I’m special:

[P]eople rarely learn a lot about international trade purely because they think that “trade is fun.”

I’m special:

[P]eople rarely learn a lot about international trade purely because they think that “trade is fun.”

Reason‘s Ron Bailey reports:

Trade is THE solution to poverty. Throw in international labor mobility, and we’re well on the way to remedying any of the problems that money can fix—like controlling infectious diseases, providing electricity, clean water and sanitation, feeding people, educating women, and so forth. Or at least that’s what Kym Anderson, an economics professor at the University of Adelaide in Australia more or less asserted in his presentation on trade and migration on the third day of the Copenhagen Consensus 2008 Conference.

Anderson looked at a number of econometric modeling scenarios and calculated the cost and benefits that would obtain from full trade liberalization under realistic assumptions derived from the current World Trade Organization’s Doha Development Agenda negotiations. Anderson estimated that liberalization of global merchandise trade would mean an annual increase of $287 billion per year in global GDP, of which $86 billion would go to developing countries.

No.

Assume there are one billion poor people in developing countries. If all of the estimated benefits of liberalisation for developing countries accrue to them, their average gain is less than 30 cents per day. Unless almost all of the world’s poor are sitting right below the dollar per day poverty line, this won’t eliminate poverty. Moreover, Anderson and Alan Winters estimate that $70b of that $86b gain goes to middle-income countries like Brazil and Mexico, leaving only $16b for low-income contries, including India, which has a couple poor people (page 60 of their paper).

Anderson and Winters never say “THE solution to poverty” in their report. They use phrases like “contribute to reducing poverty” and “helpful in the fight against poverty.” I doubt that Kym Anderson was so careless as to say that the Doha round is “THE solution,” in which case Ron Bailey’s summary of what the economist “more or less asserted” is pretty inapt.

There’s a dangerous tendency amongst libertarians to believe that free trade is a cure-all. Not only does it never do harm, but it can fix any problem! Some seem to think that a bit more trade openness on the part of the United States and Europe would solve African development and make failed states rich. This is nonsense. But unless Kym Anderson horribly misrepresented his own research, Ron Bailey either believes nonsense or didn’t listen very carefully.

[Previous installments of bad Reason reporting on trade liberalisation available here.]

Dean Baker will be pleased to see that the free traders at ECIPE are launching a project on trade in healthcare.

I just attended a pre-launch presentation by Michael Spence summarising the findings of the independent Commission on Growth and Development, which will be available from noon tomorrow at growthcommission.org.

Much of the report will be familiar to those who follow international development closely and have tracked trends in scholarly opinion in recent years, so I’ll only comment on a few highlights. Most importantly, the Commission concludes that we do not know the necessary and sufficient conditions for growth, and its aim is to launch a discussion with its report, not reach a conclusion. Nonetheless, it takes positions on a number of issues, ranging from coping with climate change to openness to international trade.

The Commissions considered the thirteen economies that experienced seven percent growth for more than twenty-five years since World War II. Since such high growth rates are not possible absent engagement with the global economy, globalisation plays a major role in the report — perhaps too much, according to some.

Also of interest is that international economics is one of the most controversial areas of the report. The Commission, aiming to help policymakers rather than only making remarks on settled matters, included discussion of topics on which the Commissioners themselves disagreed. Fiscal stability and solvency rules and central bank independence and policy were difficult areas. Outside those two, all the other controversies listed by Spence were related to international economics: capital controls, capital and current account liberalisation, exchange rate measures, and industrial policy for export promotion. Plenty of research left to do in this field!

Finally, Spence noted that the Commission will endorse Paul Collier’s call for trade preferences favouring Africa over Asia (1,2,3,4) on a ten year time horizon. According to Spence, now is the time that Africa desperately needs preferences and the cost of failure is zero. I think that this policy prescription is based on a small number of papers (such as Collier and Tony Venables in the World Economy) that haven’t been critically scrutinised. I’d like to see more research on this one.

The report, a product of about two years of work, is one hundred pages long and highly readable, according to those who have already seen it. I expect it will be much-discussed in the coming months.

I just attended a pre-launch presentation by Michael Spence summarising the findings of the independent Commission on Growth and Development, which will be available from noon tomorrow at growthcommission.org.

Much of the report will be familiar to those who follow international development closely and have tracked trends in scholarly opinion in recent years, so I’ll only comment on a few highlights. Most importantly, the Commission concludes that we do not know the necessary and sufficient conditions for growth, and its aim is to launch a discussion with its report, not reach a conclusion. Nonetheless, it takes positions on a number of issues, ranging from coping with climate change to openness to international trade.

The Commissions considered the thirteen economies that experienced seven percent growth for more than twenty-five years since World War II. Since such high growth rates are not possible absent engagement with the global economy, globalisation plays a major role in the report — perhaps too much, according to some.

Also of interest is that international economics is one of the most controversial areas of the report. The Commission, aiming to help policymakers rather than only making remarks on settled matters, included discussion of topics on which the Commissioners themselves disagreed. Fiscal stability and solvency rules and central bank independence and policy were difficult areas. Outside those two, all the other controversies listed by Spence were related to international economics: capital controls, capital and current account liberalisation, exchange rate measures, and industrial policy for export promotion. Plenty of research left to do in this field!

