Good News

Andi Suruji of Kompas, today in his column, makes a good argument in supporting Asean-China FTA. Thumbs up.

Mangan ora Mangan.. yang Penting Merkantilis

Selama tiga hari berturut-turut Kompas memuat berita terpuruknya sektor pertanian Indonesia. Setuju, peningkatan produksi dan peningkatan pendapatan petani memang perlu diperjuangkan. Sederet masalah sisi produksi masih menghambat petani kita. Fluktuasi harga menjadi momok petani sementara akses bibit, modal, dan teknologi juga menjadi penghambat daya saing produk pertanian.

Kompas juga tepat mengagkat isu dis-integrasi ekonomi domestik ketika kondisi ekonomi eksternal sedang kacau. Tantangan geografis kita sebagai negara kepulauan menyebabkan segmentasi pasar dan terbatasnya economies of scale sehingga menjadi salah satu kendala pertumbuhan ekonomi. Sulit membayangkan perekonomian Indonesia bisa tumbuh seperti China karena kita punya hambatan infrastruktur. Oleh karena itu, meningkatkan integrasi pasar domestik sebaiknya menjadi salah satu acuan Kabinet ekonomi mendatang.

Tetapi konten sentimen anti-impor yang ditulis Kompas tiga hari berturut-turut membuat saya heran. Apakah pemahanam para penulis teresebut terhadap ilmu ekonomi makin melorot? Mudah-mudahan tidak. Tetapi artikel Kompas tersebut rasanya sudah "terjebak" dalam pemikiran merkantilisme abad ke 18 yang menganggap impor suatu kejahatan dan penumpukan devisa di dalam negeri sebagai barometer prestasi ekonomi.

Artikel tersebut menuliskan bahwa Indonesia telah "terjebak impor pangan" karena impornya yang kira-kira mencapai $5 milyar per tahun. Konten berita juga mengesankan perlunya "kebijakan berani" untuk swasembada produksi.

Saya tidak ingin masuk ke teknis ekonomi pertanian, tetapi saya ingin mempertanyakan beberapa hal yang muncul dalam artikel artikel tersebut.

Pertama mengenai impor dan devisa. Memang kita mengimpor sebagian pangan dan total nilai impor 2008 mencapai $5 milyar. Dari mulai gula, kedelai, dan komoditas pertanian lain yang kita juga produsen seperti ikan tertentu Indonesia pun mengiimpor.

Yang tidak ditulis Kompas adalah total ekspor non-migas Indonesia tahun 2008 mencapai $107 milyar. Ekspor produk perkebunan, pertanian dan perikanan Indonesia di tahun itu saja juga mencapai $29 milyar dan $21 milyar tergolong komoditas pangan (termasuk sawit, teh, kopi, perikanan). Lalu kalau kita impor pangan $5 milyar, apakah ini sesuatu yang mencemaskan bagi negara dengan penduduk lebih dari 250 juta jiwa dan termasuk dalam 20 negara dengan PDB terbesar?

Betul, impor menggunakan devisa dan ekspor mendatangkan devisa. Tetapi apakah perekonomian akan lebih baik dengan hanya mengumpulkan devisa? Penumpukan devisa hanya akan mengakibatkan Rupiah terapresiasi dan akhirnya malah menurunkan daya saing produk ekspor. Memang, salah satu cara menghindari masalah ini adalah dengan meniru China yang menukarkan sebagian penerimaan devisa ekspor kedalam aset asing (seperti US Treasury). Tetapi ini juga yang mengakibatkan ketidakseimbangan global yang pada akhirnya memicu krisis keuangan saat ini.

Kedua, apakah keberhasilan adalah jika apapun dapat disediakan sendiri? Apakah para penulis artikel tersebut belum pernah mendengar istilah intra-industry trade?

