Research vouchers for graduate students

In today’s Toronto Star, Ross Finnie and Alex Usher propose a voucher program to promote quality graduate research. I haven’t formed an opinion yet, but at very least it seems much better than the current system of government-to-institution transfers.

How to expand graduate education in Canada, by Ross Finnie and Alex Usher. Toronto Star (Feb 22):

On the supply side, new money needs to flow in ways that will foster the twin goals of expansion and quality.
Traditional measures, such as increasing government-to-government or government-to-institution transfers, or putting more money into research, would help, but offer limited guarantees that the money will promote expansion of graduate education where we need it most.
An alternative approach would be to attach funding to students directly, varying the amounts with the assessed standing of the student, based on grades, exams and other criteria.
Such a voucher-type system would encourage institutions to improve the quality of their programs as they compete for students, while also giving them the means to expand.
Channelling money through students would incorporate the much-vaunted benefits of the "single-payer" approach that generates efficiencies for our publicly funded health system, while opening up the "market" for graduate education.
In short, an intelligently structured set of transfers to universities based on the number of highly qualified graduate students they enrol would strengthen incentives to offer high-quality postgraduate education. The new resources these transfers brought to institutions would allow expansion of the system precisely where quality was best.
Students, who naturally want to enrol in the best programs they can, would themselves direct the funds toward the higher-quality programs. It is a market-type solution, with market-type efficiencies, though financed entirely with public money.

Epstein on the FDA and drug patents

I wish I would have heard the latest Econtalk podcast, “Richard Epstein on Property Rights and Drug Patents,” before writing my recent post on Mexico’s generic drug market.

Epstein, in conversation with Russ Roberts, discusses such things as what would happen if the FDA didn’t exist, the problems with long supply chains, the FDA’s orders of magnitude, and the impact of generics in the drug market. (h/t Econlog)

Do tariff reductions reduce welfare?

James Townsend (University of Winnipeg) has a paper published in the February issue of The Canadian Journal of Economics (subscription required) where he states that relative wages fell in industries where tariff reductions mandated by the Canada-U.S. Free Trade Agreement (CUSFTA) were deepest.

Here’s an excerpt from Townsend’s paper, Do tariff reductions affect the wages of workers in protected industries? Evidence from the Canada-U.S. Free Trade Agreement:

By working with microdata and using hourly wages, I make several contributions to our understanding of how the CUSFTA tariff cuts affected earnings. First, by using hourly earnings and controlling for individual characteristics, I am able to isolate the effect of CUSFTA on the wage rate, which is a measure of the price of labour. Previous studies have worked with average weekly earnings for broad groups of workers. Changes in weekly earnings may come from a combination of price changes, changes in the composition of workers forming the group, and changes in the number of hours worked per week. Second, I am able to compare the response in the union and non-union sectors, which may have important implications for understanding the political economy of trade policy. My results indicate that the CUSFTA cuts resulted in a decline in the wages of those workers in sectors facing the largest cuts relative to the wages of the workers in sectors that already had low tariffs prior to CUSFTA. This result holds for both the union and the non-union sector. Wages in the union sector are also found to be responsive to changes in the industry-specific real exchange rate and to other sectoral shocks; no similar response is found in the non-union sector.

There are two things I wish Townsend would explore (or explore more). One is the annual welfare cost to Canada caused by job protection, the other is the barrier that tariffs build by not allowing the reallocation of resources to their most productive means.

Regarding the first point, the best study I’ve come across is by Gary Clyde Hufbauer and Kimberly Ann Elliott, "Measuring the Costs of Protection in the United States." (1994) For each tariff-protected industry, the authors calculate the number of jobs saved, the consumer cost per job saved, and the resulting annual welfare cost to domestic citizens. They found that consumer costs exceeded worker wages.

Don Boudreaux expressed my second point well at Café Hayek after being motivated by a speech once given by John C. Calhoun. Here’s the best part (or read the whole thing here):

The deep lesson here is that, just as moving to freer trade does indeed upset some economic apple carts, so, too, does protection upset some economic apple carts. Given that both free trade and protection cause some specific job and business losses, protection cannot be justified -- as so many try to justify it -- by pointing to people whose economic expectations will be upset by freer trade. Free-trade advocates can counter with similar accounts.

