Posted on 12/05/2005 6:56:18 AM PST by 1rudeboy
IN THE next six months or so, the world has to agree on a new set of rules to reform global trade. Yet as trade ministers prepare for a critical meeting in Hong Kong next week, their ultimate choices could be between no reform at all, or reform that barely moves the goalposts.
That prospect might seem odd to Australians, who are used to governments promoting free trade regardless of public opinion.
But that is not the attitude of governments in most of the World Trade Organisation's 150 member countries. They approach trade negotiations as opportunities to gain market access, not to give it.
And so, after four years of talking, the WTO's Doha round negotiations have failed to bridge a chasm on the central issue of trade reform: how to cut tariffs on farm produce so that low-cost farmers in countries such as Australia get access to the high-cost markets of Europe, Japan, Korea, Taiwan and the US.
A valuable new book edited by World Bank economists Kym Anderson and Will Martin,
Agricultural Trade Reform and the Doha Development Agenda , shows how unbalanced trade rules are now.
In the rich countries, tariffs on manufactures now average just 3 per cent, yet tariffs on farm produce average 22 per cent. On some, they are astronomical: 94 per cent on sugar to the US, 153 per cent on beef to Europe, and 693 per cent on wheat to Japan.
Export subsidies are banned in manufacturing, yet thrive in agriculture. OECD farmers receive a staggering $A320 billion a year in subsidies. Anderson, an Adelaide economist, and Martin estimate that almost two-thirds of all potential gains from full trade liberalisation would come in agriculture.
Removing all trade barriers, say Anderson, Martin and Dominique van der Mensbrugghe, would lift the world's output by $US287 billion ($A385 billion), as resources move from high-cost producers to low-cost producers, allowing far more to be produced.
On their numbers, all countries gain, although the big winners would be countries scrapping high farm protection — Europe, Japan, Korea and Taiwan — as cheap imported food frees up money for consumers and governments to spend on other things.
Australia would be another winner, with a 1 per cent rise in national income. That's not much, but at least it's more than the 2.4 billion people in low-income countries would get.
John Howard, who keeps telling us trade reform is the cure for global poverty, might take note: the World Bank estimates that complete free trade would lift the incomes of the world's poor by just $A9 a head. It would give more income to the 24 million people in Australia and New Zealand than to the 720 million in sub-Saharan Africa. Of course, that's just modelling, based on assumptions that could be wrong: such as assuming that elderly European, Japanese and Korean farmers whose farms become unviable will find jobs doing something else.
Real-world outcomes can be very different from those in models.
The WTO's members are not flocking to the free trade banner. There has been real progress in some areas, but unless ministers can bridge the chasm on farm tariffs, that too could be lost.
There have been two big steps. The European Union independently reformed its farm subsidies so they do not act as price supports, began slashing its sugar and cotton subsidies, and offered to scrap export subsidies.
On tariffs, however, the EU's proposal would exempt up to 175 types of farm products from change — enough, say Australian officials, to block any real market opening.
Second, key developing countries such as India and Brazil have flagged that they are willing to cut manufacturing tariffs if the EU, Japan and Korea agree to genuinely open their agricultural markets.
But EU trade commissioner Peter Mandelson insists that he has offered everything he can under the mandate given him by the 25 EU governments. The EU right now cannot even agree on its budget. A second round of farm reforms could be beyond it.
Back when the WTO was known as the General Agreement on Tariffs and Trade, it was seen as the only international body that worked. But that was so because the EU and US decided the outcomes, and everyone else had to accept them.
The WTO no longer works that way, as developing country ministers showed at Seattle (1999) and Cancun (2003), when they refused to be railroaded into supporting the developed countries' agenda.
The question now is whether the WTO can work at all. If not, the trade game now is every man for himself.
And China, with its undervalued currency, will keep winning.
You are either ignorant, or foolish.
"21% of our net worth is tied up in real estate" is a rediculous statement from the get go.
While yes, 21% of the net worth #'s are in RE, that doesn't remotely begin to represent RE's impact on our economy. It is THE SINGLE BIGGEST INDUSTRY IN THIS NATION, BAR NONE!
What do you think is going to happen when interest rates climb? Tax laws change? Money supply tightens? What do you think is going to happen when folks find themselves underwater in their houses? When all that borrowing catches up with them? What do you think is going to happen when new housing starts slide, because there is too much existing stock, and banks and others pull out of new projects? You don't have to go far to see what a local housing collapse can do to an economy, its happened in S. California, its happened in Houston, its happened in Boston, its happened in NYC. And when they happened it had catastrophic results in those localized economies...
