Wait, why do the Haitians have more right to the jobs than the Costa Ricans?

Yeah, that's pretty bizarre logic. Why would Rawlings have more of a "duty" to bring business to Haiti than, say, Microsoft, or Toyota, or any other company?

And why would an earthquake increase this duty?

That's not bizarre logic, that's not logic at all. It's just words.

Also, I'd imagine that while Haiti would welcome manufacturers with open arms, in the short term, the "business" they'd prefer to come their way would be someone buying up #### Haitian companies sell/export. That's cash into the economy now, not waiting for the trickle effects of one plant's worth of wages.

the "business" they'd prefer to come their way would be someone buying up #### Haitian companies sell/export.

By ####, I presume you mean babies?

Yeah, while it's certainly nice when businesses engage in charity and humanitarian deeds, it's not their obligation or primary reason for existence. Rawlings is no more obligated to manufacture in Haiti than the New York Times is obligated to hold onto their employees so that they can go bankrupt faster.

Nice one, Rich, real nice.

Jeff nails it dead-on. Even as a non-capitalist it makes little sense to me to think that Rawlings owes Haiti anything. It would be great if as some level of humanist capitalism they decided hey, if it works for us, why not there instead of elsewhere, they're having it rough so maybe it would help us both. I don't see the harm in those kind of thoughts; I can see how this tone would mostly raise a HOW DARE HE response from many, though.

And my idea of any company acting like that makes my Mets optimism look positively suicidal in comparison.

does Rawlings have a duty to send some business back to Haiti?

Paul Shirley doesn't think so.

I don't understand Jeff K's point. There's not much difference between a "Haitian company" exporting things from Haiti and a "foreign company" like Rawlings exporting things from Haiti, from the workers' point of view or the short-term point of view. Isn't it the Haitian company (that is, one where the bosses are Haitian) that leads to more "trickle-down effects" and better long-term policy?

As for Paul Shirley, I can honestly say that I've never been so surprised and disappointed to find out that someone was a total asshole. If I'd bought his book I couldn't stand to have it in the house any more.

Yeah, while it's certainly nice when businesses engage in charity and humanitarian deeds, it's not their obligation or primary reason for existence. Rawlings is no more obligated to manufacture in Haiti than the New York Times is obligated to hold onto their employees so that they can go bankrupt faster.

Yeah. It's not like they're selling a lot of baseballs in Haiti.

I can understand the argument "Hey Nike, you're selling a lot of $150 sneakers in US inner city neighborhoods, how about putting a few factories there?". But this is not even that.

The argument makes sense to a certain extent in that since they had a factory and employees there recently (or in econo-speak, capital and human capital), they could start it up again more easily than most other companies could start something up there.

I don't understand Jeff K's point. There's not much difference between a "Haitian company" exporting things from Haiti and a "foreign company" like Rawlings exporting things from Haiti, from the workers' point of view or the short-term point of view. Isn't it the Haitian company (that is, one where the bosses are Haitian) that leads to more "trickle-down effects" and better long-term policy?

Yeah, I'm not sure about this either, I was just agreeing generally. I'm sure some economist will pop in and educate/preach, though.

The argument makes sense to a certain extent in that since they had a factory and employees there recently (or in econo-speak, capital and human capital), they could start it up again more easily than most other companies could start something up there.

20 years ago ain't exactly recent. I doubt there's any positive difference in Rawlings starting production in Haiti than any place else. On the downside Haiti has no infrastructure, basically no government, and is hideously corrupt.

Oh, 20 years ago? I retract my statement.

on the downside Haiti has no infrastructure, basically no government, and is hideously corrupt.

Can a place be hideously corrupt if it has no government? Hideous corruption is usually good for attracting big businesses that are in search of unskilled labor, but the lack of any government at all is not good.

There's not much difference between a "Haitian company" exporting things from Haiti and a "foreign company" like Rawlings exporting things from Haiti, from the workers' point of view or the short-term point of view.

From the workers' point of view, you're correct, but that's why I specifically mentioned quick cash into the economy. In the short-term (which is really what is being espoused here, the notion that Haiti needs help now because of the earthquake) there absolutely is a difference. A Rawlings factory is only going to create an economic bump of the salaries of the plant workers and perhaps some revenue to a few local suppliers used by the plant. Money spent on Rawlings products isn't going to end up in the Haitian economy. However, if some Haitian export company has $20,000 of widgets sitting in a warehouse and Rawlings or someone else were to choose those widgets instead of their normal widget supplier, that money is going to enter and most likely stay in the local economy.