Of course, free trade's justification cannot, then, be found in the fact that protection upsets some economic expectations. Free trade's proper economic justification is, in part, this: given that both free trade and the "prohibitory system" "destroy" some jobs and "create" others, it's best to let commerce and industry be guided by market signals and consumer sovereignty so that each producer is more likely than under protection to specialize in that occupation for which he, she, or it has a genuine comparative advantage. Thus will grow the wealth of nations.

Townsend's counter-arguement is that perhaps resources shouldn’t be reallocated to a more productive means because the workers from the once-protected industries may not have the skills to get hired in more productive industries. (A recipe for growth, no doubt.)

Since skills cannot be transferred between industries, workers may be better off remaining in a declining industry at a lower wage than they would be by moving to an industry for which they have no skills. As a result, shifts in demand result in persistent changes to the wage.

So long and thanks for the graphs

I've learned a lot from The Vancouver Housing Blog since I discovered it in December, so I'm sad to see that VHB is exiting the blogosphere ("at least for awhile"). I hope he'll be back.

Mankiw on cross-country growth regressions

A couple months ago I was debating whether to ask Prof Greg Mankiw about his thoughts on cross-country growth regressions, but I was too shy. I'm excited to see that someone else got to him.

I don’t have anything to add, I just thought it was a good post. Here's a short excerpt, but the whole thing is worth reading.

In...The Growth of Nations, I tried to spell out the reasons for my skepticism [of cross-country growth regressions]. I emphasized three problems, which I called the simultaneity problem (it is hard to disentangle cause and effect), the multicollinearity problem (most of the potential determinants of growth are correlated with each other and imperfectly measured, making it hard to figure out which is the true determinant), and the degrees-of-freedom problem (there are more plausible hypotheses than data points).

Gapminder - didn't you know?

I hesitated to blog about Gapminder earlier when it occurred to me that many of you might already know about it, but I was shocked (shocked!) when an acquaintance of mine said that Gapminder was "fun for ten minutes." (I forget her exact words.) There's more here than one would suspect from first glance. I recommend watching this demonstration by Hans Rosling, "professor of international health at Sweden's Karolinska Institute, and founder of Gapminder, a nonprofit that brings vital global data to life."

Here’s a link to Gapminder. The site features tutorials.

Addendum: Happyjuggler0's comments to this post make me think that I probably should have also provided a direct link to the new Gapminder Beta (which can also be found near the top of my last link). The tutorial for Gapminder Beta is in the top left corner ("help"). I'm really looking forward to being able to import data into this. What a great tool!

Early regulation: Mexico’s generic & 'miracle' drugs

What happens when True Dough is confined to a small space? She writes a lot, she copies and pastes a lot, and she evidently refers to herself in the third person (which she would never, ever do in person.)

I’ve been thinking a bit about Mexico’s current mis-information problem when it comes to generic drugs and "miracle" drugs. I’m convinced: there is a solution in free markets, but certain early government regulation, perhaps even temporary, should have been implemented to get Mexico’s undeveloped generic drug market off on the right foot. First, I’ll admit that most of my information on this subject comes from Global Insight economist Ben Shankland, who has been covering the subject for at least the past few months (although none of his pieces have public links -- sorry). Good reporting on this elsewhere seems hard to come by.

Here’s Shankland’s latest from Feb 9, Generics Industry in Mexico Calls for Help:

Consumers’ confusion over generics and non-equivalent copies continues to present a serious challenge to manufacturers of legitimate, off-patent medicines in Mexico…. There are an estimated 120 firms currently producing non-original medicines of varying quality in Mexico.

Here’s Shankland again, this time in "Miracle Drugs" Under the Spotlight in Mexico, Feb. 6:

The Mexican pharmaceutical market regulator, COFEPRIS, has called for the national competition authority PROFECO to help pursue manufacturers of so-called "miracle drugs". In an interview with the Diario Monitor newspaper, COFEPRIS chief Juan Antonio Garcia Villa estimates that the trade is worth approximately US$900 million per year, and that it has been partly responsible for a surge in Adverse Drug Reactions (ADRs) in Mexico from around 300 per year in 2000 to nearly 9,000 in 2006. The rising rates of deaths and intoxications have come despite the fact that effective pharmacovigilance is still "virgin territory" for Mexico, according to Garcia Villa. Significance: After years of crackdowns, legal reforms and forced inspections (see Mexico: 10 June 2005: ), efforts to halt the trade in these products continue to be ineffectual.

