Economics

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Apr 13, 2016 Dani Rodrik

كمبريدج - لم يحظ نظام التجارة العالمي بشعبية كبيرة في الولايات المتحدة أبدا. ولم تحصل منظمة التجارة العالمية ولا تعدد الصفقات التجارية الإقليمية مثل اتفاق التجارة الحرة لأمريكا الشمالية (NAFTA) والشراكة عبر المحيط الهادئ (TPP) على دعم قوي من الرأي العام. لكن هذه المعارضة الواسعة لم تكن منظمة.

الفرق اليوم هو أن التجارة الدولية انتقلت إلى وسط الجدل السياسي. فقد جعل كل من المرشحَين للرئاسة الأمريكية بيرني ساندرز ودونالد ترامب من المعارضة للاتفاقيات عنصرا رئيسيا لحملاتهما. وانطلاقا من آراء المرشحين الآخرين، يشكل الدفاع عن العولمة بمثابة انتحار انتخابي في ظل المناخ السياسي الحالي.

قد يكون الخطاب الشعبوي حول التجارة مبالغا فيه، لكن قليلون هم من ينكرون حقيقية المظالم الكامنة. فالعولمة لم تعزز النمو الاقتصادي. ودمرت العديد من الأسر العاملة بسبب تأثير انخفاض تكلفة الواردات من الصين وبلدان أخرى. وكان الفائزون هم رجال المال والمهنيون المهرة الذين يمكنهم الاستفادة من توسيع الأسواق. في حين لم تكن العولمة الوحيدة (أو أهم) قوة دافعة لعدم المساواة في الاقتصادات المتقدمة، بل كانت مساهِمة في ذلك.

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PS Events: What Economics is Missing

Neglect the insights of women, particularly in economics, and society suffers. At PS’s next virtual event, What Economics Is Missing, Minouche Shafik, Dani Rodrik, Vera Songwe, and others will debate how to create the conditions for achieving genuine inclusivity in economics.

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0 Comments on this paragraph, 24 Comments on this article

ezra abrams Jun 29, 2016

"few deny any longer that the underlying grievances are real"
uh, didn't some of us, maybe not fancy pants PhDs, say before trade started, uh, how am I gonna compete with cheap labor ???

"fairness concerns in ways that the other major contributor to inequality – technology – does not. When I lose my job because my competitor innovates and introduces a better product, I have little cause to complain."

10 years from now , I'm pretty sure this will seem as clueless as the NAFTA boosters now look
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Manu Oquendo Apr 24, 2016

Professor Rodrik knows that trade agreements during an imperial cycle are instruments of the Empire's geopolitical priorities.
WTO and TTP's are precisely that and represent No significant change from the British position in the Opium War or from the root causes of the American Civil war. Power battles.
In a world dominated by Social Democratic redistribution at the State level, a trade system based on the scale available to the best placed producer generates externalities which are bound to remain with the rest of the producers--losers. A vicious circle which only reinforces de Power Position of The Empire.

A game defined by the "Winner takes all" rule is not a game, is a loaded dice.
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Val Samonis Apr 18, 2016

RE: “exchange of market access” is causing more problems than it solves.

Of course; but trade negotiations are conducted by lawyers who have always adversarial "tit for tat" attitudes imposed by their education and their practice. We need negotiators who are able to understand and act on the positive sum game proposals.
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Wim Roffel Apr 17, 2016

Crucial to development of countries is that they are capable of setting their own rules and making their own mistakes.

Trade treaties like TPP and TIPP aim to destroy that capability and to paralyze countries - just like the EU is paralyzing its member states.
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Barry McHugh Apr 15, 2016

I have made the same argument myself about the lack of uniformity in rules, which sees jobs move to regimes with softer regulation. Funny how now that I am older that I would prefer the argument to revolve around the relative poverty or prosperity of people in different locations. Both arguments have truth in them but are fraught with difficulties I.e. 'What is poverty in a rich country where if you don't pay rates and buy land you live alone?' The person in the poor country won't live alone but may only live half the number of years.
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John Brian Shannon Apr 15, 2016

Hi Dani,

A long time ago when there were unicorns on the Earth, there was a justifiable need for international trade agreements in order to spur trade, increase movement of capital flows and to promote movement of labour — but mainly to gain access to potentially larger markets in both developed and developing nations.

International trade agreements like NAFTA and even the TPP are throwbacks to a day when we didn’t have all of that. Many global economies were practically closed markets with a few rare exceptions.

It’s almost the opposite these days — globalization has certainly prevailed — and it is the rare country that isn’t selling or buying wares from around the world on a daily basis.

North Korea is a closed market, Japan is nominally closed (although it is a huge exporter) and only a handful of other countries could be considered ‘closed markets’ in any substantive sense.