Contohnya begini. Mengapa negara produsen keju seperti Belanda masih mengimpor keju dari Perancis? Arab Saudi pun masih mengimpor kurma dari Tunisia atau negara Arab lainnya. Australia sebagai penghasil wool terbesar masih mengimpor kain wool atau jas ketimbang menjahit semuanya sendiri. Mengapa Eropa sebagai penghasil Airbus masih membeli pesawat Boeing, Embraer, atau produk IPTN? Jepang, sebagai produsen mobil dunia masih mengimpor Daihatsu Grand Max dari Indonesia. Lalu mengapa Amerika sebagai penghasil kedelai, gandum, dan produk teknologi tinggi masih mau impor kecap ABC dan Indomie dari kita?

Perdagangan membuka pintu bagi spesialisasi produksi sehingga produsen bisa mengeksploitasi skala ekonomi dan keunggulan komparatif nya. Perdaganan juga memungkinkan terjadinya spesialisasi produksi yang memberikan keuntungan terbesar. Ini kredo dasar teori ekonomi yang saya tidak temukan setelah membaca artikel-artikel tersebut.

Ketiga, apakah "kebijakan berani" itu berarti proteksi, subsidi, atau tata niaga? Kalau maksudnya proteksi, tidak ada gunanya untuk dibahas karena ilmunya sudah jelas. Kalau proteksi tersebut untuk mengurangi ketidakadilan karena subsidi pertanian negara-negara maju, jalankan saja mekanisme safeguard WTO secara transparan dan bukan lewat larangan ad-hoc. Kita tinggal perlu membuktikan kalau subsidi impor produk pertanian tertentu membawa akibat desktruktif oleh karena itu bea masuk perlu dinaikkan.

Kalau subsidi, saya setuju tinggal pertanyaanya mekanisme subsidi bagaimana desain subsidi yang tepat. Apakah meniru subsidi pertanian di Eropa atau Amerika yang terjebak oleh lobi politik? Apakah sebaiknya terarah (targeted) kepada petani atau dalam bentuk irigasi, bibit, dan extension services? Dengan perbaikan infrastruktur fisik, rasanya produk pertanian kita juga bisa kompetitif di dalam negeri. Miris rasanya kalau betul marjin keuntungan mengimpor jeruk China bisa lebih tinggi ketimbang mendatangkan jeruk Medan atau Pontianak.

Bagiamana dengan tata niaga? Kecuali beras yang memang punya bobot besar (22%) dalam konsumsi rumah tangga miskin, sulit menjustifikasi perlunya tata niaga untuk produk pertanian lain. Tata niaga dapat mendistorsi sinyal harga dan meningkatkan resiko petani terjebak dalam produksi komoditas tertentu saja. Katakanlah kita memaksakan adanya tata niaga kedelai. Bisa jadi harga kedelai naik secara artifisial sehingga petani tidak dibiarkan menanam produk dengan harga yang menarik seperti holtikultur (sayuran dan buah-buahan).

Keempat mengenai ketahanan pangan. I'm not an agriculture economist but why the concept of food security seems narrowly focused on the ability to produce rather on securing the ability to access food?

CPO Price Dictator (If Any)

Khudori, in his op-ed in Kompas, lamented that:

We are indeed the world largest CPO exporter, but the price of Indonesian CPO has been dictated by Rotterdam spot market and Kuala Lumpur future market.

and he concluded

Last, as second largest CPO producer after Malaysia, Indonesia should be taking important role in the searching and making of product's price, not dictated by others.

Well, of course the equilibrium price is determined by not only supply (where Indonesia belongs to), but also demand (the rest of the world whose growth has been slumped). And how are you gonna "take a role" in making up the price? Reducing the CPO production, or setting up a cartel with Malaysia? It might not work either, since, perhaps, there are numerous substitute for CPO. I don't know.

By the way, does anyone know how much does the palm cooking oil price in Jakarta cost lately? Palm cooking oil consumer may not be happy, if you cut the CPO production.

Now which one is which?