What is Mexico to do? The 2006 NBER Working Paper "Regulating Misinformation," by Edward Glaeser and Gergely Ujhelyi addresses the topic of misinformation in the advertising of drugs (h/t Healthcare Economist)

Here’s what the authors have to say about three methods of government regulation:

We consider the effects of three different forms of government intervention: taxes or bans on advertising, counter-advertising and taxes on profits or goods. If advertising is just misinformation, then taxes or bans on advertising yield second best options that weakly dominate all other government interventions. Counter-advertising where the government tries to refute private firms is sub-optimal because it creates a costly advertising response by the private firms. Price caps and taxes on consumption can be welfare enhancing, but they yield less social surplus than directly taxing or limiting advertising. A change in the tax code that stops firms from deducting advertising expenses is equivalent to a tax on advertising and yields similar results.

But evidence suggests that it is likely that none of these regulations would be effective in Mexico without damaging social surplus. First, bans on advertising have proven to be ineffective in Mexico, partly due to the flow of information across borders.

Shankland (Feb. 6):

Both COFEPRIS and PROFECO are members of the Mexico-U.S.-Canada Health Fraud Group (MUCH), a trilateral body that joins competition authorities and healthcare regulators in the three countries in an effort to stamp out bogus medicines. However, despite a constant stream of enforcement actions on both sides of the border, little can be done to stamp out illegal television advertisements for these products in Mexico, with many ads broadcast from U.S. soil. Within Mexico, a more vigorous attitude from PROFECO would be welcome, as the chronically under-resourced COFEPRIS is unlikely to overcome this threat to public health by itself.

Glaeser and Ujhelyi also propose taxes or bans on advertising. As Shankland pointed out after the Mexican senate refused a 15 per cent tax on medicines last month, "any plan that would have involved increasing the retail prices of medicines would have had direct consequences in a market where out-of-pocket spending remains the norm for most consumers of prescription medicines."

Maybe the market has solutions. I stumbled across a WSJ article dated 14 Feb 2005:

Victor Gonzalez has come up with a novel prescription for business success here: cheap drugs, cheap doctors -- and a dose of sex.

Mr. Gonzalez, 57, is shaking up Mexico's health-care system and changing the way drugs are sold here. By spotting gaps in the country's drug market and regulations, he is able to offer low-cost medicines and inexpensive care to millions who lacked both. By raising awareness of generics as an alternative to pricey brand-name drugs, he has revived the fortunes of domestic makers and posed a threat to the U.S. and European pharmaceutical companies that dominate Latin America.

(The "dose of sex," by the way, has to do with the skimpily-dressed models that help sell Mr. Gonzalez’s services and products.)

In 2005, Mr. Gonzalez had 2,550 stores. What ever happened to him and his Farmacias del Ahorro? Doctors and at least one law firm accused him of selling shoddy drugs, but he continues to expand his small empire. "In Mexico, Farmacias del Ahorro accounts for some 25% of the market in unit terms and 6% of sales in value terms" (Global Insight, 24 Jan. 2007). Last month he opened his first outlet in Chile.

So, a final thought: Perhaps there is a free market solution to Mexico’s misinformation problem, and one that doesn’t involve taxes on advertising, etc.; however, it could have been done better. Perhaps early government regulation should be considered when markets are not able to solve for massive negative externalities (in this case, the health and death of Mexicans).

I’m not suggesting that Mexico should follow the blueprint of the FDA. Further, I’m not the only free marketer who advocates early regulation in undeveloped health markets (check out Arnold Kling’s recent admission – see, I’m in good company*). But think of the market solutions in the U.S. For example, Wal-Mart has a program where they offer cheap prescriptions for some 314 generic drugs to more than 14 states.

Mexico’s market solution is very similar, the big difference being that the quality of drugs offered by Mr. Gonzalez is apparently much lower than the drugs offered by Wal-Mart. Still, Mr. Gonzalez accounts for 25% of the market. This means that individuals aren’t getting the proper medicine, and Mexico’s generic market is suffering (doctor’s find it easier to prescribe something from Pfizer, etc). Early regulation (perhaps even temporary) in this undeveloped market could have corrected this before the mess even began.

* -- I should have made clear that Kling is commenting on an entirely different subject, but following the link will tell you this.

