I love history and I am fascinated by trade, so William J. Bernstein’s A Splendid Exchange: How Trade Shaped The World is a natural. Bernstein follows the history of trade, and how trade has shaped history, from the Sumerians of 3000 BC to 2008 when the book was published. The stories are fascinating and, you know what? – the problems faced by Sumerian traders still seize us today. Highly recommended.

As long as I am in an historical frame, Niall Ferguson’s The Ascent Of Money has got to be on my list. Ferguson does the same for finance as Bernstein did for trade. They cover some of the same ground, but from different angles. And today, as ever, finance and trade are intertwined. You can’t have one without the other. These two make a great pair.

I can’t stay away from trade policy. I could give you some tomes that will qualify you to present legal cases in the World Trade Organization, but those aren’t great reads. Instead, try Misadventures Of The Most Favored Nations by Paul Blustein about negotiations in the WTO. No cut-and-dried examination of negotiating history, Blustein is a journalist reporting what goes on behind the scenes during tarde talks. Gets into the real stories about how things work – or don’t work. I love the book’s subtitle: “Clashing Egos, Inflated Ambitions, and the Great Shambles of the World Trade System“.

Do you ever talk with some cave-dweller and, after it is over, think of all the things you really should have said? Those arguments are in Daniel Grisworld’s Mad About Trade: Why Main Street America Should Embrace Globalization. Griswold examines each of the myths that the anti-globalization folks shout about – and takes them apart logically and cogently. I doubt Lou Dobbs has read this book.

With the holidays upon us, I may miss a post here and there. Assume I’m just playing with the grandkids – because that’s what I’ll be doing!

***************************************************************************

One has to wonder about reporters. The Wall Street Journal published a nice article this week about the White House’s “new” program to attract foreign investment to the economically-beleaguered United States. The “new” SelectUSA program, announced last June, replaces the pre-existing InvestUSA program that has been around for years. Aside from a snazzy new website, there doesn’t seem to be much that is really new.

Where should we put this factory?

The “new” part happened a few years ago when the Commerce Department released its commercial operations in American embassies and consulates to actively promote investment in this country. Before that, the federal government stayed strictly “hands off” when it came to investment promotion. That was a states’ rights issue and the federal government didn’t touch it. If someone overseas asked a U.S. commercial officer where they could best put their $2 billion industrial facility, the commercial officer had to back off and tell them they need to talk to each of the fifty states and several territories. Might provide some phone numbers. The good commercial officer, seeing the futility of this approach, would give some broad hints and winks. This contrasted sharply with the approach of most other countries, which was to point the potential investor directly to a favored site and give them all the help possible to make the decision to invest an easy one.

This changed somewhat a few years ago, when the U.S. Commercial Service was empowered, even urged, to begin advising potential foreign investors on investment issues (though stopping short of telling them which states to look at). At least they could respond when a potential investor approached a U.S. embassy, telling them about federal incentives for investment, though they still cannot play favorites like their counterparts from other countries can.

Notice that I haven’t mentioned the U.S. Department of State. Fine institution, but really not a player on investment promotion unless an economics officer gets an offhand question. SelectUSA is a program housed in and run by the Commerce Department, but – despite being told that – the WSJ reporter fell into the trap of assuming that if something happens in an embassy, it must be the State Department that did it. In all but the smallest U.S. embassies, the State personnel are a plurality. There may be another couple dozen agencies or departments with people working at an embassy, so State may not be the right department to talk to. But that is what the reporter did. Ignored the people at Commerce who actually run the SelectUSA program.

The actual proposed tax rates are somewhat confusing. The Morning Post says that the social security tax on a foreign worker will be something over 21% of the worker’s pay at 10,000 yuan a month ($1552.53). In addition, they say that a foreign employer in China will have to pony up 4,400 yuan a month, which indicates that the employee pays 21% and the employer pays another 44%. No information was provided on social security payments at other pay levels.

The foreign contributors will only be able to get their money back after paying into the funds for more than 15 years.

I don’t know if this refers to the individual, the company, or both. Either way, it looks as if the equivalent of 65% of the employee’s pay goes into the social security fund for at least fifteen years. Nice source of capital, but will foreign companies pay it?

Kilauea getting ready.

Germany and South Korea have agreements with China that provide mutual exemptions from social security payments – providing the Germans and Koreans with a tremendous cost advantage on any expats stationed in China. One wonders if Beijing’s objective is not to raise money for the social security fund, but to force others into hurried agreements to negotiate similar exemptions – thus reducing the cost of stationing Chinese expats in other markets. The Morning Post article notes that the Russians, the Japanese, the Americans and at least seven other trading partners are looking into negotiating such agreements. The article quotes Japanese sources as saying that, if all Japanese workers in China paid the new taxes, the cost would amount to more than $742 million annually. That cuts the old profit margin, doesn’t it? And it may well cut foreign direct investment in China.

*****************************

Posts have been sparse lately. My wife, my mother and I took a short vacation on Hawaii’s Big Island. There has been a new outbreak of lava flows at the Kilauea volcano, which we missed seeing by one day. The picture shows the vent where the lava originated, filled to the brim the day before the new flows started.