Free Trade Doesn't Work

by Ian Fletcher

  598 “Ardent Foes of Trade Promotion Authority Begin to Make Their Case With Congress,” Manufacturing & Technology News, February 23, 2007, p.1.

  599 Gary Clyde Hufbauer and Diana Orejas, “NAFTA and the Environment: Lessons for Trade Policy,” Speech delivered at The Bildner Center, New York, February 28, 2001.

  600 John Cavanagh, Jerry Mander et al., Alternatives to Economic Globalization: A Better World is Possible (San Francisco: Berrett-Koehler, 2002), p. 76.

  601 Which reads, “This Constitution, and the Laws of the United States which shall be made in Pursuance thereof; and all Treaties made, or which shall be made, under the Authority of the United States, shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the Contrary notwithstanding.” State laws are overruled no matter when they were made; Federal laws are only overruled if made before the treaty.

  602 Tibet.

  603 Ennio Rodriguez and Stephany Griffith-Jones, Cross-Conditionality, Banking Regulation and Third World Debt (Basingstoke, UK: Palgrave MacMilllan, 1992).

  604 Refusal of loans: Ennio Rodriguez and Stephany Griffith-Jones, Cross-Conditionality, Banking Regulation and Third World Debt (Basingstoke, UK: Palgrave MacMilllan, 1992).

  Withdrawal of aid: Kanaga Raja, “North Tactics to Split Developing Country Alliances Exposed,” Third World Network, July 26, 2004.

  605 Joseph Stiglitz, Making Globalization Work (New York: W.W. Norton & Co., 2006), p. 321.

  606 Vandana Shiva, Stolen Harvest (New York: Zed Books, 2001), pp. 85, 89.

  607 Randeep Ramesh, “India Moves to Protect Traditional Medicines From Foreign Patents,” The Guardian, February 22, 2009.

  608 Robert Weissman and James Love, “U.S.-Chile Free Trade Agreement,” Press Release, Health Gap Global Access Project, January 29, 2001, http://www.healthgap.org/press_releases/01/012901_EA_CPT_TRADE_CHILE.html.

  609 Rohit Malpani and Mohga Kamal-Yanni, “Patents Versus Patients: Five Years After the Doha Declaration,” Oxfam International, November 14, 2006.

  610 William Anthony Lovett, Alfred E. Eckes & Richard L. Brinkman, U.S. Trade Policy: History, Theory and the WTO (Armonk, NY: M.E. Sharpe & Co., 1999), p. 178.

  611 Ibid., p. 141.

  612 This includes not only the groups named, but various institutional predecessors. John Cavanagh, Jerry Mander et al., Alternatives to Economic Globalization: A Better World is Possible (San Francisco: Berrett-Koehler, 2002), p. 226.

  613 Edward F. Buffie, Trade Policy in Developing Countries (Cambridge, UK: Cambridge University Press, 2001), Ch. 9.

  614 William Greider, One World, Ready or Not (New York: Touchstone Press, 1997) p. 362.

  615 Jose Antonio Ocampo, Jomo K.S. and Rob Vos, Explaining Growth Divergences (New York: Zed Books, 2007), p. 3.

  616 Nitsan Chorev, Remaking U.S. Trade Policy: From Protection to Globalization (Ithaca, NY: Cornell University Press, 2007), p. 163.

  617 Testimony of Robert E. Lighthizer, hearing on “Trade Enforcement for a 21st Century Economy,” Finance Committee, U.S Senate, June 12, 2007.

  618 For example, it ruled against zeroing in antidumping cases; deemed America’s “foreign sales corporation” provision an export subsidy; and repudiated the Uruguay Round understanding that it would generally defer to national authorities in dumping cases.

  619 “EU Commission Puts Forward Proposal for Sanctions Against U.S. Byrd Amendment,” Delegation of the European Commission to the U.S.A, March 31, 2005.

  620 A few token protests were allowed.

  621 Though these words are actually a misquotation when attributed to former WTO Director General Renato Ruggerio. Bernard M. Hoekman, The Political Economy of the World Trading System, 2nd ed. (New York: Oxford University Press, 2001), p. 3.

