In the JIE, Don Davis reviews Economic Geography: The Integration of Regions and Nations by Pierre-Philippe Combes, Thierry Mayer, and Jacques-Francois Thisse.

I just finished The Travels of a T-Shirt in the Global Economy, an excellent international trade narrative by Pietra Rivoli. Gary Hufbauer summarized the book well:

This book is unlike any text in International Economics 101. It’s totally entertaining and without those dreadful equations. The Travels of a T-Shirt in the Global Economy tells the drama of globalization through real people and their daily lives. Rivoli recounts the trials of winners and losers on three continents. From a fascinating journey, she distills economic and political lessons that just make good sense.

Many of the topics covered in the book in “Part II: Made in China” and “Part III: Trouble at the Border” will be familiar to Trade Diversion readers (sweatshops, the Multifibre Agreement, Chinese textile quotas), but the text is well-written and compelling. Moreover, I learned a lot about the history of the American cotton industry (such as the shift from the Deep South to Lubbock, Texas, covered in “Part I: King Cotton”) and US dominance of used clothing exports (“Part IV: My T-Shirt Finally Encounters a Free Market”). The latter is perhaps the most interesting part of the book.

It is only at the retail level, and after it is tossed into a Salvation Army bin, that my T-shirt’s life is a story about markets rather than politics. It is political reactions to markets, political protection from markets, and political involvement in markets, rather than competition in markets, that are at the center of my T-shirt’s life story.

While the story of cotton in Texas is about public-private research partnerships and protection, and the story of textile imports is a collection of Beltway lobbyists from the Carolinas, the Tanzanian mitumba market that Rivoli visits is a cut-throat competition amongst hundreds of small entrepreneurs. And it’s fascinating.

I’m currently reading William Easterly’s The White Man’s Burden, which is pretty well-written and reasonably argued. The most surprising content (for me) was Part III, which is an 80 page case against imperialism and nation building. As an economist, Easterly doesn’t wish to comment on the national security implications of “invading the poor,” but he analyzes the implications for the poor countries themselves.

Easterly opens chapter nine with a mockingly acerbic table. Selected entries:

I read Paul Krugman’s Pop Internationalism (1996) over the past two days. It’s well-written and a quick read. Krugman savagely demolishes bad arguments made by those that subscribed to “competitiveness” theories, thought that NAFTA would have massive impacts (good or bad) upon the United States, and made other errors. This short tome should be part of any international economics library. My only complaint is that, due to the book being a collection of previously published articles, some messages are repeated too frequently in the course of 220 pages.

Some may find the discussion of NAFTA, international competitiveness, and the Clinton administration quaintly dated. But one of the most important lessons in international economics (which you can learn from following Jagdish Bhagwati or reading Against the Tide) is that errors rear their heads again and again under guises that historically aware economists will recognize as old hat. For example, the competitiveness bug seems to have bitten Malcolm Gladwell.

There’s still much to learn from this classic collection of essays, and it’s under $8 including shipping.

I just finished reading my university’s copy of Douglas Irwin – Against The Tide and ordering a copy from Amazon. This stellar text is an intellectual history of the idea of free trade. Irwin masterfully traces the origins of the doctrine back to the ancient Greeks and illustrates its evolution up to the present. In describing how philosophers and economists thought about trade prior to Adam Smith, Irwin highlights numerous fascinating thinkers that many have forgotten. Of particular interest is Henry Martyn, who made an exceptionally advanced analytical case for free trade in 1701. And in tracing the history of free trade since Smith’s breakthrough work, Irwin aptly summarizes the most important debates with the clarity and insight afforded by contemporary analysis.

Paul Krugman found the text “full of new insights and unexpected delights.” I recommend it without hesitation.

I am probably one of the last persons interested in international economics to get around to reading Joe Stiglitz’s Globalization and Its Discontents, so I only have one comment to make.

The book is not about trade. Despite writing that “to understand what went wrong, it’s important to look at the three main institutions that govern globalization: the IMF, the World Bank, and the WTO,” Stiglitz solely focuses upon the International Monetary Fund and its greatest mistakes in the 1990s. Readers looking for insights into the World Bank or World Trade Organization will find little information. In fact, when Stiglitz does criticize the WTO, he provides (what I consider to be) incomplete information.

Late in the book, on page 216, Stiglitz states his first substantive complaint against the WTO:

The WTO puts trade over all else. Those who seek to prohibit the use of nets that harvest shrimp but also catch and endanger turtles are told by the WTO that such regulation would be an unwarranted intrusion on free trade. They discover that trade considerations trump all others, including the environment!

