Free Trade Doesn't Work

by Ian Fletcher

  500 Roy Hofheinz, Jr. and Kent E. Calder, The Eastasia Edge (New York: Basic Books, 1982) p. 46.

  501 2007 figure, excluding enterprises with annual sales below 5 million renminbi. Ligang Song and Wing Thye Woo, eds., China’s Dilemma: Economic Growth, the Environment and Climate Change (Washington: Brookings Institution Press, 2008), p. 164. For an analysis of the enduring significance of state-owned enterprises in China, see Xiao Geng, Xiuke Yang, and Anna Janus, “State-owned Enterprises in China: Reform Dynamics and Impacts,” in China’s New Place in a World in Crisis: Economic, Geopolitical and Environmental Dimensions (Canberra: Australian National University Press, 2009).

  502 Mikael Mattlin, “Chinese Strategic State-owned Enterprises and Ownership Control,” Brussels Institute of Contemporary China Studies, p. 13.

  503 Kaname Akamatsu, “A Historical Pattern of Economic Growth in Developing Countries,” Journal of Developing Economies, March-August 1962. Also see http://www.bookrags.com/wiki/Flying_Geese_Paradigm for a summary of different forms of this concept.

  504 The exact quote is: “Yet there is a dirty little secret in international trade analysis. The measurable costs of protectionist policies—the reductions in real income that can be attributed to tariffs and import quotas—are not all that large.” Paul Krugman, “Dutch Tulips and Emerging Markets: Another Bubble Bursts,” Foreign Affairs, July/August 1995. Krugman has identified some exceptions to free trade that he accepts, such as environmental externalities; see his blog entry of June 26, 2009, http://krugman.blogs.nytimes.com/2009/06/26/the-wto-is-making-sense/. See also arch-free trader Jagdish Bhagwati: “Ever since the Harberger-Johnson estimates of the cost of protection, measured as the deadweight losses (the so-called Harberger triangles) that typically ran at 2-3 percent of GDP, there has been a sense that, even if free trade is the best policy, protection is not anything you need to worry about too much since the cost of it is rather small,” in Jagdish Bhagwati, Free Trade Today (Princeton, NJ: Princeton University Press, 2002), p. 33.

  505 This is not intended to be a literal demonstrative economic argument, only an illustration to establish intuitive plausibility.

  506 “Gross Domestic Product,” Bureau of Economic Analysis, http://www.bea.gov/newsreleases/

  international/trade/trad_time_series.xls.

  507 Excepting microstates Aruba, Bermuda, and Monaco. “GDP, Per Capita GDP - US Dollars,” National Accounts Main Aggregates Database, United Nations Statistics Division, http://unstats.un.org/unsd/snaama/selbasicFast.asp, accessed January 15, 2010.

  508 “The Economic Effects of Significant U.S Import Restraints: Fifth Update 2007,” United States International Trade Commission, February 2007, p. xvii.

  509 “2008 Industry Review,” National Confectioners Association, p. 23, http://www.candyusa.com/files/

  2008_Annual_%20Review.ppt.

  510 $811 million, from “The Economic Effects of Significant U.S Import Restraints: Fifth Update 2007,” United States International Trade Commission, February 2007, p. xxiii.

  511 See, for example, Kym Anderson, Will Martin, and Dominique van der Mensbrughe, “Doha Policies: Where are the Pay-offs?” in Richard Newfarmer, ed., Trade, Doha, and Development: A Window into the Issues (Washington: World Bank Publications, 2005).

  512 Frank Ackerman, “The Shrinking Gains From Trade: A Critical Assessment of Doha Round Projections,” Global Development and Environment Institute, Tufts University, 2005, p. 2.

  513 Ibid.

  514 Ibid., p. 8.

  515 Both models use the same raw data from GTAP.

  516 Source: Frank Ackerman, “The Shrinking Gains From Trade: A Critical Assessment of Doha Round Projections,” Global Development and Environment Institute, Tufts University, 2005, p. 3.

  517 Frank Ackerman, “The Shrinking Gains From Trade: A Critical Assessment of Doha Round Projections,” Global Development and Environment Institute, Tufts University, 2005, p. 3. There is a 2008 GTAP database, but no model has yet been generated from it.