Now, nationwide we have had a housing Boom, not seen since the 70s in terms of market value of homes... and guess what... its coming to an end. Will there be some places that continue to boom? Sure there will be, but the clear national trend is going to be down, and its going to go down hardest, in the areas where it went up the fastest.
So, lets see, 21% of net worth is in RE equity... and lets say most of that gets whiped out... then the housing Trusts and stocks of companies that supply things for the housing industry contract... and so do their suppliers etc.. blowing away lots of paper equity in stocks as well... which will trickle to other industries etc etc etc.
If we have a housing collapse on a large scale in america, you are going to see a path of destruction that hasn't been seen in America since the great depression.
As to your "year over year aggregate decline" question, you might want to read a little report the government just published a few months back... its sober reading for those misinformed who think housing is guaranteed to go up.
Nope, sorry.. most cashout, move south, and don't leave lots of money to their heirs... nice try though.
Todd, the retiree on a fixed income sitting on all his equity in his property, is not going to save this nation when most of the working folks are leveraged to the hilt... Yes, their equity will show up in the statistics, and counterbalance... after all if you have 1 retiree with a free and clear house, and 1 family 100% leveraged, and both houses are worth 250k.. you have on paper 500k of worth, with only 250k of debt... so there is a 50% equity position... but that doesn't help out remotely Mr. 250k of debt when he loses his job and can't make his payments.
Fact is simple, you don't build wealth on -2.2% savings rates.. which is what the average household savings rate in america is today. You can't borrow yourself to prosperity... And frankly I'm amazed at how many supposedly conservative folks are trying to make that argument. If it was a President trying to sell that jive you'd be all over them for it, but somehow since its individual people... its ok?
Remind me of that 57% equity position, when you are trying to explain record foreclosures in every state in the country. If you have 57% equity, you don't get foreclosed, you sell, pay off the debt and rent. 57% equity position has to include all CORPORATELY and Municipally held land, not just housing held by owner occupied.
You can'g have a 57% equity position and have record foreclosures... it just doesn't work that way. Yet we have record foreclosures that are ever increasing.... and you want to sell a 57% equity position? Just doesn't add up.
You can keep trying to spin, but it doesn't work.
-2.2% savings rates. Real Dollars takes 2 incomes to basically match what one did in the 70s.... the argument that free trade as it exists today is a boon for America is an abject joke.
Hey John, would you rather be operated on using technology from 1975 or today? Would you rather be treated for a disease with drugs from 1975 or today? Which cars do you prefer; that fine Pinto from 1975, or a car with today's comforts and technology?
How about houses? In 1975 the average size of a home was 1,550 square feet. Today, it's almost 2,200. Which costs more, smaller or bigger? In 1975, only about 40% of all homes had air condiditoning. Today, it's more than 80%. Only about 40% had color T.V's; now it almost 100%. Back then, less than 2% of households even had microwaves. In '75 only about 5 million had cable. Today, 85% of all American households have cable. My house in 1975 would have no chance against a Cat 2 hurricane. Now a Cat 3 is considered no problem. Look at all the other upgrades since then. In the 70's we were stuck with Formica, shag carpet and manual garage door openers. Now we get hardwood floors, granite counters, automatic door openers, hot tubs with timers hooked up to our cell phone and home theaters.
In 1975, American's owned about 9 million recreational boats. Now it's more than 23 million. In '75, only about 55% of the population finished high school. Today it's more than 80%. Only about 15% of American's finished four years of college in 1975, and today it's more than 25%. In 1975, there were less than 100,00 people with computers. How many have them now? Who had any idea there would be cellular telephones available in just another 10 years?
Life expectancy was about 71 years in 1975 while it's 77 years today. Finally, the death rate (per 100,000) from natural causes in 1975 was about 700. Today it's less than 500.
All these things cost lots of money. The reason things cost more now is because they're better than they were in 1975 and, because we have the income to afford them. Why anyone would want to go back to the good old days of the 70's is a mystery to me.
Interesting theory. So we've gone from The bulk of that "NET WORTH" is tied up to PAPER appreciation in their homes.. which, can disappear as quickly as it appeared... not to mention, that most folks have taken nearly every ounce of equity out of it as well (kinda funny how you can have the bulk of your net worth tied up in paper gains while at the same time drawing down your equity to zero, LOL!) to 50% of the people have no mortgages while 50% have 100% mortgages (no equity).
Fact is simple, you don't build wealth on -2.2% savings rates..
