development of renewable energy. With this motivation to find less expensive, reliable energy sources, Spain is becoming known as a “Cradle of Renewable Energy.”

During the night time, wind energy fulfills 70% of Spain’s electricity needs, with a daytime record achievement of 54%. Over 29 million homes in Spain are currently powered by wind energy. However, wind energy is unpredictable, which makes forecasting key to sustainable clean energy. The Spanish firm Acciona consistently monitors the operations of 9,500 wind turbines at the Pamplona control center.

In Germany
The German nation’s quest for renewable energy has recently gained momentum. According to the Agora Energiewende think tank, Germany was able to supply nearly 100% of its energy needs with renewable sources for an entire day. Conventional power plants were able to supply 7.7 gigawatts at their energy output peak. As the country moves forward to phase out nuclear and fossil fuels, Germany’s cleaner power drive / quest narrows in on solar and wind power.

In China
Never a country to miss out on significant global trends, China has taken stock in its renewable energy resources. Aware of the need to combat climate change, China sets up new wind turbines at the astonishing rate of two every hour. According to the International Energy Agency (IEA), onshore wind and solar panels have increasingly been reduced in costs.

The IEA reported this decline as impressive, and they expect the trend to continue. With cheaper renewable energy options, the clean power usage trend will continue to take off, most industry expert agree.

The Rewards of Renewable Energy
The damaging effects of current levels of carbon dioxide emissions and the awareness of ever-limited natural resources are being felt around the world. The need for a better way to generate energy is clear. Given the recent trends of success, in a growing number of countries, solar and wind energy power sources are not going away any time soon. These renewable resources are the forecasted “superheroes” for continued (and significant) reduction in dangerous carbon emissions and energy source and supply security on a global scale.

That’s the good news to share today.

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Allison Crady provides these links to the companies she serves as marketing specialist:
• http://www.cdfdistributors.com/
• https://www.fastpartitions.com/

Alison Crady

Guest Commentator Alison Crady