LECTURE 2: COTTON WARS (PLANET MONEY PODCAST)
It’s about US vs Brazilian cotton farmers. US gets subsidized by their government and Brazil finds that unfair Not allowed according
WTO agreements
Brazil decides to take on, not only the US but other big countries like Japan
They win all of them except for the US at first
Later on they do win from the US and the WTO decides that the US must cut cotton farmer subsidies
The US ignores it, ever after it’s been ruled 3 times
Brazil’s only choice is to retaliate They go to other US industries such as cosmetics, cars & some medicine (after the WTO informed
them to what extent they can levy taxes) and told them that they would raise taxes if the government didn’t stop subsidizing
This way, Brazil managed to get all these US industries on their side
The US met with Brazil and said they cannot abolish that funding until 2012 Misunderstanding because Brazil thought they would
abolish in 2012 but the US didn’t necessarily
Another solution that they reached was that the US would now subsidize Brazilian cotton farmers as well. They still do.
LECTURE 2: SHOWDOWN AT THE WTO (PLANET MONEY PODCAST)
About flavoured tobacco Clove vs. Mint
Obama (2009) signed a big anti-smoking bill, specifically aimed at banning flavoured tobacco as this is popular amongst kids
Indonesia has been sending these to the US for decades
Indonesia noticed that mint flavoured tobacco (menthol cigarettes) wasn’t included in this ban Which is coincidentally mainly produced
in the US
Indonesia found this to be an international trade violation under the WTO
Geneva, Switzerland (WTO headquarters) received a letter from Indonesia saying that the US discriminates against clove cigarettes from
Indonesia Thereby ignoring WTO agreements basically saying that they cannot screw each other over
The two countries have to work it out on their own (2010-2014).
The US says they ban it to protect the kids. Indonesia says that’s bs because they still allow mint – you’re just protecting your own
tobacco companies. Stalemate, they don’t agree
They bring in experts (usually (former) diplomats) to decide whether the US violated the agreements Headquarters WTO
o Every other country that stands to win/lose over the US ban are meeting with them too (e.g. Brazil, Turkey, Guatemala)
Brazil sides with Indonesia
Turkey wonders if mint and clove are the same product
Guatemala finds too many ramifications and thus doesn’t take a side
1.5 year later: 190-page report saying that the US is right that flavoured cigarettes get kids into smoking. However, they do say that the
US is discriminating against an Indonesian product.
US appeals the decision Appellate body of WTO
o The US loses again Appellate body agrees with previous three experts
WTO gives countries permission to punish other countries (money) Indonesia wants $42mln from the US for every year the law is in
effect.
Indonesia & US reach a secret settlement
o US keeps ban & Indonesia starts selling (clove) cigars instead
o This is how it usually ends because countries don’t usually want to fight to the death over these things because they want to
participate in trade. In the long term there are bigger issues, it’s in everyone’s best interest to compensate.
Then… Donald Trump was elected
o “The WTO has been a disaster for this country”
o Trump administration fights back against these countries and also goes against the WTO itself
IS MINT A FLAVOUR?
All countries have to agree on who the WTO judges are. Every country has veto power. The US is now preventing every judge from even
being considered – not even allowing the process to begin with. There are 4 judges left, with 2 going out. This compromises the system.
o There’s no enforcement power within the WTO, just an agreement that everyone plays nice with each other
o The US is still on the field playing against other countries. They’re still bringing disputes to the WTO even though they do not
seem to want the system at all. “WTO: Can’t live with it, can’t crush your trade opponents without it
The US announced that they’re now considering banning all of the flavours including cigars, e-cigarettes and menthol
LECTURE 3: TIRES, TAXES, AND THE GRIZZ (PLANET MONEY PODCAST)
The average price of tires in the US has gone up 40% in the last five years
This has given rise to a new industry that barely existed before: tire rentals
Part of the reason is that rubber has gotten really expensive, but aside from that the US government is to blame for this increase in tire
prices
o Around 5 years ago, Obama put a tariff on Chinese tires in attempt to limit the amount that was being imported (less Chinese
tires More American tires)
Obama said that it saved an American industry, but as it turns out that it did not really do that
o It might have saved some jobs, but the economic consequences for the rest of the population was pretty bad
How did this tariff arrive?
o China started to compete with the US but for cheaper prices, which caused a collapse in the pricing of the US industry
o They had the support of the CEO of ‘Titan Tires’, Morrie Taylor Also known as ‘the Grizz’
He set the longest strike ever in the rubber industry, in collaboration with the steel industry
Even though they hated each other, the union and the Grizz hated the new Chinese tires more
The steel workers thought the Chinese were stealing their jobs
The Grizz thought the Chinese were stealing the Titan Tires’ business
o They started by asking Congress for help
They went to the International Trade Commission (ITC) They look at whether other countries are cheating in their
trade deals to the US. They agreed with them, saying what the Chinese are doing is wrong and they punished them
by increasing tariffs
The Grizz was satisfied but the unions wanted more
They felt that the damage that had been done to their industry deserved the most severe punishment that
China could get
This resulted in a 35% tax tariff for China
Gary Hoffbauer (economist of Peterson Institute) says there’s nothing to celebrate here
o This tariff maybe preserved 1000 jobs
It’s about US vs Brazilian cotton farmers. US gets subsidized by their government and Brazil finds that unfair Not allowed according
WTO agreements
Brazil decides to take on, not only the US but other big countries like Japan
They win all of them except for the US at first
Later on they do win from the US and the WTO decides that the US must cut cotton farmer subsidies
The US ignores it, ever after it’s been ruled 3 times
Brazil’s only choice is to retaliate They go to other US industries such as cosmetics, cars & some medicine (after the WTO informed
them to what extent they can levy taxes) and told them that they would raise taxes if the government didn’t stop subsidizing
This way, Brazil managed to get all these US industries on their side
The US met with Brazil and said they cannot abolish that funding until 2012 Misunderstanding because Brazil thought they would
abolish in 2012 but the US didn’t necessarily
Another solution that they reached was that the US would now subsidize Brazilian cotton farmers as well. They still do.