Can a place be hideously corrupt if it has no government?

Sure. You just end up paying protection money instead of bribes.

I like to call myself an economist. I'd say that the main advantage local entrepreneurs have relative to foreign ones is that they are more aware of the limitations of the local economy.

I'm no economist, but I wonder if Rawlings wouldn't save money on labor to put their plant back in Haiti. Wages have got to be a crapload lower in Haiti than in Costa Rica. (I mean, I'm sure Haiti's wages are lower than just about anyplace's, but Costa Rica's got a high standard of living by Latin American standards.)

Not that other factors (the aforementioned political instability in Haiti, etc.) wouldn't offset that--just saying.

Isn't it the Haitian company (that is, one where the bosses are Haitian) that leads to more "trickle-down effects" and better long-term policy?

Well, yes. But the point is that virtually all of the benefits of Rawlings opening a plant there right now (assuming it were even feasible) are going to be trickle-through. Other than the local suppliers (if they exist, I don't know where Rawlings gets its raw goods or how much local buying an individual plant does), you're basically talking salaries. Even if you were looking at equivalent dollar figures of salaries vs. inventory purchasing (not terribly likely), those wages are going to slowly come to the workers while the inventory purchase will go off on Net-45 or whatever.

Sure, a new Haitian-owned plant would have more trickle-through/down effects even than the Rawlings plant. But as a percentage of the total economic benefit provided, it's going to be much lower. Because the direct influx will be there, too.

Long Term Rnk Short Term
-------------- ----------
HaitiOwn Plant Buy Inventory/Raw Materials from HOwn company
ForeignOwn Plnt New HOwn Plant
1-Tm Inv Purch ForOwn Plant


The one-time inventory/raw materials purchase is a quick fix, but obviously if it doesn't turn into long-term contracts, it has little future benefit. But for quick, we-need-money transactions done in the course of business, the Haitians (who, as I mentioned, would welcome manufacturers with open arms) would do better by selling goods than building PPE.

I'm no economist, but I wonder if Rawlings wouldn't save money on labor to put their plant back in Haiti. Wages have got to be a crapload lower in Haiti than in Costa Rica. (I mean, I'm sure Haiti's wages are lower than just about anyplace's, but Costa Rica's got a high standard of living by Latin American standards.)

Reading this made the whole original idea seem kind of gross as it would undoubtedly end up coming to practice.

Per BR, no MLB players have been born in either Costa Rica or Haiti, and only Ray Stoviak died in either country (Costa Rica). You'd think baseball would have caught on a little in Haiti, since they share the island with the DR, but I guess poverty and isolation (via mountain range) have prevented that.

I'm no economist, but I wonder if Rawlings wouldn't save money on labor to put their plant back in Haiti.

Purely on a labor $/hr cost, probably. But is that likely to be enough to offset, on its own, the incredible costs that can be involved in making a move like that? No. Incentives usually defray some of those costs, but I honestly have zero idea what position Haiti is in to even be able to offer those kind of incentives at the moment. I doubt pretty strongly that this would be a net positive proposition for Rawlings.

Incidentally, Lassus, don't be so quick to dismiss the notion of enlightened capitalism being a valid and utilized option. If the situation you pose in #6 were to come to be and a company had multiple options including Haiti, all other things equal, they will put a value on helping/doing good. If for no other reason than the beneficial PR. Problem is, all other things aren't equal. You'd have to be near bonkers to spend serious infrastructure money in Haiti right now. It wasn't all that smart 6 months ago, and epic seismic events ripping apart a poverty-stricken populace don't tend to set minds at ease.

FYI, there was a piece on rebuilding Haiti's economy on NPR's All Things Considered that is worth a listen. The first point made was that just prior to the earthquake, Haiti was doing very well (for Haiti, of course).

There's not much difference between a "Haitian company" exporting things from Haiti and a "foreign company" like Rawlings exporting things from Haiti, from the workers' point of view

Actually, there is a difference between locally owned companies and foreign manufacturers in labor intensive assembly and garment production in low-wage poor countries: the foreigners normally pay higher wages and have superior working conditions. That is true in countries all over the world, from China to Vietnam to Mexico to Bolivia to African countries to Pakistan*.

