Saturday 13 November 2010

Popular rhetorical resistance to freer trade from all sides

How much of the suspicion and complaints about harm from trade are due to actual net harm from trade, and how much due to political economy - the ideological, political and psychological issues - some of which we reviewed last week?

As we have been discussing the last few weeks, trade can impact an economy through a variety of channels and depending on the underlying conditions, these mechanisms (either for good or for bad) will be more or less important in the net final outcome. This does not mean that the outcome is arbitrary, however - and for the most part, most of the theory and evidence suggest that freer trade should in most cases be beneficial, especially in the longer run. I have certainly never seen a convincing case that all or most countries would generally be hurt from fewer trade barriers (in goods).

However the chorus of anti-trade rhetoric is growing, and it seems to be growing on all sides. At least in the corridors of ID, I hear complaints that the WTO and international trading system is biased in favour of rich industrialised nations "who wrote the rules." Many people in the rich countries, however, believe exactly the opposite, that the current trading system is biased against them in favour of developing countries - and this view is gaining ground, as described in this recent op-ed in the New York Times. Each view sounds plausible (a view or idea must sound plausible to become so widespread -- so among all widespread ideas, plausibility is not actually much evidence of veracity, however), but I find it highly unlikely that both arguments could be correct.

Thus perhaps paradoxically, I personally find the increasing complaints about the effects of trade from all sides to be increased evidence not so much of any actual harm of trade, but more for the political and psychological explanations for trade resistance. What do you think? DV409 students must be hearing a variety of perspectives in their classes so comments welcome!

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