Corcoran on Pigovian taxes

Terence Corcoran doesn’t believe in Pigovian taxes. In his latest anti-Pigovian tax article he reasons that decreased smoking rates don't coincide with increased price rates, therefore we shouldn’t expect gas consumption to decrease in response to taxes on gasoline. Here’s an excerpt from his article in yesterday's National Post:

According to [Prof Greg Mankiw], "economists ... have found that a 10% increase in the price [of cigarettes] causes a 4% reduction in the quantity demanded. Teenagers are found to be especially sensitive to the price of cigarettes: a 10% increase in the price causes a 12% drop in teenage smoking."

In practice, however, the link between price and smoking seems a little less direct and a lot more uncertain. Real cigarette prices in Canada (using Ontario as a measure) have rolled up and down by as much as 80% over the last 20 years, with impacts on smoking prevalence that are far from clear. The link between price and
smoking is certainly far from the mechanical one implied by Prof. Mankiw...

We appear to be witnessing a decline in smoking, including among teenagers, but the movement in smoking rates seems strangely disconnected from price. Teen smoking declined between 1993 and 2001, for example, at a time when prices first fell and then remained flat. We also know that smoking is now subject to the greatest onslaught of regulation short of an outright ban. What role has price really played?

Could it be, in the case of gasoline taxes, that people have a much better idea of the economics of prices and demand than economists? Using price to change behaviour and shift demand forces all individuals to make major compromising decisions. Large numbers would have to continue to consume gasoline at high prices, forcing them to curb their consumption of something else. That's the result planners want, but it is not obvious to consumers that it will work or that it is fair. Look what happened to tobacco.

Not knowing a lot about the tobacco industry, I can’t argue with Corcoran too strongly, but he does fail to take into account the impact of increased cigarette prices on substitutes, something regulations were not responsible for (unless you account for medications to curb cravings, etc). I can think of a few examples. Statistics Canada finds that fine cut tobacco has been used as a substitute when prices are on the rise. As another example, price increases have allowed cheap generic brands of cigarettes to enter the market (even as a non-smoker I noticed their quick market entrance). And finally, how many Canadians attempted to cut costs (say, by purchasing tobacco in the tin and rolling their own cigarettes) rather than immediately quitting? In sum, Corcoran fails to mention that increased prices may have encouraged substitutes to emerge on the market, which is the same affect that a Pigovian tax should have.

Dependence on anything, whether it’s cigarettes or gasoline, cannot be cut overnight, but (to return to the theory on gas taxes), increased costs of gasoline should prompt industries to invest and switch to lower-cost fuel options.

Still, I’m not entirely sold on the Pigovian gas tax. As a low tax it’s ineffective, as a high tax it can be harmful. The only way I can conceive it as having higher benefits than costs is if corporate taxes were slashed and replaced (in part) with a Pigovian tax charged to industries, those most responsive to changes in natural gas prices.

Addendum: Prof. Brian Ferguson has a good post on Corcoran's article.

Your Views

Mark Thoma at Economist’s View has a cool new idea. He writes:

I am going to try something. It is based upon The Economist's decision to publish all of their letters to the editor in a blog. I have created a blog called "Your Views." Anyone can post there.

I suspect there are a lot of people who have good ideas for a blog entry but don’t have the time or interest to actually develop a blog. I’m eager to see how this works.

I’ve also started something new. I’ve been filing videos of interest to me on a YouTube channel I call True Dough Tube. I started it because I’m unable to watch videos in their entirety on my laptop; however, I’ve since started saving clips that I’ve seen and enjoy. My "video log" and my "what I’m watching" folder contain econ-related content, while my "favorites" folder may not be of interest to readers here (it's basically my video log with additional non-econ related videos). I’ll continue to post econ-related videos to my video log as I stumble across them. It’s not a major project, but there’s no sense keeping it to myself.

The sticky mess we’re in?

The quality of Canada’s new and existing jobs is slipping, concludes CIBC economist Benjamin Tal after calculating the latest Job Quality Index (JQI), which is based on compensation (70% of the index) and job stability. Tal suggests that the JQI is slipping because self-employment is rising (not necessarily a bad thing if it’s encouraging workers into the labour force who had previously outsiders) and/or unskilled workers are being used as substitutes for skilled workers because Canadians lack the right skills.

Perhaps an interesting statistic would be the relative "stickiness" of the JQI over time. To the extent that we can expect bad jobs to replace good jobs more quickly than vice versa, stickiness may be somewhat predictable, depending whether the index is rising or falling. But if the JQI quickly rebounds after falling, and if we know which components caused the JQI to fall, this may be telling.