In your home country, you can probably buy a car, a music player, clothing, food, and almost anything else — and it likely wasn’t built, created, or grown, in your country.

Globalization has succeeded wildly and we now live in a globalized world.

How’s it working?

For the people in developed nations it has meant 25-years of inexpensive goods on store shelves — goods that were either assembled, grown, or created in developing nations — which has been a bonus for developed world consumers, and it has also benefited workers in the developing world.

Unfortunately, it also led to many high-paying jobs being sent overseas, resulting in higher unemployment and even worse social ills than that, in developed nations.

Liberalized international trade has become all that it could be.

Which is fine. It’s served it’s purpose and we now have open markets around the world with levelization of trade, capital, knowledge, labour, and general market equilibrium — if not market symbiosis.

But there isn’t much more room for globalization to grow. Other than tidying-up some intellectual property rights regulations, we’ve arrived at our free trade destination. We’re already living in the globalized economy. Full stop.

Where do we go from here?

There are a number of things that can strengthen our domestic economies without turning back the clock to the (almost) closed economics of the 1960’s.

Read my fully expanded comment at: https://johnbrianshannon.com/2016/04/15/nafta-tpp-tariff-me/

As always, a great pleasure to read your thoughts here at ProSyn, Dani.

Cheers, JBS
- John Brian Shannon Apr 18, 2016
  
  Hi Harry,
  
  Those are fair questions.
  
  Of course, there are two paths for countries to choose;
  
  Re: Your Question #1:
  
  "Why, given the size of the population in a country such as China, is there a need or them to export? Surely there are enough people in that country that a market for any goods produced is readily available, and that the production of such goods will be profitable because of the size of that market."
  
  Brief Answer for Question #1:
  
  a) Isolationism is where the country does not engage in any meaningful international trade.
  
  This has been tried in the past, and it has been found that nations pursuing this policy lost ground vs. the nations that *did* engage in international trade.
  
  It's not that their economies didn't progress -- it's just that every economy that engaged in international trade progressed faster.
  
  b) Free trade where the country freely trades goods and services with other nations (and this is a big one) also allows other nations to invest in their economy -- much as Toyota spending billions of dollars in the North American economy to build auto assembly plants (usually building them during our recessions) that provided many thousands of jobs for unemployed GM, Ford and Chrysler workers.
  
  In short; International trade is a net benefit for almost every country, especially when viewed over decades.
  
  Re: Your Question #2:
  
  "Why should any country be concerned about the ability to transfer assets around the world without restriction? Surely those assets should be used to facilitate the civil society in which they were created. Not transferred for use in another country, particularly ones as large as China and India."
  
  Brief Answer for Question #2:
  
  You're assumption that 'country A' can produce everything it needs is incorrect.
  
  Countries like Switzerland, don't have any oil and gas reserves. If the citizens of that country want to drive modern vehicles, they need to import oil and gas.
  
  (Nowadays, they could buy EV's and just plug them in every night, but what about tourists that may want to drive their own vehicles through the countryside? And what about transport trucks and buses?)
  
  Import gas and oil for transportation use, or ride your horse, was basically the deal in Switzerland for decades.
  
  Another point: Some countries have a high tech sector and can readily build their own computers, etc. but some don't have that level of technical expertise, even in the 21st century.
  
  Taiwan did the world a huge favour by taking a computer chip that was designed in the U.S. and manufacturing it cheaper, faster, and with higher quality than any country in the world.
  
  Because of this specialization, Taiwan was able to build a booming economy from nothing and capture almost the entire global market share of computer chips, due to economies of scale and a sterling reputation.
  
  Every computer in the world is much cheaper to purchase, on account of Taiwan's astounding performance in the computer chip business.
  
  It's not only Taiwan. Every country has products or services that it can produce or offer -- at a significant advantage relative to other countries.
  _____
  For another example: If you want fresh pineapple or bananas, you're going to be buying from countries that can reasonably produce those items at a reasonable cost, even when shipping costs are factored in. If you live in Iceland or Norway, you can't produce those items at a reasonable cost.
  
  Therefore, international trade is a bonus for consumers as it lowers the price and raises the quality of goods and services, relative to each country producing everything it needs on its own.
  _____
  It is also a bonus for shipping companies and oil and gas producing nations, as you can imagine.
  
  To give you some idea of how big the global shipping industry is, it is handy to look at its overall CO2 emission levels.
  
  The global shipping industry emits 2% of the worlds CO2 emissions -- even since most ships have converted to super-clean natural gas power, instead of burning hideously dirty 'bunker fuel'.
  
