My writing is “surprisingly naive and highly superficial,” to such a degree that it is obvious that I have “limited knowledge of global economics,” according to a pair of Canadian fair trade activists. They’re responding to a fairly conservative piece on the WTO that I published in my college newspaper in December. I find their tone disrespectful, but it would be unwise to fail to respond to published criticism of my opinions, so here are a few excerpts from their posts and my rebuttal.
Free trade causes poverty… there is no way you can lift protection without hurting people.
Trade liberalization hurts those factors of production earning economic rent in previously protected sectors. Every economist acknowledges this. In fact, the purpose of liberalization is to encourage the shifting of resources amongst production activities so as to achieve gains from comparative advantage. But saying that free trade causes a few job losses by improving allocative efficiency is very different than saying free trade causes poverty. Trade liberalization hurts some people, but it creates more winners than losers. The burden of proof lies with those opposing trade.
Also, there is an unfortunate misunderstanding because of the term “Fair trade” that has multiple meanings.
My piece particularly criticizes those who claim the global trading system is patently unfair and that the rules are “rigged” against the poor. I focused upon Oxfam because that is the group that is active at Gonzaga.
On the other (dark) side, take a magnifying glass to Walmart: just how many trillion dollars of profit is required to claim success? And at what cost to human dignity? Their profits, earned off the backs of abused 3rd world workers in 2004 were double the GDP of Denmark.
Wal-Mart’s gross profit is $68 billion, not trillions. Moreover, attempts at comparing corporations and countries are bunk, as Martin Wolf explains here. GDP measures value-added, while revenue measures total value.
My opinion of “abuse” depends upon whether you mean physical abuse or merely low-wages. I don’t know which you’re implying.
Finally, a plug for a wonderful independent film that is both highly entertaining and life changing in the sense that it demonstrates a feisty response to injustice. The Yes Men
I’ve seen it, thanks.
Most economists are patently insane… what most people don’t realize is that GDP growth increases with every murder, cancer victim, or robbery (which, for example, adds ‘economic activity’ to law enforcement agencies, hospitals, pharmaceutical companies & insurance companies, respectively)
Economists have been familiar with the broken window fallacy since Frederic Bastiat exposed it in the eighteenth century. I have a history of criticizing economists who think that hurricanes or tsunamis are good for growth. I have difficulty imagining a development economist recommending murders, cancer, and robberies as routes to promoting growth, so why voice this objection?
many ‘people’ do support “unfair trade” – they are called “corporations”
The WTO’s liberalization serves to eliminate rent-seeking opportunities, including those enjoyed by corporations.
the WTO is NOT “an exercise in international democracy” it’s a neoliberal sham that favours corporate profits over human rights” plutocracy at it’s finest
I stand by my original claim:
The WTO is an exercise in international democracy – since its trade agreements require a consensus to take effect, each member nation holds a veto. The walkouts by developing nations at Seattle in 1999 and Cancun in 2003 reflect their negotiating muscle. While the WTO has its flaws, it remains a viable trade liberalization mechanism for both developed and developing countries, as demonstrated by Brazil’s cotton subsidy victory against the United States at the organization’s dispute settlement panel.
The vast majority of poor countries who are “importers of agricultural products” don’t necessarily want to be importing subsidized agricultural crops from the EU/US that put farmers in developing countries out of work, which leads to increasing dependence on imported crops, which leads to food insecurity.
Thanks to the EU’s Everything But Arms program, LDCs are able to receive protectionism-inflated prices for their exports while importing food at subsidized prices. As Arvind Panagariya has repeatedly explained, that means that the end of market distortions in agricultural subsidies will be a terms-of-trade deterioration for LDCs. That won’t improve agricultural employment.
As for food security, it’s not obvious to me why poor countries would find importation to be an unreliable method of procuring agricultural products.
I suspect Jonathan Dingel has limited knowledge of global economics… even though economists are
I’m afraid that my letter to the editor was limited to 600 words, but I have a feeling that a longer piece would have done little to change your mind.