Haiti, because of its relative instability, has very little foreign direct investment. However, no country (not even Mexico) has more favorable terms to export its garments into the U.S. than does Haiti. As such, the largest sector of export-oriented labor in Haiti is in garment manufacturing. Most of Haiti's exports (including cash crops) go to the United States.

But in contrast to our very friendly terms for garment manufacturing, our ag policies harm Haiti's agriculture. Sugar is an important crop to almost all Caribbean countries, including Haiti. We have strict sugar quotas to keep prices in the U.S. high. Haiti is not favored by our quotas. Haiti also grows rice. However, its rice growers are harmed by our (and Europe's) huge subsidies to rice farmers, which creates massive overproduction and then dumping onto the world market. The subsidies, of course, benefit poor consumers in countries like Haiti. But when a substantial percentage of your labor is in agriculture, the net effect is quite negative.

"Nice one, Rich, real nice."

Thank you, Lassus. It is a very serious point (one which went over your head, though). Haiti is overpopulated. Massively, so. That depresses wages and has helped to devastate Haiti's environment. If any of you ever fly to the Dominican Republic, you will notice that it is a lush country, full of trees. But if you fly over Haiti, you will notice it's a desert. They have chopped down almost all of their forests for fuel. Overpopulation has thus resulted in Haiti exporting its most valuable asset: its smart people. Haitians who have an education leave Haiti. They work in the U.S., Canada and the D.R. And from those countries send a lot of money home. But for the export of its own citizens, Haiti would be far worse off today than it is.

*Notice sometime where the garments you buy come from: chances are very strong, they won't come from India. You might wonder why not, doesn't India have hudreds of millions of poor people willing to sew clothes and assemble shoes, the same as in Bangladesh or Pakistan? Of course the people of India would love those jobs. And some have them. However, India (even since it has partially liberalized its economy) has protected its domestic manufacturers. And the result is, in low-tech and low wage industries, India gets almost no FDI. India's economy is like the mirror opposite of China. The Chinese have a bottom-up approach which has raised 6 hundred million people out of poverty through low-wage labor and improved elementary education and so on. India has far better universities and high-tech programs for its smartest people. But India has done everything possible to keep its poor people living in squalor in villages with a very bad education system for everyone but the few who are rich or very smart.

However, no country (not even Mexico) has more favorable terms to export its garments into the U.S. than does Haiti.

Is this the case? I could swear I remember a story on NPR (This American Life, perhaps?) about Cambodia's uniquely sweet deal wrt this. Aha, I see that they were the lone quota-free Asian nation (prompting HK, Singapore, Taiwan, and Malaysian firms to produce for export from Cambodia), but the quotas in for that industry are all gone now, thanks to the WTO.

Anyway, I'm looking at Hope II, and I'd have to disagree with your assessment of it. Sure, it grants duty-free rights for 70 million SMEs of both knit and woven apparel, but I don't see a marked difference between that and our agreement with Oman. And the only thing it's got over NAFTA is the 3-1 origin sourcing deal, but that's entirely designed to bring the knit-to-shape jobs to Haiti. For any country that isn't desperate for those jobs, that portion is not all that valuable. And considering the ILO requirement, I'm not sure where the notable advantage is for Haiti over Oman, much less Mexico and Canada.

FYI, there was a piece on rebuilding Haiti's economy on NPR's All Things Considered that is worth a listen. The first point made was that just prior to the earthquake, Haiti was doing very well (for Haiti, of course).

Well, they had just gotten out of arrears with the World Bank, but looking through the CIA Factbook, I don't see much else of happy note recently. I guess three years of positive GDP growth (miniscule, after being negative in 2005) is something.

Interestingly, and bang on-topic as to why Rawlings wouldn't want to come back, is the data on governmental delays/roadblocks to development. From the World Bank: "On average, opening a business took 204 days. For comparison, the average was 73.3 days in Latin America and 16.3 days in OECD countries."

Is this the case? I could swear I remember a story on NPR (This American Life, perhaps?) about Cambodia's uniquely sweet deal wrt this.

The Haitians have a unique trade deal with the U.S. It was concocted in the GW Bush Administration and it is only for Haiti. The idea, of course, was to try to do something to bring up the standard of living of our poorest hemispheric neighbor, besides just giving them cash.