  The global aviation industry also emits 2% of the world's CO2 emissions -- and now, many airlines and air cargo carriers are burning biofuel blends that lower emissions by up to 80%.
  
  See the Boeing biofuel program: http://www.boeing.com/principles/environment/index.page
  
  Now to put it in context:
  
  Canada, with 36 million people emits 2% of the world's CO2 emissions.
  
  South Africa, with 53 million people emits a little over 2% of the world's CO2 emissions.
  
  So you can see that shipping and non-military aviation are large beneficiaries of international trade, and provide millions of jobs to citizens around the world.
  
  And consumers, businesses, and industry can purchase larger quantities, a wider range of products, and at higher quality -- all at a lower price.
  
  That is the short list of positives to support international trade.
  
  Now we need to do a little more work on making 'free' trade 'fair' trade.
  
  But that's a topic for a different day. :)
  
  Best regards, JBS
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- harry wilkinson Apr 17, 2016
  
  Just one question for you. Why , given the size f the population in a country such as China, is there a need or them to export? Surely there are enough people in that country that a market for any goods produced is readily available., and that the production of such goods will be profitable because of the size of that market.
  
  Second question. Why should any country be concerned about the ability of being able to transfer assets around the world without restriction? Surely those assets should be used to facilitate the civil society in which they were created. Not transferred for use in another country, particularly ones as large as China and India.
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George H Blackford Apr 14, 2016

For a country to accumulate foreign debt as it runs a persistent trade deficit is not, in itself, a bad thing. The US followed this course throughout the nineteenth century, but we used that debt to import capital goods and foreign technology. We invested in public education and other public infrastructure that led to increases in productivity in agriculture and manufacturing. We built national railroad and telegraph systems and created steel, oil, gas, electrical, automobile, and aviation industries. We protected manufacturing as our economy grew more rapidly than our debt, and as Europe squandered its resources in senseless conflicts, by the end of World War I the United States had become a net creditor nation and the economic powerhouse of the world.

This is not the course we have followed over the past 40 years. We have exported rather than imported capital goods and technology and borrowed to import consumer goods. We invested less rather than more in our public education, transportation, and other public infrastructure than other countries. While we made huge advances in the electronics and computer industries, we have not protected manufacturing, and we have outsourced the manufacturing and technological components of these industries to foreign lands. As a result, our economy is not growing more than our debt, and it is the US that is squandering its resources in senseless conflicts.
Keeping our exchange rates high so that American corporations can buy cheap abroad as they sell dear at home and take their profits in tax havens while everyone else goes deeper and deeper into debt is not free trade.

What's more, the export-led growth model that is thought to justify this kind of ‘free trade’ has failed miserably. It led an increase in the concentration of income throughout the world (especially in the US) and to increases in debt relative to income in the importing countries that caused the financial catastrophe we went through in 2008, the economic stagnation that followed, and the social unrest we see throughout the world today. (See: http://www.rwEconomics.com/Ch_1.htm , http://www.rwEconomics.com/htm/WDCh_2.htm , and http://www.rwEconomics.com/htm/WDCh3e.htm .)

This has to change if we are to survive this catastrophe with our social, political, and economic institutions intact. (See: http://www.rwEconomics.com/LTLGAD.htm .)
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Thaomas H Apr 14, 2016

Presumably it is covered in the book, but why should trade restrictions as opposed to some other polices be used to achieve "social norms?"
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Adam Harper Apr 14, 2016

This piece is a remarkably imaginative, articulate, and seductively sweet call to arms in the latest trade war. The 1930's would be proud.
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Steve Hurst Apr 14, 2016

I am getting slightly tired of hearing references to the argument that the poor of the world need raising out of poverty at the cost of the West, which incidentally in practical terms is implicit in UN Agenda 21. This task is never ending. The population of Africa is due to double in a matter of a few decades for example The task there will therefore double and that is without additional problems - social or environmental due to that population growth. The idea the Western consumer, a minority population in the world, can carry the world is wearing a bit thin. By all means assit the development of measures that help the poor, but with that comes the necessity for developing economies to adopt measures that reinforce that objective not undermine it

As for TPP, how can anybody talk about a deal that has no meaningful public detail and appears to favour corporations above all? As for the claim TPP has strong support in the general public, please validate this with data
- Steve Hurst Apr 15, 2016
  
  @Alisdair
  
  ; )
  Perhaps I should have said I am fed up of any reference for or against the idea of the Western consumer uplifting the poor of the world
  
  You are quite correct I misread the first para as claiming support was evident for TTP
  
  I was speed reading between transactions
  
  Thnx for pointing this out and apologies to DR
  
  Regards
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- Alisdair Hamilton-Wilkes Apr 14, 2016
  
  Urm did you read this article?
  