  518 “Fortune 500 2009,” Fortune, May 4, 2009.

  519 Frank Ackerman, “The Shrinking Gains From Trade: A Critical Assessment of Doha Round Projections,” Global Development and Environment Institute, Tufts University, 2005, p. 8.

  520 Ibid., p. 5.

  521 Ibid., p. 9.

  522 Ibid., p. 5.

  523 Mark Weisbrot, David Rosnick and Dean Baker, “Poor Numbers: The Impact of Trade Liberalization on World Poverty,” Center for Economic and Policy Research, 2004, p. 6.

  524 The logic we examined in Chapter 5, according to which any nation, no matter how rich or poor, can realize gains from trade runs afoul of the various flaws in the theory of comparative advantage noted in that chapter. This logic also does not guarantee that gains from trade will clear the hurdle imposed by transaction costs, which include everything from transportation to political corruption. Therefore it is entirely possible for some nations to derive no benefit from trade in practice.

  525 Frank Ackerman, “The Shrinking Gains From Trade: A Critical Assessment of Doha Round Projections,” Global Development and Environment Institute, Tufts University, 2005, p. 7.

  526 Robin Broad and John Cavanagh, “Global Economic Apartheid,” in John Cavanagh, Jerry Mander et al., Alternatives to Economic Globalization: A Better World is Possible (San Francisco: Berrett-Koehler, 2002), p. 34.

  527 “2008 World Development Indicators: Poverty Data Supplement,” The World Bank, 2008, p. 10.

  528 Ibid., p. 11.

  529 There is some evidence that Cuba, though not North Korea, has actually performed better than conventional GDP measures suggest.

  530 “The human poverty index is just under 20% in coastal provinces, but more than 50% in inland Guizhou,” per “Human Development Report 1999,” United Nations Development Programme, p. 3.

  531 Statement of Joshua Muldavin, Hearing on “Major Internal Challenges Facing the Chinese Leadership” before the U.S.–China Economic and Security Review Commission, U.S. House of Representatives, February 2-3, 2006, p. 95.

  532 Theo Sommer, “Is the 21st Century Going to be the Asian Century,” Asien, July 2006, p. 74.

  533 Statement of Joshua Muldavin, Hearing on “Major Internal Challenges Facing the Chinese Leadership” before the U.S.–China Economic and Security Review Commission, U.S. House of Representatives, February 2-3, 2006, p. 95.

  534 Branko Milanovic, Worlds Apart: Measuring International and Global Inequality (Princeton, NJ: Prince-ton University Press, 2005), p. 78.

  535 Ricardo Hausmann and Dani Rodrik, “Doomed to Choose: Industrial Policy as Predicament,” John F. Kennedy School of Government, Harvard University, 2006, p. 3.

  536 Kevin Watkins, ed., “Human Development Report 2005,” United Nations Development Programme, 2005, p. 37.

  537 Branko Milanovic, Worlds Apart: Measuring International and Global Inequality (Princeton, NJ: Princeton University Press, 2007), p. 47.

  538 Ibid., p. 61.

  539 Syed Mansoob Murshed, “The Conflict–Growth Nexus and the Poverty of Nations,” Institute of Social Studies, 2007, p. 2.

  540 Eric S. Reinert, How Rich Countries Got Rich and Why Poor Countries Stay Poor (New York: Carroll & Graf, 2007), pp. 161-4.

  541 Ibid.

  542 Ibid., pp. 161-4, 183.

  543 Jose Antonio Ocampo, Jomo K.S. and Rob Vos, Explaining Growth Divergences (New York: Zed Books, 2007), p. 161.

  544 John Cavanagh, Jerry Mander et al., Alternatives to Economic Globalization: A Better World is Possible (San Francisco: Berrett-Koehler, 2002), p. 214.

  545 Eric Reinert, “International Trade and the Economic Mechanisms of Underdevelopment,” PhD diss., Cornell University, 1980.

  546 Years 1990-3. “Trade with Canada: 1990, 1991, 1992, 1993,” U.S. Census Bureau, http://www.census.gov/foreign-trade/balance/c1220.html#1990.