Not Tariff, but Subsidy and Bailout

Dede of Diskusi Ekonomi is apparently more optimistic than I on recent G20 meeting. Take international trade issue, he wrote that one of the important meeting's results was the agreement for not to adopt protectionism. Here is the official statement #13:

We underscore the critical importance of rejecting protectionism and not turning inward in times of financial uncertainty. In this regard, within the next 12 months, we will refrain from raising new barriers to investment or to trade in goods and services, imposing new export restrictions, or implementing World Trade Organization (WTO) inconsistent measures to stimulate exports.

This is surely a good policy. But the problem is whether the governments are effectively able to do that against own domestic political pressure? While they might not raise the tariff, which is a blatant WTO violation, it seems that the more subtle subsidies and bailouts are now gaining popularity --which is just another kind of protectionism. The US, for instance, now debated on whether or not to save those inefficient Detroit's big boys.

And The Nobel Prize Goes to....

Paul Krugman of Princeton and NYT columnist.

His academic work on increasing returns to scale in the international trade as well as economic geography are surely worth the Nobel-- although his partisanship tone in his NYT op-eds somewhat discounted it. But no doubt, Krugman is a prolific writer and as an economist, one of the best.

My favorite book is Pop Internationalism when he debunked those funny pundits' faux international economics theories by not only pointing names, but also deploying superb writing skills. Before becoming columnist, he was the most effective guardian against the economics illiteracy in public discussion. Lately, ironically, as a pundit, he has been the subject of the same contention.

He also earned fame for being 1998 Asia crisis analyst, partly due to his somewhat unrelated pre crisis column in the Foreign Affairs in 1994, The Myth of Asia's Miracle. Borrowing Alwyn Young's Asian countries' TFP analysis, he concluded that the high growth, the miracle, was not a result of total productivity but very much capital accumulation which is subject to diminishing return. I think this piece was my first encounter with Paul Krugman.

To me, and the baristas here, (early) Krugman's are the example for popular yet effective, no-nonsense, writings that get the economic theories right.

Footballnomics #10: will protection work?

UEFA just imposed the so-called "home-grown rule", which forced Champion League teams to have at least eight home-grown players. At least four must have been produced by their own academy, the other can be graduates from other local academy. This is a version of imposing nationality requirement. Under EU ruling, workers (including footballers) from EU member countries are treated as locals. So it will be illegal for UEFA or local FAs to force clubs to have a certain number of local players.

This article, and the related discussion thread, reminds me on the classical free trade vs. protection debate. Free traders argue that protection will reduce overall competitiveness. The other side of the camp argue that some kind of protection will serve as incentives for local business (clubs) to invest more.

In the case of football, I must say, both camps have valid arguments. However, we can not assess the impact now - maybe in two World Cups. Historical data doesn't help provide conclusion as there are mixed results. Italy's youth development system is pretty solid, and it is translated to the national team's achievement. The Netherlands also have a good system (Ajax and PSV are well-known as producers of young talents), but they never won any World Cup (I know, the won the 1988 and 1996 Euros). On the other hand, Brazil and Argentina's system are not better than the Europeans, but they have abundant skilled talents to guarantee the national teams always perform well. Same thing can be said for France.

If we talk specifically about England, well, the problem lies on the input. The average talents of children entering the football academy (at the age of 10-12) is poor, according to an article I once read. I don't know what the reason is. This just illustrates that such 'home-grown' protection may not help countries like England much.

In other words, protection doesn't necessarily help a country in globalization.

Is Import Bad?

Kompas daily said (translated):

In 2000, Indonesia imported 6.037 million tons of wheat. Five years later, in 2005, wheat import increased by almost 10 percent to 6.589 million tons. In 2025, import of wheat is projected to increase three times as much to 18.679 million tons. Soybean import, in the last five years (2003-2007), amounted to on average 1.091 million tons or 60.5 percent of total need.

Good or bad news?

But before answer it, hold on a second, you should hear my story.

In 2000, I bought not a single vinyl LP from the record store next door. Eight years later, in 2008, my vinyl purchase increased a lot to, say, 100 LPs. In 2025, my purchase of LPs is projected to increase god-knows-how-many-times as much to 300 LPs. My comic purchase, in the last five years (2003-2007), amounted to on average 5 books, or 60.5 percent of my total need.