The program is called the "Haitian Hemispheric Opportunity Through Partnership Encouragement" (or the HOPE Act). Here is what it says about it on the USTR site:

The HOPE II Act was enacted in 2008 as a continuation and expansion of the original HOPE Act of 2006. These agreements acted as extensions of the benefits provided by the Caribbean Basin Initiative trade programs. HOPE II provides for duty-free access for up to 70 million square meter equivalents (SME) of knit apparel (with some t-shirt and sweatshirt exclusions) and 70 million SMEs of woven apparel without regard to the country of origin of the fabric or components, as long as the apparel is wholly assembled or knit-to-shape in Haiti. HOPE II provides for duty-free treatment of knit or woven apparel under a "three for one" earned import allowance program: for every three SMEs of qualifying fabric (sourced from the United States or certain trade partner countries) shipped to Haiti for production of apparel, qualifying apparel producers may export duty-free from Haiti or the Dominican Republic to the United States one SME of apparel wholly-formed or knit-to-shape in Haiti regardless of the source of the fabric. HOPE II also provides for duty-free treatment for certain brassieres, luggage, headgear, and certain sleepwear. HOPE II allows these Haitian goods to enter the United States duty-free if shipped either directly from Haiti or through the Dominican Republic.

The fact that Haitian producers can buy cheap Indian cotton and make it into garments for sale in the U.S. is what is so unique. We greatly restrict the imports of cotton products, unless the cotton was grown in the U.S. But Haiti has the lone exemption (among all apparel manufacturing countries) from the origin restrictions. And because of that, the cost of production in Haiti is much lower than it is anywhere else, including anywhere ins S.E. Asia.

There are two reasons why the D.R. is involved in this program: 1) many, if not most of the garment manufacturers (that is, the owners of the factories) in Haiti are Dominicans, not Haitians or Haitian-Americans or other Americans. The D.R. is much, much wealthier than Haiti. Its per capita income (in PPP) is 6 times that of Haiti; and 2) Haiti's port facilities (pre-earthquake) were inadequate. So the manufacturers from the D.R. wanted to be able to move the goods through Santo Domingo, where they were set up for imports and exports.

Weren't Haitian made baseballs considered to be of very poor quality? I seem to recall a lot of players complained the seams would loosen up very easily, for examples.

Right, I mentioned HOPE II in my post, specifically the origin sourcing portion. There are a couple of issues with putting that forth as unique to the US/Haiti trade relationship with significant impact:

1) It's not unique.

a) Check the Dominican Republic-Central America-United States Free Trade Agreement Implementation Act, and you'll find that the DR enjoys the same fabric origin waiver with no restriction on SME levels. As does Nicaragua.
b) The key thing to note is that while HOPE II is worded differently than our other bilateral trade agreements, it still ends up at the same place. You stopped underlining just a moment too soon; if you'll note the "if the apparel is wholly assembled or knit-to-shape in Haiti." That doesn't qualify it as an origin item under our agreements with, say, Australia or the other NAFTA members. It would, however, completely fit the bill wrt our trade agreement with Israel. The same mechanism would mark it as a new product made in Israel, which could then be exported freely.

2) It's not a significant impact. The purpose of the Trade Preference Level (it's not called that in HOPE II, but it's the exact same thing) is not to boost the Haitian economy by allowing third-country fabric apparel to be exported by Haiti. The purpose is to allow third-country fabric apparel to come from Haiti up to a specific amount, *if the apparel is put together in Haiti*. There's a reason the language here is different than our other trade agreements. It's a jobs program, basically, with the incentive offered being duty waivers up to a specific level of exports.

As for cotton specifically, CAFTA is in the middle of an automatic process to remove all restrictions from all six member countries (plus the US.) It's already not unique to Haiti, and it's getting less so. Last, you missed a reason for the DR's involvement in the enabling mechanisms of HOPE II: because the DR is already basically a free zone under past, present, and future agreements.

As I said, while HOPE II is a very helpful thing for Haiti, the benefits it grants are not unique either directly or indirectly, the impact is focused on job creation by bribery and everything else is secondary, and lest ye forget, I will bring up the ILO requirements again. That *is* unique as far as I can tell, and it is burdensome. I continue to disagree with your assessment that Haiti via HOPE II is getting a better deal than any of 10-12 other countries, at least.