  547 “Trade with Canada: 2006,” Census Bureau, http://www.census.gov/foreign-trade/balance/c1220.html#2006.

  548 “Trad
e with Mexico: 1993,” Census Bureau, http://www.census.gov/foreign-trade/balance/c2010.html#1993.

  549 “Trade with Mexico: 2007,” Census Bureau, http://www.census.gov/foreign-trade/balance/c2010.html#2007.

  550 Based on the number of workers certified as displaced by imports by the NAFTA Transitional Adjustment Assistance (NAFTA-TAA) program. See Gary Clyde Hufbauer and Jeffrey Schott, NAFTA Revisited: Achievements and Challenges (Washington: Institute for International Economics, 2005) p. 41.

  551 Bruce Campbell, Carlos Salas, and Robert E. Scott, Economic Policy Institute, “NAFTA at Seven: Its Impact on the Workers in all Three Nations,” Economic Policy Institute, April 2001.

  552 Business Mexico, April 1997.

  553 John R. MacArthur, The Selling of “Free Trade”: NAFTA, Washington, and the Subversion of American Democracy (New York: Hill and Wang, 2000), p. 81.

  554 Paul Krugman, “The Uncomfortable Truth about NAFTA: It’s Foreign Policy, Stupid,” Foreign Affairs, November 1993.

  555 Ibid.

  556 Paul Krugman, “How is NAFTA Doing? It’s Been Hugely Successful—As a Foreign Policy,” The New Democrat, May/June 1996.

  557 Joseph Stiglitz, Making Globalization Work (New York: W.W. Norton & Co., 2006), p. 64.

  558 Ibid.

  559 Stiglitz, Joseph, “The Broken Promise of NAFTA,” The New York Times, Jan 6, 2004.

  560 John H. Christman, “Mexico’s Maquiladora Industry Outlook: 2004-2009 And Its Future Impact on the Border Economy,” Global Insight, Inc., December 3, 2004, p. 5.

  561 Demetrios Papademetriou, John Audley, Sandra Polaski, and Scott Vaughan, “NAFTA’s Promise and Reality: Lessons from Mexico for the Hemisphere,” Carnegie Endowment for International Peace, November 2003, p. 20.

  562 Mexican farmers produce maize at 4 cents/lb, vs. 6 cents/lb for American farmers. But American maize is subsidized down to 3 cents/lb. Craig Sams, “Subsidized Theft,” Resurgence, May/June 2006, p. 14.

  563 Examples include Richard Mills of the U.S. Trade Representative’s office (Washington Post, Letters, July 28, 2001) and Robert Zoellick, currently president of the World Bank and then U.S. Trade Representative in “Countering Terror With Trade,” Washington Post, September 20, 2001, p. A35.

  564 John MacArthur, The Selling of Free Trade: NAFTA, Washington, and the Subversion of American Democracy (New York: Hill & Wang, 2000), pp. 257, 264, 275.

  565 Bruce Campbell, Carlos Salas, Robert E. Scott, “NAFTA at Seven,” Economic Policy Institute, p. 19.

  566 Joseph Stiglitz, Making Globalization Work (New York: W.W. Norton & Co., 2006), p. 65.

  567 Ralph Nader, William Greider et al., The Case Against Free Trade: GATT, NAFTA and the Globalization of Corporate Power (San Francisco: Earth Island Press,1993), p. 211.

  568 “Trade in Goods (Imports, Exports and Trade Balance) with Singapore,” Census Bureau, 2009, http://www.census.gov/foreign-trade/balance/c5590.html.

  569 “U.S. FTAs,” Bilaterals.org, http://www.bilaterals.org/rubrique.php3?id_rubrique=55.

  570 Ibid.

  571 Peter Ping Li and Steven Tung-Lung Chang, “The Effect of Property Rights on International Joint Ventures in China,” in Ilan Alon, ed., Chinese Culture, Organizational Behavior, and International Business Management (Westport, CT: Praeger, 2003).

  572 India’s global trade is still disproportionately small relative to India’s size, and it still maintains relatively high tariffs. For its tariffs, see 2009 National Trade Estimate Report on Foreign Trade Barriers (Washington: Office of the United States Trade Representative, 2009), p. 235.

