Monday, August 04, 2008

End of free trade? Maybe not

The World Trade Organization's Doha Round of trade talks ended in failure last week, the first time since the establishment of the generally trade-promoting GATT regime after WWII that a round of talks -- these started in 2001 -- failed to produce some kind of liberalization agreement. This time they couldn't even come up with a token move. Editorials lamenting this failure rang out across the land. I think, however, that the Cato Institute's Dan Ikenson has convinced me that the death of moves toward freer trade has been exaggerated. As this Register editorial explains, while political leaders may denounce globalization and free trade in public, the record of recent years has shown that the countries that trade the most tend to enjoy the most economic growth -- so even as India undermined the WTO talks to popular acclaim in India, India has liberalized both its internal and external business and trade policies and begun to enjoy growth and some measure of affluence.

I still don't understand why free trade, which anyone who has ever taken Econ 101 or thought for more than a moment understands is long-term beneficial to the society that adopts it (though there may be short-term disruptions and losers, as always happens in a dynamic economy), is so easy to denounce in the political realm. Dan says, however, that some of same politicians who demagogue against free trade and globalization privately understand that the stance is stupid populism (maybe Barack Obama?) and in action take steps to increase trade. (Count on politicians to be hypocrites.) Dan sees a good deal of progress in the area of reducing bureaucratic impediments -- overlapping agencies demanding forms and doing inspections, sometimes soliciting bribes, consuming valuable time -- which can be more significant than outright tariffs at impeding trade flows.

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