For example, consider scenario A and B in period of time (t), both of which take the JQI to the same level below JQI (t-1). In scenario A there’s weak compensation due in large part to an increase in self employment spurred by individuals inside and outside of the labour market. There’s also weak stability because an increase in jobs in western Canada draws workers (again, from within and outside of the labour market) west to try on jobs until they find a satisfactory match.

In scenario B the situation is similar, only now the greatest weight pulling down the JQI is unskilled workers being used as substitutes for skilled workers when in actuality they are not substitutes. Again, consider that JQI at B is at par with JQI at A.

Would either scenario have a stickier JQI? The significance has to do with our productivity and our ability to rebound from a recession. In scenario A we have a weakish economy but more people in the labour market. In scenario B we have a weakish economy and evidence of more of a mis-matched, unskilled labour market. If we can agree that we're seeing a mix of scenario A and B, perhaps the [edit: greater ] A is, the less sticky we can expect the JQI to be. To be clearer, studies have shown, for example, that "a lack of employment stability, job skills, and occupation-specific experience can impede welfare recipients’ abilities to obtain “good jobs” or transition into them from bad ones."

On a side note, overall I like CIBC's’s JQI as a raw estimate. It has its weaknesses (no pun intended); for example, it's based only on compensation and job stability. However, it also avoids mistakes made by others (eg, CIBC uses data from 100 separate industries, rather than data from industry aggregates).

Skilled immigrants and earnings

In a paper published by Statistics Canada, Garnett Picot, Feng Hou, and Simon Coulombe suggest that Canada’s policy on points-based immigrant selection and higher educational standards has not lowered the probability that an immigrant will enter a low income bracket; however, it has changed the composition of immigrants in chronic low income.

Basically, the authors show that many skilled immigrants are not able to secure high-paying jobs before their arrival. They saw that once skilled workers entered low income, they only had a slightly higher chance of exiting it than high school educated immigrants, but their relative advantage of exiting low income increased marginally over the period observed.

Excerpts from StatsCan:

For the purposes of this report, "chronic" low income was defined as being in low income at least four of the first five years in Canada. The report found that nearly one in five (18.5%) of recent immigrants who arrived between 1992 and 2000 were in low income at least four years during their first five years in Canada. This was more than twice the corresponding rate of around 8% among Canadian-born people.
For the group that arrived in 1993, the five-year chronic low-income rate was 20.5%. For those who arrived in 2000, it had declined to 16.2% as the economy improved.
There were two possible reasons for the decline: the more favorable labour market-related characteristics of immigrants entering in the late 1990s, and improving economic conditions (business cycle). The report found immigrant characteristics accounted for virtually none of the improvement; improving economic conditions accounted for the majority.
Overall, the large rise in educational attainment of entering immigrants and the shift to the skilled class immigrant had only a very small effect on poverty outcomes as measured by the probability of entry, exit and chronic rates.
This is because by the early 2000s, skilled class entering immigrants were actually more likely to enter low income and be in chronic low income than their family class counterparts.
In addition, the small advantage that the university educated entering immigrants had over, say, the high school educated in the early 1990s had largely disappeared by 2000, as the number of highly educated immigrants rose.
Changes in entering immigrant characteristics did alter the composition of the immigrants in chronic low income.
Among those who arrived in 2000, 52% of those in chronic low income were skilled economic immigrants. About 41% had university degrees, up from 13% in the 1993 cohort.

And from the report: (pdf warning)

… With respect to immigrant class, immigrants in the skilled economic class were more likely to enter low income than their family class counterparts, possibly because the family class immigrants often entered an already economically established family. This relative disadvantage observed for the skilled class increased significantly over the 1992 to 2004 period, when the number of skilled class immigrants rose. However, this should not necessarily be interpreted as meaning that individuals in the economic class do worse in the labour market (i.e., in term of individual earnings) than their family class counterparts. The opposite has historically been the case.

This is an interesting report because it’s acting as fuel for debates from all sides. On one hand, it can be seen as a call for more friendly policies towards skilled immigrants. (As long as labour regulations create barriers to immigrants, to what extent can we really expect the contributions of skilled immigrants to be greater than lesser-skilled immigrants?) Martin Collacott, on the other hand, has used the report to further his anti-immigration argument (which I don’t buy).