  622 Estimate of Lawrence B. Krause, University of California at San Diego, quoted in William Greider, One World, Ready or Not (New York: Touchstone Press, 1997), p. 137.

  623 Jan Orbie, Europe’s Global Role (London: Ashgate Publishing, 2008), p. 58.

  624 Offset deals can also include coproduction, licensed production, subcontracting deals, technology transfers, directed investment, and export promotion.

  625 Article IV, revised, which went into effect in 1978.

  626 “Auto bailouts in the United States and elsewhere largely fall within the purview of the WTO definition of actionable subsidies.” This is the conclusion, with much obfuscation, of Claire Brunel and Gary Clyde Hufbauer, “Money for the Auto Industry: Consistent With WTO Rules?” Peterson Institute for International Economics, February 2009, p. 10.

  627 Worldwide average: “Border Tax Equity Act: Legislative Overview,” Coalition for VAT Fairness, http://www.bordertaxequity.org/. EU average: “The Border Tax Equity Act: VAT - The Problem,” National Textile Association, http://www.nationaltextile.org/VAT/problem.htm.

  628 Alfred E. Eckes, Jr., Opening America’s Market: U.S. Foreign Trade Since 1776 (Chapel Hill, NC: University of North Carolina Press, 1995), p. xvi.

  629 Jeff Garten, “Business and Foreign Policy,” Foreign Affairs, May/June 1997, pp. 70-71.

  630 William Greider, One World, Ready or Not (New York: Touchstone Press, 1997), p. 188.

  631 Ibid. p. 139.

  632 Interview “Behind the Sound Bites of Republican Presidential Hopeful Rep. Duncan Hunter: U.S. Multinationals Have Become Chinese Corporations,” Manufacturing & Technology News, March 13, 2007, p. 1.

  633 William Anthony Lovett, Alfred E. Eckes and Richard L. Brinkman, U.S. Trade Policy: History, Theory and the WTO (Armonk, NY: M.E. Sharpe and Co., 1999), p. 139.

  634 Sherrod Brown, Myths of Free Trade: Why America’s Trade Policies Have Failed (New York: The New Press, 2004), p. 19.

  635 William Greider, One World, Ready or Not (New York: Touchstone Press, 1997), p. 192.

  636 See p. 131.

  637 William Greider, One World, Ready or Not (New York: Touchstone Press, 1997), p. 132.

  638 Ross Perot and Pat Choate, Save Your Job, Save Our Country (New York: Hyperion, 1993), p. 19.

  639 Nitsan Chorev, Remaking U.S. Trade Policy: From Protection to Globalization (Ithaca, NY: Cornell University Press, 2007), pp. 112, 137.

  640 U.S. Senate, Committee on Finance, Trade Reform Act of 1974, pp.94-95; Public Law 93-618.

  641 “United States Promotes Development Through Aid for Trade,” Press Release, United States Trade Representative, December 16, 2008.

  642 William Greider, One World, Ready or Not (New York: Touchstone Press, 1997), p. 189.

  643 Eamonn Fingleton, Blindside: Why Japan is Still on Track to Overtake the U.S. by the Year 2000 (New York: Houghton Mifflin, 1995), p. 47.

  644 “Trade with Japan: 2000,” U.S. Census Bureau, http://www.census.gov/foreign-trade/balance/c5880.html#2000 and “Trade with Japan: 2009,” U.S. Census Bureau, http://www.census.gov/foreign-trade/balance/c5880.html#2009.

  645 “Explaining the Mystery,” The Economist, January 4, 1992.

  646 Jean Imbs & Romain Wacziarg, “Stages of Diversification,” American Economic Review, March 2003. Also see Bailey Klinger & Daniel Lederman, “Diversification, Innovation, and Imitation Inside the Global Technological Frontier,” World Bank, 2006.