It is a very good news for me, don't you think? Although I run a trade deficit against those record and bookstores, every purchase I made or plan to make implies that I somehow have the money to pay them in order to get those stuffs. In fact, part of the reasons why I work, sell the product or services to anyone but myself (read: export), and earn the money, is to buy those LPs and comic for myself (read: import).

And on independency issue: of course I depend on them. I have to live with the fact that I can not make a record at all and even if I try to draw a comic book, it would be obviously way costlier for me than doing economics (in comparison to, perhaps, Art Spiegelman on comic drawing and economics). It's no dependency, it's just a free trade.

On Doha

Here's Puspa's take on the extended, heated meeting there in Geneva -- Manager

On Doha

by Puspa

With rising oil and food prices, and the woes of the US domestic economy still taking a toll and the consequences of the financial crisis still unfolding —who cares about trade any more?

News clips of hundreds of Californians waiting in line at various branches of IndyMac Bank to claim their money seem to have diverted attention away from any other developments in international economic policy. Meanwhile, those who are new to the American mortgage markets are amusing themselves trying to figure out what’s behind acronyms of Freddie Mac and Fannie Mae.

Yet, something went somewhat unnoticed in the news last week. Negotiations of the previously-suspended Doha Round were re-opened last week in Geneva. The Doha Round remains a tough deal to conclude. The negotiations, initially scheduled to end last Friday (July 25^th ’08) continued up until today.

The negotiations continue to pit the two competing blocks, the developing countries (spear-headed by Brazil, China and India) vs the developed countries (US and EU negotiators carrying the torch for their ‘important’ constituent, the farmers).

The core contentious issues are still the same ones, agriculture and NAMA. After several impasses, there is yet to be an agreed formula to reduce neither domestic agricultural subsidies (a concession made by developed countries) nor an agreed set of modalities to grant Non-Agriculture Market Access (NAMA), which is largely translated into slashing very high tariffs in industrial goods, a practice currently adopted mostly by developing countries.

These issues have been sharp and dividing for the past few years. Should be any reason, that in these troubled times, any of the parties involved are in a position to relax their respective stands?

The answer is yes, if you believe that concluding the Doha Round is part of a continued effort to uphold the institutional mechanism of a world trading system that has operated for over half a century. The reason should be yes, if you believe that a positive breakthrough on Doha signals commitment of countries that have agreed to continually liberalize and lower tariffs.

In difficult times, one should aim at picking low-hanging fruits. Pascal Lamy’s efforts to come up with a compromise proposal, with a more modest aim of tariff reductions for both agricultural subsidies and NAMA, should be applauded. It’s now up to the big players to adjust their bargaining positions accordingly.

Defender of French Culture

Tyler Cowen writes:

The French spend approximately $3 billion a year on cultural matters, and employ twelve thousand cultural bureaucrats, trying to nourish and preserve their vision of uniquely French culture. They have led a world movement to insist that culture is exempt from free trade agreements.

Creative Destruction, p.2

Twelve thousand bureaucrats to defend a culture.

But my question runs deeper: first, what is the so-called French culture? Hanging out in a cafe thinking about existensialism, deep-fried potatoes, or a certain smooching technique?

Second, what is a culture --the thing to preserve against free trade-- anyway?

Addendum: I think Asterix would be the best possible answer for my first question. Or Tanguy et Laverdure.

But I don't think Asterix and Obelix need any help from the government's bureaucrats. They know, if they are indeed competitive, thanks to their very own magic potion, even the mighty Romans would give up.

On Fears for Free Trade

Tyler Cowen argued that:

What’s really happening is that many people, whether in the United States or abroad, are unduly suspicious about economic relations with foreigners. These complaints stem from basic human nature — namely, our tendency to divide people into “in groups” and “out groups” and to elevate one and to demonize the other. Americans fear that foreigners will rise at their expense or “control” some aspects of the economy.

