Mode 2 trade in retail services: from Toronto to Buffalo

Buffalo, New York. Photo by Stephen Zimmermann

This article provides an illuminating example of that oft-overlooked mode of trade in services: consumption abroad ("Mode 2" in the lingo of the General Agreement on Trade in Services). The article focuses primarily on retail services, and particularly the substantial impact of Canadian shoppers on the Buffalo-area economy. It also addresses several other service industries, such as travel and tourism, health care, and live sporting events.

Jeremy Lin and U.S. Exports of Services

Photo source: Wikimedia commons

Writing in the Wall Street Journal, University of Chicago economist Austan Goolsbee recently prepared one of the most accessible and entertaining introductions to international trade in services that I've ever read. And the best part about it is that he used the sensational Jeremy Lin to illustrate his points. If only all the literature on trade in services could be this fun!

Thanks to SBP for pointing me to this article.

Target in India: Undermining the Case for "Headquarters Effects" of Outward FDI in Retail?

India's recent decision to indefinitely put off opening its market to foreign direct investment (FDI) in retail disappointed many. But that does not mean that foreign retailers are not busily taking advantage of opportunities in India. Much has been written about Wal-Mart and similar multinational, "multibrand" retailers' entry into the country via wholesale warehouse stores. But there is another way that these companies appear to have become  involved in the Indian economy: offshoring of headquarters operations. This article details how Target is using a team of several thousand talented Indian architects, IT engineers, and other skilled workers to plan and execute its entry into Canada. Several colleagues and I wrote a working paper that explored the links between outward investment and U.S. employment. One topic we explored is the extent to which affiliate activity leads to job growth in the U.S. by creating more work for retailers' headquarters staff ("headquarters effects"). Target's model for its Canada expansion would certainly appear to attenuate such effects. The key question is whether Target and other multinationals follow this strategy frequently, or whether it is an exceptional case. This is a question we will certainly be exploring.

One impressive public servant

Source: U.S. Dept. of the Treasury

I thoroughly enjoyed this piece from today's New York Times profiling Lael Brainard, our present Under Secretary of the Treasury for International Affairs. As a civil servant, I find her example an inspiring one: she is an extraordinarily talented economist and could have built a successful career without ever setting foot in government -- yet she chose to serve. And by all accounts, she has done an exceptional job. It is also inspiring to see a woman take such an influential role in a field, international finance, that has been all-too-overwhelmingly male-dominated for a very long time. She's the highest-ranking female Treasury official in history (at least according to her Wikipedia page).
Keep up the great work, Lael!

Chúc mừng năm mới -- Happy New Year!

Tết display in Saigon. Source: Wikimedia Commons

Today, Vietnamese people around the world are celebrating Tết Nguyên Đán (or just Tết), the Vietnamese Lunar New Year. Here is an interesting article that addresses how important the holiday is for Vietnamese retailers, much as the December holidays are for retailers in the United States. It also notes that demand for consumer goods for Tết was so high this year that it might  have been too much of a good thing, as robust consumer demand has done nothing to help tame galloping inflation. Also interesting is the article's quoting of one firm's prediction of a banner year for sales of baby products, as some observers expect an increase in births  due to this being a "lucky" dragon year in the Vietnamese zodiac.

A skilled-labor shortage... for retailing?

This article describes a problem we don't often think of: a skilled-labor shortage in the retailing industry. In this case, the particular industry segment in question is luxury retailing in India. It seems that more often than not, we are accustomed to thinking of retailing as a low-skill profession for which the labor supply is virtually unlimited (even though one could make a strong argument that virtually all retail jobs require specialized skills, from supply chain management, to merchandising, to the interpersonal techniques vital for securing sales). While the shortage in India is in all likelihood real, one might reasonably question whether the country ought to dedicate scarce educational resources to teaching people how to sell luxury goods. Perhaps that is a line of education best left to the companies doing the hiring.

Ikea's meatballs = unfair trade?

Image source: Steffan Wurzel, Wikimedia Commons

According to  Michael Freeman of TheJournal.ie, Belgian restaurateurs have launched an aggressive campaign against Ikea's low-priced meatballs. The leaders of the campaign are accusing Ikea of "dumping" the meatballs at artificially low prices that harm competition.

This is an interesting case on a number of fronts. It is the first time I have heard "dumping" used in the context of the restaurant industry. This term is more commonly associated with trade disputes involving tires, shrimp, and other traded commodities. And given that the alleged perpetrator is a foreign multinational, it brings to mind a vision of a most unusual anti-dumping dispute: imagine, for a moment, that Belgium's enraged restaurateurs won the day, and the government sought to impose some sort of special surcharge on Ikea's meatball sales. Does a forum exist at the WTO or elswhere at which the Swedes could hope to have such a dispute settled? I'm not sure.

In  the meantime, it will be interesting to see if the anti-meatball campaigners can capture public settlement. A lot of folks (myself included) have trouble saying "no" to a plate of cheap, reasonably satisfying meatballs.