  647 Dani Rodrik, One Economics, Many Recipes (Princeton, NJ: Princeton University Press, 2008), p. 103.

  648 “Precisely because economic theory is concerned with static equilibrium, not with the dynamics of development, it is hard to find within traditional theory a basis on which a systematic and positive policy for competitiveness or development can be built.” Stephen S. Cohen and John Zysman, Manufacturing Matters: The Myth of the Post-Industrial Economy (New York: Basic Books, 1988), p. 214.

  649 Michael Porter, The Competitive Advantage of Nations (New York: The Free Press, 1990), p. 103.

  650 Ibid., p. 139.

  651 These externalities extend far beyond technology per se. See Porter, The Competitive Advantage of Nations
(New York: The Free Press, 1990), p. 144. Further evidence that location-specific externalities exist is the fact that industries often cluster in specific cities or regions, a strategy deliberately employed by China today in the form of the “network clustering” mentioned in the table on p. 76.

  652 See Michael Porter, The Competitive Advantage of Nations (New York: The Free Press, 1990) p. 153 concerning keiretsus, p. 446 concerning Italy, and p. 472 concerning chaebols. Conglomerates have suffered a poor reputation in the U.S. in recent years. This is mainly due to the fact that the U.S. conglomerates such as ITT and Gulf+Western were not deliberately run to exploit these externalities. Those that have been, such as GE and 3M, have actually been very successful: note as one case GE’s use of dig-ital imaging technology from one of its military divisions, to take the CAT scanner market from EMI.

  653 American venture capital firms have an extremely hard time functioning beyond a five-year time horizon.

  654 Richard J. Elkus, Winner Take All: How Competitiveness Shapes the Fate of Nations (New York: Basic Books, 2008), p. 67.

  655 Clyde Prestowitz, Trading Places: How We Are Giving Our Future to Japan and How to Reclaim It (New York: Basic Books, 1993), pp. 139-141.

  656 Technically, of course, Ricardian comparative advantage is not a growth model at all like, say, the So-low growth model. But if it doesn’t advise on how to obtain growth, it lacks policy relevance.

  657 Lester Thurow, “Microchips, Not Potato Chips,” Foreign Affairs, July/August 1994.

  658 Laura D’Andrea Tyson, Who’s Bashing Whom? Trade Conflict in High-Technology Industries (Washington: Institute for International Economics, 1993), p. 12.

  659 Stephen S. Cohen and John Zysman, Manufacturing Matters: The Myth of the Post-Industrial Economy (New York: Basic Books, 1988), p. 216.

  660 Paul Krugman, Rethinking International Trade (Cambridge, MA: MIT Press, 1994), p. 157.

  661 Strictly speaking, the theory of comparative advantage finesses this problem by treating comparative advantage as exogenous, i.e., as a given. This is logically coherent but renders the theory useless for determining how to obtain the best comparative advantage.

  662 Eric S. Reinert, How Rich Countries Got Rich and Why Poor Countries Stay Poor (New York: Carroll & Graf, 2007).

  663 Ricardo Hausmann, Jason Hwang, and Dani Rodrik, “What You Export Matters” Center for International Development, Harvard University, March 2006. The caveat, of course, is that the exporting industries have to be genuine viable industries, not hothouse flowers permanently dependent upon subsidies.

  664 Ricardo Hausmann and Dani Rodrik, “Doomed to Choose: Industrial Policy as Predicament,” John F. Kennedy School of Government, Harvard University, p. 6.

  665 Hausmann, Ricardo, Jason Hwang, and Dani Rodrik, “What You Export Matters,” Journal of Economic Growth, March 2007.

  666 John M. Culbertson, The Trade Threat and U.S. Trade Policy (Madison, WI: 21st Century Press,1989), p. 72.

  667 Eric S. Reinert, How Rich Countries Got Rich and Why Poor Countries Stay Poor (New York: Carroll & Graf, 2007), p. 262.

  668 For details, see William Easterly, The Elusive Quest for Growth: Economists’ Adventures and Misadventures in the Tropics (Cambridge, MA: MIT Press, 2002 ), p. 49.

  669 “The Facts About Modern Manufacturing,” 2002 data, per National Association of Manufacturers, 7th ed., October 2, 2006, Section 2, p. 24.

