Dissent from trade pessimism

Fretting about the failure of the WTO’s Doha round of negotiations? Fallen off your trade liberalization bicycle? Fearful of rising protectionist sentiments? Relax, says Douglas Irwin:

The fashionable answer among many academic observers and prognosticators is to express concern (and perhaps even fret) about the current state of trade relations, to issue a warning about impending protectionism, and to suggest that the world trading system could collapse without renewed efforts on its behalf. In this paper, I offer a mild dissent. I do not think that there has been or will be a serious backlash against globalization. Indeed, I am surprised by the lack of ‘push back’ or resistance to greater economic integration in the United States and other industrial countries over the past 20 years, even as such integration has accelerated…

Indeed, barring a global war or a major depression, globalization today is probably irreversible as the steady march of technology brings economies together. The technology behind increased international communications, from the telephone and internet to the Boeing 747 and Airbus A-380, cannot be undone. Even if trade policies were to be used in an attempt to offset this shrinkage of the world, they cannot put the globalization genie back into the bottle because the toothpaste is out of the tube (to mix metaphors). To use a historical analogy, when railroads ran deep into the Midwestern United States and Russia in the late nineteenth century, grain prices fell across Europe. Agricultural tariffs rose somewhat in response, but this policy response failed to offset the rapid decline in transport costs. In the end, grain markets were integrated to a much greater degree than before.

Furthermore, the momentum of global economic policy is toward the continued opening of markets, more through bilateral and regional arrangements than through the multilateral process, an issue to which I will return shortly. This makes it difficult to see a revival of protection on the horizon, but economists have not refrained from crying wolf on this score for many years…

The lack of progress in the Doha Round is lamentable, but not surprising. Multilateral trade liberalization has never, ever, been easy. We seem to think of the 1950s and 1960s as the halcyon days of trade liberalization, when there was consensus and political will, and everything was easy. This is a false reading of history. Each of the GATT negotiating rounds was an extremely difficult task. From about 1947 until the end of the Kennedy
Round in 1967, the GATT accomplished virtually nothing. History indicates that progress at the multilateral level should be measured in terms of decades, not years. Doha may be behind schedule; so what else is new? Most trade rounds take about a decade to conclude, and as this text is being written (2005) it has only been less than four years since the commencement of the Doha round…

Let me conclude by saying that, despite the challenges ahead, we should view the pervasive pessimism about world trade negotiations with some degree of scepticism. At the risk of being accused of complaisance, I take comfort from the fact that policy efforts—however erratic—are being made largely in one direction: the opening of world markets. There is globalization fatigue, but not globalization backlash. And it simply takes time to recover from fatigue.

Read the full piece (pdf), which packs plenty of historical perspective into five pages.