The nation's state

Here’s a fun map from Carl Størmer that compares the GDP of U.S. states to other nations.

(Click for a larger view)

From what I can tell, it seems like it might be somewhat accurate in terms of ballpark figures. For example, Canada’s 2005 GDP was USD1131.8 billion while Texas’ was USD989.4 billion. What's a couple billion?

Anyway it’s interesting to consider.

Water exports vs. food exports

What are the chances that Canada will export water to the U.S. in the foreseeable future? Slim, says the Canadian government. But maybe there's a better alternative to the US's water woes: the exportation of water-intensive commodities.

Neil Reynolds explored this issue back in the Jan. 26 issue of The Globe and Mail. I've been meaning to comment ever since. First, here's an excerpt from a paper he quotes from, The Water Footprints of Morocco and the Netherlands by A.Y. Hoekstra and A.K. Chapagain:

Although bulk water itself is not a tradable commodity, agricultural commodities – that generally consume a lot of water during production – are increasingly being traded. As a result, water use within a nation is no longer an appropriate indicator of national water demand, at least not if one takes the consumer’s perspective. ...The water footprint of a country is defined as the volume of water needed for the production of the goods and services consumed by the inhabitants of the country. The internal water footprint is the volume of water used from domestic water resources; the external water footprint is the volume of water used in other countries to produce goods and services imported and consumed by the inhabitants of the country.

Mr. Reynolds draws from this report:

Canada's dependence on U.S. produce, and the water it contains, raises ethical as well as economic considerations. As the Council of Canadians often asserts, the United States is beginning to run out of water. ("We live next to a superpower," says Maude Barlow, who is the council. "And the superpower is getting mighty thirsty.") But the United States uses the bulk of its fresh water in the production of food — more than 80 per cent of water it consumes. And Canadians are principal beneficiaries. We get 60 per cent of the fruits and vegetables that we eat from the United States. Canadians, so to speak, are drinking the United States dry. Is it not in our national interest to replace this precious water — if only to keep the food coming?

…In one academic study published last year by UNESCO, two economists (A.Y. Hoekstra and A.K. Chapagain) looked at this issue from the perspective of the Netherlands… The academic conclusion: "International trade can result in water savings provided water-intensive commodities are traded from countries with high water productivity to countries with lower productivity."

All factors considered, Canada helps save the world's water supply by buying California lettuce and Florida oranges.

If I understand Mr. Reynolds right, he's saying that it's more efficient for Canada to purchase oranges and lettuce from the U.S. rather than from other countries with lower water productivity. Of course, we also have the incentive to purchase these goods from the U.S. because of lower transportation costs and shelf life reasons, so I'm not sure why Mr. Reynolds chooses to spin it this way. I see it differently.

If we're taking a lesson from Hoekstra and Chapagain, Canada (with its greater water supply) should have a comparative advantage in water-intensive commodities that actually grow in our climate and soil. Increased efficiency would result from Canada selling the U.S. certain water-intensive commodities because it would save the U.S. from having to import (or desalinate, or whatever) its water. Therefore, following Hoekstra and Chapagain's theory, the U.S. would help save the world's water supply by buying Canadian water-intensive commodities.

If Canada has a comparative advantage in water-intensive commodities over the U.S., it hasn't been realized. First, the U.S. might enjoy a degree of independence in food production. Second, the market is distorted. If subsidies to farmers were killed, comparative advantage within and across both countries would surely become a little clearer, thus allowing resources to be reallocated to their most efficient means. In other words, as long as farmers in arid lands are being subsidized to water their low-quality soil, regions will not achieve their comparative advantage, resources will not be efficiently allocated, and a vicious circle will ensue (eg. farmers might continue to be dependent on government initiatives such as the Canadian Wheat Board, or perhaps they too will rely on subsidies, if the CWB closes).

Of course, Canada may never have a great comparative advantage over the U.S. in water-intensive commodities. The Financial Times, Jan. 31:

Unlike other big WTO members such as the European Union and Japan, the US cannot sign a Doha deal where it loses benefits for farmers but gains export markets for its manufacturers and service companies. The power of the farm lobby means the US needs new export markets for agriculture to make up for any cuts in subsidies. This puts it on collision course with the "Group of 33" developing countries that want to protect their small-scale farmers.

So much for that. Load up the water.