And yet, our net worth still increases.
You can't borrow yourself to prosperity
Why not? If I borrow at 6% and earn 12% that sounds like I'm on the way to prosperity.
57% equity position has to include all CORPORATELY and Municipally held land, not just housing held by owner occupied.
Wrong again. Just houses owned by households. That'd be people, not governments.
You can'g have a 57% equity position and have record foreclosures... it just doesn't work that way.
Really? Record foreclosures? You have a link? How many is a record?
Just doesn't add up.
Just 'cause (as we've proven) you don't know how to add? LOL!
Hey John, would you rather be operated on using technology from 1975 or today? Would you rather be treated for a disease with drugs from 1975 or today? Which cars do you prefer; that fine Pinto from 1975, or a car with today's comforts and technology?
So using the logic you provided above, pushing forward 35 more years, say around 2035, we'll need 3 or 4 incomes per household to afford these wonderful things. I wonder if they'll lower the working age to 10 or 11 years old? Get those kids earning some income.
Not my numbers. They're from the Fed. You got anything, other than your feelings, to refute what they say?
What do you think is going to happen when interest rates climb?
If you're really in real estate you'd know that aggregate housing values in this country continued to climb even when mortgage rates were 10%.
Tax laws change? Money supply tightens?
Yup, these changes have been going on for a long time. Again, all those changes notwithstanding, when was the last time this country experienced a year over year decline in aggregate real estate values?
What do you think is going to happen when folks find themselves underwater in their houses?
With 57% average equity in their homes....not much.
When all that borrowing catches up with them?
Do you not understand how net worth is calculated?
What do you think is going to happen when new housing starts slide, because there is too much existing stock, and banks and others pull out of new projects?
Be sure to ping me when all that happens.
You don't have to go far to see what a local housing collapse can do to an economy, its happened in S. California..
Yes, and what's happened to values there since then? I have friends in Manhattan Beach and in Mountain View who have become rich simply by virtue of buying a home when the prices were depressed in 1992.
its happened in Houston, its happened in Boston, its happened in NYC
Houston experienced the worst housing price decline in modern history (23%). Of course, unemployment was around 10% then. Are you expecting 8-10% national unemployment anytime soon?
So, lets see, 21% of net worth is in RE equity... and lets say most of that gets whiped out...
Aww, C'mon, you can do better than that. Let's say that bird flu comes to this country and wipes out 100 million. That would really kill the housing market. As long as you're dealing in Armageddon, why not swing for the fence?
If we have a housing collapse bird flu pandemic, on a large scale in america, you are going to see a path of destruction that hasn't been seen in America since the great depression
you might want to read a little report the government just published a few months back... its sober reading for those misinformed who think housing is guaranteed to go up.
If you gave us the link, it would be the first time in this entire thread that you even attempted to back up what you've claimed. I'd be happy to read it. Should I take it from your answer however, that housing values in the U.S. haven't shown a year over year decline in a very long time?
Yeah, sure. that's why more than 70% of Americans support eliminating the death tax....Nice fact-free drive-by though!
Which is why governments (in any form) have no business regulating trade. In the long-term the market is always more efficient in regulating the economy.
I can't see into the future but with incomes historically rising faster than inflation, I'd say that my children will be just fine and that they will have the opportunity to pursue any lifestyle they choose.
All I have to do is look around me to clearly see and fully understand that my parents lived much better than their parents did and, that my standard of living is better than that of my parents at this same point in their lives. I have no reason not to be optimistic about the future for my children. Those who take education seriously and are motivated to achieve and create value, will always maintain an exceptional standard of living.
You never did answer my question though. If your life was on the line, what would you rather your doctor use: Knowledge and technology from 1975, or from 2005?
Of course. Perhaps I should have said "That does not sound like a serious economic threat."
Since I am an American who believes in individual rights, I support limited government and oppose government over-regulation of the economy. Governments should protect life, liberty, and property, but not meddle in commerce. Free trade generally results in greater freedom and greater wealth for all involved.
Toddster, your ignorance on this topic is astounding.
Record foreclosures have been going on in most states for the last 5 years, Colorado, New York, Pa... etc.. the fact is Foreclosures are at the highest they have been in decades, and have been for years now... in 2002, foreclosures were at their highest nationally than they had been in 30 years. (see any number of news reports on this one)
For a more recent take, see the May 30, 2005 Washington Post... (A Bane Amid The Housing Boom: Rising Foreclosures).. Or perhaps RealtyTrac (National Foreclosures Increase Almost 19% in October According to RealtyTrac(TM) U.S. Foreclosure Market Report 11-28-2005) one out of ever 1,422 households was in some part of the Foreclosure process. NJ had the highest with 1 in 422 homes.. Colorado which actually had a 29% decrease in October from September, still managed to stay in the top 5 for foreclosures... Ohio is average 1 Foreclosure per every 1,018 households....