Dani Rodrik retorted:

So the "us" and "them" characterization that Tyler attributes to irrational nativism perhaps has more to do with the absence of a common set of international rules on labor standards, environment, consumer safety, and so on.

Now, an anecdotal evidence from the English Premier League (I know Rodrik roots for ManU, and I Arsenal -- not that this fact's important though), on foreign players' impact on the three-lions national team performance, its Chairman said:

Does the Premier League hurt the national side? I think the answer to that has got to be yes.

What is more common than football's set of rules and standard? Yet, this Englishman prefers to blame those non-Britons players for the lousy performance of its national team that even doesn't qualify for Euro 2008 final round.

I can not imagine the EPL without foreign players.

High Rice Price Quiz

We know that:
a. The world rice prices hit the $1,000-a-tonne level for the first time
b. Indonesia’s rice production is estimated to be about 2m tonnes higher than consumption this year thanks to improving yields and an increase in the harvested area.

What can you infer?
Yes, sell the surplus and reap the windfall profit. I heard you said you always want to help rice farmers.

But the rice consumers might suffer, so, you said, we restrict export to tame the inflation. Why didn't you tell me the same story when domestic rice price is high and we wanted to import, but you said no? Let us be consistent, if the poor --and only the poor-- could not afford rice, provide them with the direct money subsidy. Let the middle and high incomes pay the market rate.

You know what, you can not talk about agriculture revitalization --itself a long term plan--, while at the same time propose rice export restriction. After all, you want to sell the agriculture output as many as possible at the price as high as possible, no?

(Subsidized) Blueberry and Raisin Ice Cream

Suppose Rizal likes ice cream. So far he can always buy it from AP, the seller, at an inexpensive price. AP usually gets his ice cream material, --blueberries and raisins--, from mostly Aco and, for smaller amount, Ujang. Why Aco? Because he offers lower price than Ujang.

It turns out that Sjamsu, by taking, say, Hillary and Barack's money, subsidizes Aco's soybean blueberries and raisins that allows him to become major supplier.

Of course Ujang dislikes the idea, but the question is: Should Rizal and AP condemn Aco and Sjamsu for taking Hillary and Barack's money for lower price of blueberries, raisins, and henceforth, inexpensive ice cream?

Good Coffee, Finally

OK, nothing beats Monmouth Coffee Shop yet, but after several weeks enduring mediocre and bad taste caffeine, today I relish to find a real good coffee at this place. And they play good jazz too, it was Miles Davis. Next time I might bring a pack of Sampoerna Mild and join that crowd in their smoking room with big table -- a rarity in this more health conscious western society.

Speaking of Monmouth Coffee, I learned that they just visited Indonesia to sample the best of Sumatra (Lintong, Mandheling, and Gayo). They really should extend the trip to Toraja, I must say. So if you happened to be in the old London at the moment, given their knowledge of properly roasting the beans, I am sure you can have oh-so-good full bodied coffee from Dairi at their place now.

Bill Easterly in his book praises globalization and trade as bringing Colombian coffee closer to his mug, via, well, Starbucks. But even if you condemn that green fairy label for spreading bad coffee and culture, you still could have way better coffee via specialties stores, using the same mechanism (namely international trade).

In trade, both who embrace urban mass culture lifestyle (that chain cafe's addicts) and coffee freaks and snobs (like me) are happy.

Questioning Krugman

Probably, this op-ed is what Aco's economist friend meant when he (or she) said about Krugman and fragmentation in trade theory. In that piece, Krugman wrote that on free trade:

"(But) for American workers the story is much less positive. In fact, it’s hard to avoid the conclusion that growing U.S. trade with third world countries reduces the real wages of many and perhaps most workers in this country. And that reality makes the politics of trade very difficult."

Dani Rodrik, as expected, praises this line of argument. But Greg Mankiw and Don Boudreaux are certainly much less impressed with such protectionist flavors.

I'd rather wait more numbers, and perhaps new theory, to appear on academic paper by Krugman himself. Nonetheless, it would be small wonder for me if this early assertion were picked up by protectionists from our side to defend anti free trade stance and hence bark at the wrong tree.