Jagdish Bhagwati:

But the Turtle-Shrimp decision at the WTO in October 1998 upheld GATT Article XX(g) on allowing the US to use it to protect turtles! It only objected to the selective and discriminatory way in which the US legislation was designed and directed at the Asian nations who had brought the complaint to the WTO. [What Really Happened In Seattle (PDF)]

Environmentalists might have a case against the WTO, but Dr. Stiglitz choose a poor example to demonstrate his complaint. See pages 156-158 of Bhagwati’s In Defense of Globalization for further discussion of the shrimp-turtle case and his case against using trade sanctions to promote environmental interests.

Sitglitz then ponders the representation of developing countries at the WTO:

While the voting arrangements at the IMF ensure that the rich countries dominate, at the WTO each country has a single vote and decisions are largely by consensus. But in practice, the United States, Europe, and Japan have dominated in the past. This may now be changing. At the last meeting at Doha, the developing countries… achieved some notable concessions…

The most fundamental change that is required to make globalization work in the way that it should is a change in governance. This entails… changes to ensure that it is not just the voices of trade ministers that are heard in the WTO. [p.225-6]

This is a call for the WTO to expand its governing mandate to non-trade issues. In making this case, Stiglitz implicitly concedes that the WTO has pursued a narrow agenda, rather than “dominating” the process of globalization. In fact, it has been the rich countries that have pushed for an expansion of the WTO’s mission, so as to tie non-trade issues like intellectual property rights to liberalization rounds at the expense of poor countries (an issue that Stiglitz notes on pages 245-6).

Stiglitz expresses concerns about transparency:

At the WTO, the negotiations that lead up to agreements are all done behind closed doors, making it difficult – until it is too late – to see the influence of corporate and other special interests. The deliberations of WTO panels that rule on whether there has been a violation of the WTO agreements occur in secret. [p.227-8]

The negotiations are opaque so that negotiators can make offers conditional upon a reciprocal concession. I imagine that the EU trade ministers would have been even less forthcoming in Hong Kong if every offer they made was subject to scrutiny by an audience in France. Similarly, legal decisions have traditionally been made in private so that a ruling can be judged on its merits independent of the intellectual process that produced it. It is difficult to imagine the US Supreme Court being forced to disclose its rough drafts of opinions. If Stiglitz believes that negotiations and deliberations ought to be transparent, he needs to explain how they would work. His few paragraphs are insufficient for me to understand his proposal.

On page 244, Stiglitz argues that the advanced economies have preached free trade while practicing protectionism. While it is true that developed nations have been hypocritical in this regard, it is important to remember that their rhetorical demands have not become reality, and poor nations remain vastly more protectionist than their rich counterparts. Thus, it isn’t true that the trade agenda has become “unfair” in the sense that the poor have been forced to liberalize more than the rich.

The WTO is mentioned a few more times: the Seattle protests on page three, the WTO’s establishment in 1995 on page seven, a similar note on page sixteen, the IMF-WB-WTO trio’s “domination” of the global scene on page twenty-two, the IMF’s faster pace of liberalization than the WTO on page 62, and the IMF-WB-WTO trio’s “set[ting] the rules of the game” on page 214.

While Stiglitz builds a strong case against the conduct of the IMF in Globalization and Its Discontents, his call for reform of the WTO is unconvincing, as he devotes few pages to the topic. However, Stiglitz’s next book, co-authored with Andrew Charlton, will remedy this. The text, forthcoming in a few weeks, is titled Fair Trade For All: How Trade Can Promote Development.

Today I read The Shackled Continent by Robert Guest. It’s a non-technical book by the Africa editor of The Economist seeking to help answer the question: Why is Africa so poor?

Sub-Saharan Africa’s poverty has become the central focus of development discussions in the popular press and amongst NGOs over the last year or so. As someone not very familiar with development literature specific to the continent, I found the book to be an excellent primer on Africa.

Given my greater familiarity with development literature generally, I found Guest to be at his best when delivering detailed historical accounts (such as Robert Mugabe’s wrecking of Zimbabwe, the failure of ANC economic policy in South Africa, and disastrous civil wars), telling entrancing personal narratives (such as his journey on a truck delivering Guinness in Cameroon or troubles warding off prostitutes), or offering amusing asides (such as his use of a North Korean computer operating system). These gems aren’t found in the other books I’ve read.

Unfortunately, much of the content in this non-technical text will be familiar to those that have read books like Johan Norberg’s In Defense of Global Capitalism and William Easterly’s The Elusive Quest for Growth. As such, I found the book at its weakest when it was covering well-treaded ground such as agricultural subsidies, the failure of development assistance, and the lack of transparent property rights.

Nonetheless, for those with more than a passing interest in development, I’d recommend The Shackled Continent.

My most serious complaint: The introduction, which at twenty-five pages (10% of the total) is far too long, provides an outline of the topics to be covered so exhaustive that one later reads many sections with a sense of deja vu.