Finally, Spence noted that the Commission will endorse Paul Collier’s call for trade preferences favouring Africa over Asia (1,2,3,4) on a ten year time horizon. According to Spence, now is the time that Africa desperately needs preferences and the cost of failure is zero. I think that this policy prescription is based on a small number of papers (such as Collier and Tony Venables in the World Economy) that haven’t been critically scrutinised. I’d like to see more research on this one.

The report, a product of about two years of work, is one hundred pages long and highly readable, according to those who have already seen it. I expect it will be much-discussed in the coming months.

I just attended a pre-launch presentation by Michael Spence summarising the findings of the independent Commission on Growth and Development, which will be available from noon tomorrow at growthcommission.org.

Much of the report will be familiar to those who follow international development closely and have tracked trends in scholarly opinion in recent years, so I’ll only comment on a few highlights. Most importantly, the Commission concludes that we do not know the necessary and sufficient conditions for growth, and its aim is to launch a discussion with its report, not reach a conclusion. Nonetheless, it takes positions on a number of issues, ranging from coping with climate change to openness to international trade.

The Commissions considered the thirteen economies that experienced seven percent growth for more than twenty-five years since World War II. Since such high growth rates are not possible absent engagement with the global economy, globalisation plays a major role in the report — perhaps too much, according to some.

Also of interest is that international economics is one of the most controversial areas of the report. The Commission, aiming to help policymakers rather than only making remarks on settled matters, included discussion of topics on which the Commissioners themselves disagreed. Fiscal stability and solvency rules and central bank independence and policy were difficult areas. Outside those two, all the other controversies listed by Spence were related to international economics: capital controls, capital and current account liberalisation, exchange rate measures, and industrial policy for export promotion. Plenty of research left to do in this field!

Finally, Spence noted that the Commission will endorse Paul Collier’s call for trade preferences favouring Africa over Asia (1,2,3,4) on a ten year time horizon. According to Spence, now is the time that Africa desperately needs preferences and the cost of failure is zero. I think that this policy prescription is based on a small number of papers (such as Collier and Tony Venables in the World Economy) that haven’t been critically scrutinised. I’d like to see more research on this one.

The report, a product of about two years of work, is one hundred pages long and highly readable, according to those who have already seen it. I expect it will be much-discussed in the coming months.

Jagdish Bhagwati recently offered a harsh rebuke (.doc) to those worried about economic losses from globalization, going so far as to say that “the quality of [Krugman’s] work on this subject [trade and inequality] hardly deserves any attention” and “Stiglitz perpetrates other fallacies such as that unemployment means you cannot have gains from trade — that issue was examined by trade theorists in the 1950s and even a Nobel Prize cannot shield you from ignorance and folly.”

The McGill Faculty of Law runs a Preferential Trade Agreements Database that contains the text of almost every PTA in existence!

You can’t blame trade for Chinese pollution, report Judith Dean and Mary Lovely over at Vox:

In a recent working paper, “Trade Growth, Production Fragmentation and China’s Environment,” we calculate and track the pollution content of China’s export and import bundles from 1995 to 2005… We find that as China’s trade has grown, the pollution intensity of almost all sectors has fallen in terms of water pollution (measured by chemical oxygen demand (COD)) and air pollution (measured by SO2, smoke or dust) in 2004…

Our study also reveals that China’s major exporting industries are not highly polluting, and that the export bundle is shifting toward relatively cleaner sectors over time. In 1995, textiles and apparel accounted for the largest shares of Chinese exports to the world, but these shares fell by about a third over the following decade. Office and computing machinery and communications equipment, in contrast, were the fastest growing exports and accounted for the largest export share in 2005. What is striking is that these growing sectors are cleaner than textiles and apparel; indeed, they are among the cleanest manufacturing sectors by the available measures of air and water pollution. The most polluting sectors, such as paper and non-metallic minerals, have in fact very low and declining shares in China’s manufacturing exports.

Linking industrial pollution intensities to detailed trade statistics from China Customs, we find that, contrary to popular expectations, China’s exports are less water pollution intensive and generally less air pollution intensive than Chinese import-competing industries. Moreover, both Chinese exports and imports are becoming cleaner over time. Part of this trend reflects changes in the composition of the trade bundle, as noted above. However, our evidence suggests that most of the fall in the pollution content of China’s trade is due to changes in industrial pollution intensities (how China produces), rather than in trade patterns (what China exports and imports). This latter finding has important implications as it suggests that the downward trend is not dependent on relationships with particular trade partners…

Finally, we find some evidence that international production fragmentation, the breaking of production into distinct processes, may have played a role in reducing the pollution content of Chinese trade. “Processing trade” alone accounts for about 56% of the growth in China’s exports and 41% of the growth in China’s imports between 1995 and 2005. If investment in processing activities expands the range of the production process performed in China, this investment will tend to make China’s production and trade cleaner. Additionally, if the foreign-invested enterprises responsible for most of this trade bring greener technologies than those used by domestic producers, this will tend to make trade even cleaner. We find strong evidence that Chinese processing exports are cleaner than Chinese ordinary exports. Statistical testing suggests that processing trade has played a key role in explaining the drop in the pollution intensity of Chinese exports over time and that FDI inflows have contributed significantly to this decline, even controlling for the processing trade share.