  573 Dani Rodrik & Francisco Rodriguez and Dani Rodrik, “Trade Policy and Economic Growth: A Skeptic’s Guide to the Cross-National Evidence,” in Ben Bernanke and Kenneth S. Rogoff, eds., Macroeconomics Annual 2000 (Cambridge, MA: MIT Press, 2001), pp. 261-325.

  574 “World Development Indicators Database,” World Bank, April 2009, http://ddp-ext.worldbank.org/ext/ddpreports/ViewSharedReport?REPORT_ID=9147&REQUEST_TYPE=VIEWADVANCED.

  575 Edsel Beja, “Things are Different When You Open Up: Economic Openness, Domestic Economy, and Income,” Manila University, January 2009.

  576 Jose Antonio Ocampo, Jomo K.S. and Rob Vos, Explaining Growth Divergences (New York: Zed Books, 2007) p. 174.

  577 Dani Rodrik, One Economics, Many Recipes (Princeton, NJ: Princeton University Press, 2008) p. 217, based on Dollar and Kraay 2000 dataset.

  578 David N. DeJong and Marl Ripoli also report that “we find no evidence globally of a negative relationship between growth and the trade barrier we measure directly,” in “Tariffs and Growth: An Empirical Exploration of Contingent Relationships,” The Review of Economics and Statistics, October 2006.

  579 Kevin Watkins and Penny Fowler, Rigged Rules and Double Standards (Oxford, UK: Oxfam International, 2002) p.5.

  580 Joseph Stiglitz, Making Globalization Work (New York: W.W. Norton & Co., 2006), p. 78.

  581 Martin Wolf, Why Globalization Works (New Haven, CT: Yale University Press, 2004), p. 213.

  582 Calculated on a purchasing-power parity basis to remove distortions due to exchange rates, figures from Graham Dunkley, Free Trade: Myth, Reality, and Alternatives. (New York: Zed Books, 2004), p. 195.

  583 Ibid.

  584 John MacArthur, The Selling of Free Trade: NAFTA, Washington, and the Subversion of American Democracy (New York: Hill & Wang, 2000), p. 135.

  585 See Chapter 11 of NAFTA, for example.

  586 John Cavanagh, Jerry Mander et al., Alternatives to Economic Globalization: A Better World is Possible (San Francisco: Berrett-Koehler, 2002), p. 23.

  587 Jorge G. Castaneda and Carlos Heredia et al., The Case Against Free Trade: GATT, NAFTA, and the Globalization of Corporate Power (San Francisco: Earth Island Press, 1993), p. 25.

  588 The U.S. maintains retaliatory tariffs on Dijon mustard, Roquefort cheese, and truffles worth more than $125 million per year.

  589 The Lome Convention was replaced by the Cononou Agreement in 2000. This imposed more conditions on recipient nations and was organized as a set of trade and cooperation pacts with individual countries.

  590 “The WTO Erodes Human Rights Protections: Three Case Studies,” Global Exchange, November 15, 1999.

  591 Ross Perot and Pat Choate, Save Your Job, Save Our Country (New York: Hyperion, 1993), p. 20.

  592 Despite the fact that since 1960 it has ratified over 25 treaties on subjects as sensitive as nuclear arms without doing so.

  593 As Cyrill Siewert, CFO of Colgate-Palmolive, put it, “The United States does not have an automatic call on our resources. There is no mindset that puts this country first.” Louis Uchitelle, “U.S. Businesses Loosen Link to Mother Country,” The New York Times, May 21, 1989.

  594 Ha-Joon Chang, Bad Samaritans: the Myth of Free Trade and the Secret History of Capitalism (New York: Bloomsbury Press, 2008), p. 36.

  595 William Greider, “The Battle Beyond Seattle,” The Nation, December 9, 1999.

  596 U.S. Department of State, “North American Free Trade Agreement,” December 17, 1992, Article 104, Section 1. Two less important American agreements, one with Mexico and one with Canada, also enjoy protection.

  597 Peter Dauvergne and Jennifer Clapp, Paths to a Green World: The Political Economy of the Global Environment (Cambridge, MA: MIT Press, 2005), p. 146.