The future of trade policy analysis

Professor Ross Garnaut:

Some economists warned of the emerging dangers of proliferation of preferential trading arrangements when they became apparent from late 2000, and argued against the early and decisive steps that Australia took to hasten the Asia Pacific region down the preferential path. But that debate has come and gone. Mark Antony would have said that it was time to bury the old traditions of free trade, not to praise them. The task now is to analyse the emerging realities, and to apply the lessons to ongoing policy development. [PDF]

Public opinion on trade

An interesting divide in feelings about the level and rate of change of economic openness:

The survey, by the German Marshall Fund of the US, a transatlantic think-tank, shows that public opinion across a range of European countries and America has become more confident over the past year about economic growth and the positive effects of existing international trade. But there is much less support for more trade liberalisation, with 59 per cent of American respondents and 58 per cent of French thinking that freer trade will cost them more jobs than it creates. [FT]

“Trade Obstructionism”

Robert Samuelson voices concern over the risk of protectionist backsliding in the next Congress:

Just last week, Democratic congressional leaders signaled they might oppose new trade agreements with Colombia and Peru. Who, if anyone, would benefit is unclear…

We are dealing with something new here. It transcends traditional protectionism, which tries to shield specific industries and workers from imports. It’s trade obstructionism: a reflexive reaction against almost any trade agreement. The idea is that much trade is inherently “unfair.” …

Every three months, 7 million to 8 million U.S. jobs disappear, and roughly an equal or greater number are created. Trade is a relatively minor factor in job loss.

It is, however, an easy scapegoat. It enables critics to blame foreigners and suggest a solution — restrict trade. Globalization becomes a convenient explanation for many economic discontents, from job insecurity to squeezed living standards.

Hence, trade obstructionism…

The next Congress must decide whether it embraces the symbolism or reality of trade. If it chooses symbolism, it will perversely harm many of the workers it’s trying to help.

[HT: Mankiw]

Shopping for tariff preferences

I find the thrust of this paper by Hiau Looi Kee, Marcelo Olarreaga & Peri Silva entirely unsurprising, but it’s worth passing along nonetheless:

This paper addresses two main questions: Can lobbying by Latin America’s exporters in the US explain the observed pattern of tariff preferences? And if yes, what is the return on $1 dollar of lobbying in the United States by Latin American exporters?

Results suggests (sic) that lobbying by Latin American exporters to the US government can indeed help explain the variation in tariff preferences across products and countries. Moreover, the returns to foreign lobbying seem to be relatively high, around 50 percent. Finally, contrary to the empirical literature for the United States described above we found very low values for the estimates of the weight granted to social welfare in the government’s objective function (around two times the weight granted to foreign lobbying contributions), which underscores the importance of foreign (and domestic) lobbying in determining US trade policies.

Key WTO reps to meet in January

AP:

Ministers from the WTO’s most influential powers will meet early next year to make their first joint attempt at reviving global trade talks since their collapse last summer, officials said Monday.

Top representatives of the United States, the European Union, Japan, Australia, India and Brazil are among those expected to gather on the sidelines at the World Economic Forum’s annual four-day meeting of global leaders in Davos, Switzerland. Pascal Lamy, director-general of the World Trade Organization, also has been invited to attend the meeting at the end of January, officials said.

Stephen Meardon: A Tale of Two Tariff Commissions

If you enjoy learning about the history of trade theory and the history of trade policy, then you’ll likely enjoy reading “A Tale of Two Tariff Commissions and One Dubious ‘Globalization Backlash'” (PDF) by Stephen Meardon.

The article presents a history of the American tariff controversies after the Civil War. Meardon focuses on the roles of two important free traders: Arthur Latham Perry and David Wells, who are largely unknown to modern students of international economics. He argues that those who believe that “that the previous globalization sowed the seeds of its own destruction” by its impact on income distribution have the history backwards, and that “[t]he arguments relating to income class, distribution and power belonged to free traders,” not protectionists. These ideas matter: “What we include or omit in history signals the ideas that capture our attention and will likely shape the policies to come.”

Excerpts below the fold (and hat tip to Richard Baldwin for the link).

Continue reading →