You are blindly ignorant if you don't know that foreclosures are at all time highs in most of the country and have been for years. And its for the same reasons I've been stating over and over.... folks have no equity, because they have taken what they have had and spent it on crap usually. You don't build wealth by consuming more than you produce.
You don't build wealth by having a national average savings rate of -2.2%. You aren't winning if it takes 2 people workign to make the same real dollars that 1 did in 1970.. Free Trade is a scam, particularly in its current incarnation.
Wanting to not pay taxes when you die, is not an indicator that that huge amounts of wealth are waiting to be handed over... fact is most folks don't hit the estate limit when they pass away currently that is exhempt. (or was before the temporarily lifting).... Given a choice on ANY tax, 70% would likely want it abolished, this doesn't mean that its going to be a windfall for all of them.
Nice strawman argument... but like everything else you've said here... its smoke and mirrors.
Wow!!! 0.07% of every American household is in some sort of foreclosure. That's terrible. And yet 57% average home equity is something you can just laugh off.
You are blindly ignorant if you don't know that foreclosures are at all time highs in most of the country and have been for years.
Considering your ignorance of household net worth and average home equity perhaps you are in no position to throw stones?
And its for the same reasons I've been stating over and over.... folks have no equity, because they have taken what they have had and spent it on crap usually.
Except for the $10.47 trillion in equity that folks do have.
You don't build wealth by having a national average savings rate of -2.2%.
Please educate us all on the methods the government uses to calculate the savings rate.
You should probably keep better track of what you post on these threads. You argue that the massive amount of homeowner equity in this country (more than $10 trillion) is being held mostly by retirees. Then you go on to say that there won't be a large amount of wealth to pass along when they die. This just doesn't make any sense. Of course, I've always contended that protectionists are only consistent in their inconsistency.
None of this really matters anyway though, does it? With the entire real estate market about to collapse...right? Path of destruction not seen since the great depression..right?
You do a good job with hyperbole, histrionics and all that fact-free stuff though.
Again, consult the report from the government released just last month.... it shows that your perception that housing values always increase is quite wrong.... it found that in most places they are stagnant in real dollars, and yes, even lose money.
Some markets boom, while others bust... cycle is about 8 years in most areas, but can be 20+ years depending on the situation.
Not much eh? Record foreclosure rates nationwide in 2002, and record rates this year continue in states like NY, Colorado, NJ, Ohio, PA.. but folks have 57% equity positions? You are clearly naive or ill informed if you believe most folks have nearly 60% equity in their homes.
The typical home refinances every 3 years... one way or another. Few, VERY VERY FEW, have more 40+% equity in their properties... most thanks to liberal lending of the last 10-15 years, are lucky to have any equity. 125% mortgages a few years back.. no money down 103% financing going on today... 100% refis... most folks are not sitting on huge equity positions.
Yes, in some markets you can see a huge appreciation in a year, but most you can't.
And while rates have moved in cycles for years, never before have folks been getting into properties with negative equities or zero equities from the get go. When you have to put down 20% down payment, you have a lot of wiggle room.. when you have no equity, you don't have bupkus, and that is where most folks are.. which is exactly why foreclosures are indeed are record levels nationally.
Your attempt at counter examples are interesting.... you think that DEPRESSED values in 1992 were a fluke? You don't think that its going to happen again? I watched Sunnyvale, San Jose fall 20% in less than a year when the bubble burst... In S. Cal, it too more than 8 years for people who bought right before it burst to be able to sell for what they STILL owed on their original mortgages.
Funny how you ingored the larger impact of those "localized" events.. when Texas Land Values collaped... they to WESTINGHOUSE down with it... cut the companies value of a 100+ year old company in 1/2 overnight..... and they weren't even Texas based.. And they weren't alone. So that one shift in one local market had huge impact beyond the local unemployment rates.
I have backed up many things here.
Real wage numbers are straight from the department of labor. I just cited many articles on foreclosure numbers, again... and the report can be found here as well: http://www.federalreserve.gov/pubs/ifdp/2005/841/ifdp841.pdf
Get informed, you'll find out, you don't know, what you don't know.
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