  670 Laura D’Andrea Tyson, Who’s Bashing Whom? Trade Conflict in High-Technology Industries, (Washington: Institute for International Economics, 1992), p. 32.

  671 Strictly speaking, rent is any return to a factor of production above the amount required to cause that factor to participate in that production. As returns in a pure free market will be competed down to that minimum, anything above that is rent.

  672 Erik S. Reinert, “Competitiveness and its Predecessors—a 500-year Cross-National Perspective,” STEP Centre for Innovation Research, p. 5.

  673 Michael Porter, The Competitive Advantage of Nations (New York: The Free Press, 1990), p. 89.

  674 This now unfashionable term derives from economist John Kenneth Galbraith in his 1952 book, American Capitalism: the Concept of Countervailing Power (Boston: Houghton Mifflin, 1952).

  675 The importance of this fact was noted by Adam Smith (and quoted by Ricardo): “The desire for food is limited in every man by the narrow capacity of the human stomach, but the desire of the conveniences and ornaments of building, dress, equipage, and household furniture, seems to have no limit or boundary.” Adam Smith, The Wealth of Nations, Book. I, Chapter XI, Part II, quoted in David Ricardo, On the Principles of Political Economy and Taxation, Chapter 21.

  676 See Hans Singer, “The Distribution of Gains Between Investing and Borrowing Countries,” American Economic Review, May 1950; Raúl Prebisch, The Economic Development of Latin America and its Principal Problems (Lake Success, NY: United Nations Department of Economic Affairs, 1950).

  677 Board of Trade Journal, August 4, 1951, reprinted in B.R. Mitchell and Phyllis Deane, Abstract of British Historical Statistics (Cambridge, UK: Cambridge University Press, 1962), p. 332. This fact had actually been known for a very long time; it is discussed at length in Alexander Hamilton’s 1791 Report on the Subject of Manufactures (Philadelphia: William Brown, 1827), pp. 44-45.

  678 The World Bank disputes this, pointing out that it only directly financed a small part of the Vietnamese coffee industry.

  679 Eric Reinert, How Rich Countries Got Rich and Why Poor Countries Stay Poor (New York: Carroll & Graf, 2007), p. 112.

  680 It has been estimated that modernizing Indian agriculture would put 600 million people in need of new employment. Colin Tudge, “Time for a Peasant Revolution,” Resurgence, May-June 2005, p.14.

  681 “Human Development Report 1999,” United Nations Development Programme, p. 3. Note that economic growth in India and China mean that on a population-weighted basis, global inequality peaked in 1992, and has dropped slightly since then.

  682 Of course, some colonial powers lack the understanding of economic mechanisms to do this, and some colonies, such Canada, weren’t true colonies in the economic sense or, as in the case of Manchukuo, were operated according to entirely different economic strategies. And some colonialism doesn’t even get this far, but operates by mere plunder or mere territorial conquest without economic content.

  683 Lawrence A. Peskin, Manufacturing Revolution: The Intellectual Origins of Early American Industry (Baltimore: Johns Hopkins University Press, 2003), p. 20.

  684 Paul Bairoch, Economics and World History: Myths and Paradoxes (Chicago: University of Chicago Press, 1993), p. 38.

  685 For a precise Ricardian analysis of this problem, framed in terms of changing productivity over time, see Frank D. Graham, “Some Aspects of Protection Further Considered,” The Quarterly Journal of Economics, February 1923.

  686 Joseph Stiglitz, Making Globalization Work (New York: W.W. Norton & Co, 2006), p. 85. Total OECD subsidies from OECD, Agricultural Policies in OECD Countries: Monitoring and Evaluation (Paris: OECD, 2005), p. 7.

  687 The success of Japan was a hidden factor in persuading the Soviet elite to abandon Marxism. The success of China left them no choice, as the U.S.SR would have declined to irrelevancy within a visible time frame. Because it was America’s need to keep Japan anticommunist that allowed Japan the breathing space to rebuild its economic machine after catastrophic losses in 1945, it is arguable that the Cold War was won in Tokyo.