Why? Because the negative impact, if it's plausible, would be borne by workers in rich countries and comes from manufactured goods trade. Indonesia is rather far from being rich country at the moment and is struggling to strive in the said manufactured goods export. The winner is us and more free trade would be even better then. Not the other way around.

(Another) Natural Resource Curse

Dede of Ekonomi dan Politik di Indonesia (in Bahasa Indonesia) raised an interesting issue on the paradox between natural resource richness and low economic growth --or more technically called natural resource curse. He basically said that it is actually no wonder that countries like Indonesia, with its abundant natural resource, don't perform remarkably well in comparison to countries with limited resource for two reasons: First, the Dutch disease, real exchange rate appreciation makes producing tradable goods less attractive (Sachs and Warner, 1995). Second, weak institution as natural resources rich countries are more prone to corruption (Mehlum, Moene, Torvik, 2006).

Suppose, then, that we can get rid of those problems, are we now free from the spell? Alas, not that fast.

Hausmann and Klinger of Harvard (2007), --hat tip to undercover economist Tim Harford--, introduced the idea of economic space of production network (the proximity amongst products). In that space they spotted densed (manufacturing) and sparsed area (natural resource based products). Look at the paper for more detail of products.

And yes, they found that country with good economic performance tend to export products in densed (closely related products) space. Why? The flexiblity of country's acummulated capabilities to be redeployed across products, hence greater gain from trade.

It leads you to a very interesting situation: What to produce, and specialize in, matters and relying on exporting natural resource based products might be inherently a disadvantage. But it is costly for natural resource rich countries to redeploy production capabilties and to move into the centre of dynamic world production network.

At home, it also intuitively tells why after the crisis that brought back Indonesian revealed competitive comparative advantage to more natural resource based products, the country's export performance remains weak. Probably, we are now no longer that close to the most dynamic locus on global production network.

Don't miss this!

One of the best debates ever in the blogosphere: Dan Drezner, Dani Rodrik, Greg Mankiw, Tyler Cowen, Alex Tabarrok, Paul Krugman, and others. Of course, usefully summarized by Mark Thoma of Economist's View. Thanks to Dede who first alerted me to all this.

Who's afraid of banana?

My baby boy loves banana. I was told by his doctor that banana is good for babies. I so assume that many parents feed their babies with bananas, too. For them, and for the babies' sakes, less expensive banana is therefore a good thing.

Apparently, the government (and Indonesian Banana Association -- of course this is not their name, I made it up) disagree. So far, Indonesian banana market has been a good sale place for cavendish bananas from the Philippines. Last year, the price was good (as consumers, we don't care why it could be less expensive, we only care that it was relatively not expensive). As it turns out, and if the government accusation is correct, them Philippinos were doing a dumping strategy. That is, they were selling bananas at lower price to us than to their own folks.

And the government had to do something: cheap bananas are not good for the economy. So they came up with a decree imposing an anti dumping tariff on cavendish bananas from the Philippines (if you are curious, it is the Ministry of Finance's Decree No. 81/PMK.010/2006).

Ah, again.

Discriminatory trade arrangements

Yes, that is what the Free Trade Areas (FTA) should be called. An FTA is not free trade. It is a PTA, preferential trade agreement/arrangement. And "preferential" means discrimination. Suppose we have JFTA -- Jakarta Free Trade Area. Goods exported by West Jakarta to North Jakarta are tariff-free. But goods from Depok, Tangerang, and Bekasi are imposed some tariff if to be sold in Jakarta area. As a result, they can't compete with goods made in Jakarta. What do you call this, free trade? Nope. It's discrimination.