LECTURE 2: SHOWDOWN AT THE WTO (PLANET MONEY PODCAST)
About flavoured tobacco Clove vs. Mint
Obama (2009) signed a big anti-smoking bill, specifically aimed at banning flavoured tobacco as this is popular amongst kids
Indonesia has been sending these to the US for decades
Indonesia noticed that mint flavoured tobacco (menthol cigarettes) wasn’t included in this ban Which is coincidentally mainly produced
in the US
Indonesia found this to be an international trade violation under the WTO
Geneva, Switzerland (WTO headquarters) received a letter from Indonesia saying that the US discriminates against clove cigarettes from
Indonesia Thereby ignoring WTO agreements basically saying that they cannot screw each other over
The two countries have to work it out on their own (2010-2014).
The US says they ban it to protect the kids. Indonesia says that’s bs because they still allow mint – you’re just protecting your own
tobacco companies. Stalemate, they don’t agree
They bring in experts (usually (former) diplomats) to decide whether the US violated the agreements Headquarters WTO
o Every other country that stands to win/lose over the US ban are meeting with them too (e.g. Brazil, Turkey, Guatemala)
Brazil sides with Indonesia
Turkey wonders if mint and clove are the same product
Guatemala finds too many ramifications and thus doesn’t take a side
1.5 year later: 190-page report saying that the US is right that flavoured cigarettes get kids into smoking. However, they do say that the
US is discriminating against an Indonesian product.
US appeals the decision Appellate body of WTO
o The US loses again Appellate body agrees with previous three experts
WTO gives countries permission to punish other countries (money) Indonesia wants $42mln from the US for every year the law is in
effect.
Indonesia & US reach a secret settlement
o US keeps ban & Indonesia starts selling (clove) cigars instead
o This is how it usually ends because countries don’t usually want to fight to the death over these things because they want to
participate in trade. In the long term there are bigger issues, it’s in everyone’s best interest to compensate.
Then… Donald Trump was elected
o “The WTO has been a disaster for this country”
o Trump administration fights back against these countries and also goes against the WTO itself
IS MINT A FLAVOUR?
All countries have to agree on who the WTO judges are. Every country has veto power. The US is now preventing every judge from even
being considered – not even allowing the process to begin with. There are 4 judges left, with 2 going out. This compromises the system.
o There’s no enforcement power within the WTO, just an agreement that everyone plays nice with each other
o The US is still on the field playing against other countries. They’re still bringing disputes to the WTO even though they do not
seem to want the system at all. “WTO: Can’t live with it, can’t crush your trade opponents without it
The US announced that they’re now considering banning all of the flavours including cigars, e-cigarettes and menthol
LECTURE 3: TIRES, TAXES, AND THE GRIZZ (PLANET MONEY PODCAST)
The average price of tires in the US has gone up 40% in the last five years
This has given rise to a new industry that barely existed before: tire rentals
Part of the reason is that rubber has gotten really expensive, but aside from that the US government is to blame for this increase in tire
prices
o Around 5 years ago, Obama put a tariff on Chinese tires in attempt to limit the amount that was being imported (less Chinese
tires More American tires)
Obama said that it saved an American industry, but as it turns out that it did not really do that
o It might have saved some jobs, but the economic consequences for the rest of the population was pretty bad
How did this tariff arrive?
o China started to compete with the US but for cheaper prices, which caused a collapse in the pricing of the US industry
o They had the support of the CEO of ‘Titan Tires’, Morrie Taylor Also known as ‘the Grizz’
He set the longest strike ever in the rubber industry, in collaboration with the steel industry
Even though they hated each other, the union and the Grizz hated the new Chinese tires more
The steel workers thought the Chinese were stealing their jobs
The Grizz thought the Chinese were stealing the Titan Tires’ business
o They started by asking Congress for help
They went to the International Trade Commission (ITC) They look at whether other countries are cheating in their
trade deals to the US. They agreed with them, saying what the Chinese are doing is wrong and they punished them
by increasing tariffs
The Grizz was satisfied but the unions wanted more
They felt that the damage that had been done to their industry deserved the most severe punishment that
China could get
This resulted in a 35% tax tariff for China
Gary Hoffbauer (economist of Peterson Institute) says there’s nothing to celebrate here
o This tariff maybe preserved 1000 jobs
