The NY Times reports today that ag exports are up.  What does this mean in terms of trade?

First, we don’t know about “net exports”, which are the key measurement rather than just “exports.”  We need to know the import side as well to get full information on the “net.”

Second, 2008 was a good net export year for agriculture.  Why?  Because all commodities, ag and non-ag (including oil), had price spikes that year.  The export volume was not necessarily up, but the value per unit was up.  Thus, the value of exports was not a good indicator of trends.  The volume of exports is.

Third, our net ag exports have declined precipitously since 1992, though we had a 2008 bump as I mentioned above.  As to countries we have bilateral trade agreements with, we are net import status.  Thus, the trade agreements caused a net import trend in agriculture, excluding the 2008 price bump.  See this chart.

Fourth, the biggest correlating factor of export volume (which again is a better indicator than export value) in agriculture is non-trade factors like major supply issues… such as a substantial drought.  This year, Russia is suffering from a drought of Biblical proportions, and stopping any exports from within the country.  That is a big hole to fill in world ag commodity commerce, and U.S. farmers and agri-business will benefit from that hole.  Commodity prices for corn, wheat, soybeans, etc. are rising as a result.  But this effect occurs despite – not because of – trade policy.

Summary:  If you want to know the state of trade in agriculture, you need to know (1) net trade, not just gross exports, (2) volume of trade, not just value, (3) the year to year trends, and (4) whether supply disruptions caused any upticks, which means it is a one-year blip rather than a trend.

Russia is raising its import tariff’s on U.S. pork by 75%.  Where is the NY Times editorial board outrage?   Shouting Smoot-Hawley.  I’ll bet Russia has a depression as a result.

We are the unilateral free traders in a world of mercantilists.  Look how good the model works for us.

And take a look at the corruption rankings, just for fun:

The Anti-corruption body, Transparency International, places Russia and China at the top of their list, as the places where one has to pay a bribe to do business.
 
The worse of the 22 countries surveyed were lead by Russia, China, Brazil and Mexico, the United States came in at number 9 on the list.
 
However if you take into consideration the fees of Lobbyists, then the United States would top the list.
 
Its amazing how the wording can give a whole new meaning to actions, when recession can be called economic slowdown or torture harsh interrogation.

Oil producing countries, or at least their leaders, seemed rich to me when oil was at $25 per barrel.  But what do I know?  They certainly were rich when oil was $145 per barrel. 

Now oil is below $70 and oil producing countries are in trouble.  Odd.  Does the whole world spend like a drunken sailor?

So Russia is bailing out the big wigs.  Sound familiar?

Companies belonging to two of Russia’s richest men are among the first recipients of a $50 billion bailout program. The project, like so much else here, is opaque in its details but has resulted in some of the nation’s oil windfall being funneled to well-connected Kremlin insiders.

Russia built up huge financial reserves when oil was high, but…

On Aug. 8, reserves peaked at just under $600 billion, the third-largest in the world. By this week, they had fallen to $484 billion, as money flew out of government vaults to support the ruble, prop up the banking system and bail out the businesses of the rich Russians known as oligarchs.

This week’s fall — $31 billion — was the steepest so far. With no end to the global troubles in sight and a worldwide recession likely, which could further reduce oil prices, the question is: How long can Moscow keep this up before its reserves grow thin?

Despite America’s financial woes, the dollar is still the reserve currency, for now. 

Russians have converted nearly $3.5 billion in ruble bank accounts into dollar bank accounts. …

An opinion poll by the Levada Center in Moscow found that 40 percent of Russians who had bank accounts feared they could lose money to bank failure; most of those who feared for their accounts listed political and economic instability, or a devaluation of the currency as occurred in 1998, as their biggest worries.

The power of the U.S. energy dependence issue is great.  Most energy exporting countries are geopolitical rivals.  If we get our economy back on track without reducing imported energy dependence, we increase demand and prices and finance them.  Also Exxon Mobil gets to report new record profits.  Those countries need to mature their forms of government and diversify their economies, rather than continue the "resource curse" path of instability and corruption.

The resource curse (also the paradox of plenty) refers to the paradox that countries and regions with an abundance of natural resources, specifically point-source non-renewable resources like minerals and fuels, tend to have less economic growth and worse development outcomes than countries with fewer natural resources. 

Unfortunately, the view that capitalism begets democracy has proven false in the past 30 years where dictatorships hold strong in capitalistic economies.

Russia, Iran and Qatar are forming a gas cartel.  Like OPEC. 

Europe and the United States have warned against such a gas export body, saying it could pose a danger to global energy security and create room for price manipulation.

Yup.  There is certainly "room" for manipulation there.  Yesiree.  Sounds like we can create more "trade" with them.  Trade is good.  Are you against trade?

Energy is about one third of our trade deficit.  $145 oil finances our geopolitical rivals, excluding China.  With $74 per barrel oil, Russia, Venezuela and Iran, among others, are not as flush with cash.  

 As the price of oil roared to ever higher levels in recent years, the leaders of Venezuela, Iran and Russia muscled their way onto the world stage, using checkbook diplomacy and, on occasion, intimidation.

America must solve its energy supply problems in some way.  We export too much of our wealth otherwise.  And many of those importing our wealth are unfriendly.

Daniel Yergin, chairman of Cambridge Energy Research Associates, a consulting firm in Cambridge, Mass., said oil states were facing something of a reckoning. Originally, he said, they saw the economic crisis as a problem mainly for the United States — but then oil prices went into free fall.

“Now, the producers are experiencing a reverse oil shock,” Mr. Yergin said. “As revenue went up, government spending went up and expectations of a continuing windfall led to greater and greater ambitions. Now they are finding how integrated they are into this globalized world.”

The multi-sector coalition effort to Fix America’s Economy makes energy supply solutions a priority.  Every business, organization, politician and association should consider signing on the document.

Free trade radicals that don’t like enforcing the rules have said
allowing all foreign investment is good.  Foreign investment is
money coming into our country to buy companies and assets, when we are
being drained by the trade deficit.  "It balances out," they say.

Not
really.  China uses the dollars purchased through their currency
manipulation to buy U.S. assets.  This is the Chinese government,
not fully private Chinese companies.  

"Sovereign
wealth funds" is the term.  They are government controlled funds
that buy foreign assets.  They are foreign policy tools, not
responders to market signals. 

The argument on these funds has not been well developed, and those voicing concern are successfully shouted down.  So far.

Now the SEC’s Christopher Cox has raised the concern, along with other U.S. and G-7 officials.  The China purchase of the Blackstone Group was specifically raised.

The rise of sovereign wealth funds,
along with that of government-owned companies that are publicly traded,
Cox said, "call into question the adequacy of our enforcement and
regulatory regime."

Solutions are probably not mere openness.  Sovereign wealth fund
investment is probably worth slowing or halting.  National
security and market function are at risk.

Countries with sovereign wealth funds include: China, Korea, Kuwait,
Norway, Russia, Saudi Arabia, Singapore and the United Arab Emirates.