Suppose again, labor from Tangerang are cheaper than those of West Jakarta in producing hats (I use hats here, so that I can assume similar technology, no?). In the absence of tariff, Tangerang-made hats should be cheaper than West Jakarta-made ones. In the meantime East Jakarta doesn't produce hats. But their people like hats. Which hats they would rationally buy? Tangerang hats, of course. But what is the main goal of JFTA? To make the Tangerang-made hats less competitive. That is, by imposing the damn tariff, JFTA makes the Jakarta-made hats cheaper. Or more precisely, deceptively cheaper. East Jakartans now are buying hats from the inefficient West Jakarta's producers. And you're calling this free trade? Give me a break.

That was the main point in my presentation this morning in Kuala Lumpur for the 8th Annual Conference of Economic Freedom Network Asia. The theme this year is "Preferential Trade Agreements: Local Solutions for Global Free Trade?". Of course I wasn't talking about my imaginary JFTA. I was concerned with all the current movements in the region toward PTAs (and other type of discrimination, bilateral trade agreements, BTAs). I know WTO's Doha Agenda was fractured. But at least, if you really have to have some kind of "clubbing", do it on MFN (most-favored nations) principle. That is, a non-discriminatory way. And if you don't want the "spaghetti bowl effect" (boy it's messy), try unilateral improvements at home. While waiting for the WTO's major surgery.

Oh by the way, the Network also launched the 2006 Annual Report of Economic Freedom of the World. As usual, the Report has some interesting stuff inside, including of course the Economic Freedom Index; and now with a special chapter by William Easterly. Ape, who's also here will be talking about that. Ape, the floor is yours.

FTA | PTA | WTO | Economic Freedom Index

WTO and ... sorry... globalization

I was invited by Jogjakarta-based USC-SATUNAMA to give a talk on globalization before a group of NGO representatives. That's not an easy job, especially after yet another WTO fiasco in Hongkong.

It was a good crowd, though. They might hate globalization but at least they were willing to listen what actually globalization means. Some of them came to realize afterward that what they initially thought of globalization was actually globalism. That what they thought they hated was WTO, not the globalization itself. That liberalization, deregulation, and privatization are just some actions or process taken by institutions to cope with globalization. That globalization has both effects: positive and negative depending on how you react or respond.

Of course there were some who refused that globalization has positive effects. This included one participant who approached me at lunch time. He asked me lots of question as if I were Pascal Lamy. He was surprised that I didn't believe the WTO talks would work out well. In fact, I told him, I'm skeptical with all the WTO rounds. The fact that the US' and EU's governments are not willing to wipe out the huge subsidy to their farmers is enough not to believe that the WTO agenda will work for both developed and developing countries. I won't be surprised if both groups will have not reached agreement by March 2006, as they claimed they will. But I have hope that subsidy and other form of protections will diminish -- not thanks to WTO rounds, but to the time where everybody sees the merit of free trade. And globalization makes that possible. Globalization is inevitable, with or without Doha.

I was tired. In my flight back I grabbed a newspaper. There was this article reporting the premiere of the movie "Memoirs of Geisha" in Tokyo. According to the article, some people make fuss about it, because the movie is about Japanese women, but it is produced by Hollywood, directed by an American, and it features a Chinese as the geisha ("wrong nationality"). That reminded me of a play I attended two weeks ago. It was about the epic journey of Sawerigading as told by I La Galigo, a Bugis counterpart of Homer, the teller of Odysseus' journey. The play was directed by an American. It used spectacular lighting from Germany. The dialogues were delivered in Bugis and Makassar. The music were mixed: traditional Bugis, Java, and even Chinese tone. How can I not like globalization?

Protection, protection, protection

China produces a lot of steel. We need steel. When we buy, we like to pay at lower price. China overproduces: it's people don't need that much of steel. China would like to sell the remaining steel to other countries. Indonesia is close, so why not? Note that the term "overproduce" and "remaining" suggest lower price (why?). Conclusion: we can buy steel at a lower price that we used to. What's wrong with this story? Seems like everybody is happy.

But not so fast. It turns out, there is also a steel producer at home. It's been in the business for quite a long time (no, it's not an infant industry company). It worries that Chinese steel will outcompete theirs in price. What would it do? You're right. Ask for protection!

By the way, the company is state-owned. Sounds familiar?