  I think you have confused it's jist because it is highly critical of TPP and suggests it does NOT have widespread support.
  
  Furthermore the author is critical of the assertion that Africa et al will be able to grow from free trade with the west alone. You actually seem to be in violent agreement.
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M M Apr 13, 2016

This whole article, which is a very good one, well done, can be summarized in only two words” Real Partnership”. As long as there is no real partnership between the parties neither will there ever be due to lack of trust and other considerations, retrenchment becomes the order of the day. The trade deals that Iran is currently making with some countries in the West to the dismay of the US Administration may become the norm in the future.
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Robert Bruce Apr 13, 2016

With every major presidential candidate now opposed to new trade deals, and UK on the verge of Brexit, it seems that Global economic co-operation is the whipping boy for all our current woes. This would be fair if outsourcing to China and other developing countries had pushed the G8 economies into recession, but it did not. In fact, despite huge relocation of manufacturing, countries including the UK and USA managed sustained growth in total GDP and employment, up until the 2008 financial crisis. The true issue has been one of domestic economic policy, where we have failed to redeploy displaced workers, and allowed most of the benefits of Globalisation to accrue to the top 1%. A return to national protectionism and retreat from Global trade will not change this. Only voters can do that, by electing governments which look after the interest of their poorer citizens, and generate realistic plans for investment and job growth in a new sustainable economy.

Robert P Bruce - author www.TheGlobalRace.net
- Peter Schaeffer Apr 18, 2016
  
  RB, the financial / housing bubbles of the pre-2008 period were very much a response to trade-related real economic decimation. The bubbles ended in catastrophe. Like it not, there is a clear line of causality from "globalization" to economic disaster.
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- stephan Edwards Apr 14, 2016
  
  If this is winning I would hate to see losing.
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- Adam Harper Apr 14, 2016
  
  As a consumer, you ARE the winner of globalization.
  
  Congrats
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- stephan Edwards Apr 13, 2016
  
  Isn't anyone in politics in the US in the last 30 years who gives a damn about anyone who works for an hourly wage. The so called benefits of globalization have gone to a very small minority. We on the hourly side have lost jobs that paid a decent wage in Manufacturing and IT and even phone services. We had them replaced with jobs like nursing home attendant, Starbuck's Barista or mopping floors in a methadone clinic bright futures there. We hate globalization for very good reason. Since every politician holding federal office is beholden to the 1% to get there any hope for change is some what "limited". So if the elites and their enablers in congress and academia want to understand the abandoned half of societies hatred of globalization I would suggest they look in the mirror. The voters you say? How much input do the voters have really?
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Robbie Jena Apr 13, 2016

I think, you can NOT have one highly populated and smart country produce everything the Planet needs and make the Planet go...It is that simple.
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Jerry F. Hough Apr 13, 2016

Somehow foreign profits must be redistributed. The Dow was 750 in 1982, 3000 in 1992, and 6500 in 2009. It is now 1800This was been a period of wage stagnation. That is evil and politically no longer sustainable.

Now we have had three straight months of declines in retail trade, while the market is bouncing nicely--because the Fed says things here and abroad are too bad to raise interest rates.

And, of course, all the talk is of cutting corporate tax rates. The time has come to reverse the talk. A certain percentage of foreign earnings should be earmarked for a specific popular new social benefit.

Or maybe it should be an income tax bonus for citizens. Let us limit all immigration, including legal--maybe not to 1924 levels, but severely. Couple an enforceable and severe penalty on hiring with a change in the 14th amendment . All this is easy, and then couple it with amnesty.

The reason to link benefits with citizenship is that it gives people an incentive to become citizens. With such a large proportion of the poor being non-voters, the politicians naturally vote in favor of the affluent.

Things like this need to be done, or Trump, who certainly should be elected this year, will seem mild in comparison with what is coming. But since economists are rich, I suppose a revolution is needed.
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MK Anon Apr 13, 2016

Dani, it's great to read you, thank you!
Please do me a favor. can you please share a bit of your wisdom with your colleague J.F. who seem to struggle with models beyond the meat/potatoes producers .
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Jose araujo Apr 13, 2016

The globalization movement has bee driven and motivated by a paradigm change in our economies. We changed from a resource/manufacturing paradigm to the knowledge society, where most of the value is captured through property rights and copyrights.

The west has been promoting free trade aiming to lower manufacturing costs and increase property rights, if we think of it, we kind of want to buy the pig and pay in sausages.

Its not going to take long before the owner of the pig learns how to make sausages, or just refuses to pay for the recipe..

We have been in a constant devaluation of work and labor, the result can be seen. If you undervalue your most valuable asset and value creating mechanism, the whole value of your society is going to fall.
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