Benefits Of Free Trade Research Articles

Special and differential treatment in the WTO agricultural negotiations: Analysis and policy recommendation1 2

Abstract The on-going Doha Development Round under the World Trade Organization (WTO) has its main focus on development. This is due to the widespread disappointment with the results from the former Uruguay Round Agreement. Developing countries have not reaped the benefits of free trade. For this current Round to be a success, developing countries have to be more integrated in the multilateral trading system. One of the means of integrating is Special and Differential Treatment (SDT). SDT is a deviation from the basic principle of Most Favoured Nation, positing that developing countries can have more flexibility than others. This article investigates the positions on SDT made by WTO members. The analysis gives some insights into the negotiations. First, the analysis reveals the fact that the positions of WTO members are relatively close to each other. This could indicate that countries in fact agree or that sensitive areas are maintained as yet unaffected. Second, being able to sustain a certain level of ...

Canada—U.S. Relations after Free Trade: Lessons Learned and Unmet Challenges

Fifteen years ago, Canada and the United States entered into a historic commitment: to facilitate and manage the growing integration of their two markets on a bilateral, rather than a multilateral, basis. The result was the Canada-United States Free Trade Agreement (FTA), which entered into force on January 1, 1989. Five years later, they agreed to add Mexico to the mix and convert the FTA into the trilateral North American Free Trade Agreement (NAFTA). By 2004, Canadians could look back on fifteen years of experience under the new arrangement. What have we learned from that experience? Let me share six lessons that fifteen or more years of involvement in the free trade project have taught me, and draw out some guidance for the future. Three of the lessons are largely political, while the other three are more academic or intellectual in their scope. They can be summarized, briefly, in the following way: 1. Projects of this nature require an unique partnership of political leader and policy entrepreneur. Without political leaders of courage, conviction, and vision, it would not have proved possible to confront the deeply entrenched but false fears that are so critical to the continued appeal of protectionism and nationalism, and without policy entrepreneurs prepared to challenge the purveyors of conventional wisdom in government and academia, freer trade in North America would have remained captive of incrementalism and multilateralism. 2. Success on this project relied on the support of business in all three countries which dared to dream big; it was important to listen to their diagnosis of the problems that needed to be addressed and equally important to ignore their prognosis of what to do about them. 3. So-called civil society groups added spice to this project and reminded us all that there is more to North America than trade and economics, but the project would not have succeeded if political leaders and negotiators alike had not learned to keep the views of the most trenchant civil society groups in perspective; theirs was usually a different agenda. 4. Economists were generally right about the benefits of free trade, but have not always proved helpful in finding the best way of achieving them. 5. Political scientists were generally wrong about the threats posed by freer trade, but they can make an important contribution to designing the institutional underpinnings required to gain the full benefits of freer trade. 6. Finally, it is important to involve the lawyers, but only if you keep them in their place. A Partnership of Vision and Knowledge For many people, the most admired politician of the twentieth century was Winston Churchill. It is not difficult to understand why. Churchill exemplified the best qualities of leadership: vision, courage, and bulldog determination. He demonstrated that if a project is worth doing it must be done, regardless of the politics. He also understood that leadership requires the ability to draw out the best in others and an understanding that most major projects can only be accomplished through the cooperative efforts of many individuals. North American free trade was such a project. It required the vision of an exceptional generation of political leaders prepared to swim against the tide of the postwar Keynesian consensus, but it also took the dogged determination of policy entrepreneurs in all three capitals ready to reject the conventional wisdom of entrenched bureaucracies. Remarkably, the 1980s produced both groups of people in Ottawa, Washington, and Mexico City: political leaders like Brian Mulroney, Ronald Reagan, George Herbert Bush, and Carlos Salinas de Gortari, who were prepared to reject the easy path of ever-growing statism; and advisors and policy entrepreneurs capable of translating their priorities and values into workable policies and programs. The result was a fundamental re-ordering of the relationship between government and society. …

Imports, Exports, and Jobs: What Does Trade Mean for Employment and Job Loss?

Kletzer adds to our understanding of the magnitude of the costs and benefits of free trade. She presents a focused examination of the relationship between changes in international trade, employment, and job displacement for a sample of U.S. manufacturing industries. The link between international trade and domestic jobs is also explored through studies of both net and gross employment job change.

Current protectionism and the benefits of free trade

Current protectionism and the benefits of free trade

Do What You Do Best, Outsource the Rest?

International trade generates higher overall output by redirecting jobs to those who create the most added value, that is, to those who maximize their productive abilities. Put simply, the benefits of free trade can be summarized as: Do what you do best. Trade for the rest. But times are changing, and so are many traded commodities. The newest U.S. trade commodity is skilled white-collar work, with an estimated 60 percent of these outsourced jobs going to India. As with most traded commodities, outsourcing work abroad is the product of lower foreign labor costs and potential higher future profits. And like free trade, outsourcing has become controversial. Outsourcing's critics see only the elimination of work previously done in the United States and view outsourcing as exporting white-collar jobs to other countries. What they fail to recognize is that attempting to protect these jobs would mean higher prices for consumers and the unrealized potential for more productive jobs in newly created industries. What is outsourcing? Why is India the leading country in attracting outsourced work? And what are the economic and political implications as firms do what they do best and outsource the rest?

Imports, exports, and jobs: what does trade mean for employment and job loss?

Kletzer adds to our understanding of the magnitude of the costs and benefits of free trade. She presents a focused examination of the relationship between changes in international trade, employment, and job displacement for a sample of U.S. manufacturing industries. The link between international trade and domestic jobs is also explored through studies of both net and gross employment job change.

Source Rules, Trade and Income Taxes, and Electronic Commerce: Designing Rules for the Taxation of Cross-Border Income

Several issues in the design of international tax rules are examined. One is whether the income from intangible assets such as royalties should be taxed by the host country in which the intangibles are used or the home country in which they were developed. Another is whether local sales should be a basis for taxing foreign companies even if they have no local physical presence. A third related issue is whether a destination basis income tax is a valid policy option. The introduction develops a general framework to evaluate tax regimes, based on efficiency along various behavioral margins such as the choice of where to exploit an intangible asset. The analysis concludes that the income from intangible assets should be taxed by the home country, not the country where it is used. Also, any attempt to tax foreign companies based on their local sales is simply the equivalent of a tariff. The paper shows that there are some extreme circumstances which would justify a tariff to offset the distortions created by an income tax, but electronic commerce does not seem to qualify for this departure from the benefits of free trade. Finally, a destination basis income tax creates an incentive to invest abroad rather than at home. It is an improper attempt to graft a consumption tax concept onto an income tax

Globalization

Millions of people around the world are defying conventional thinking, often at great risk to themselves and to their communities. Instead of toeing the line of free trade and regional economic integration, they are retreating into more insular patterns to exercise control over the ecosystems that they are called on to husband, to produce more of their own basic needs, and to diversify productively so that they do not have to close themselves off to the world economy. They are actively rejecting the call for a crusade to shape a single international economy, impetuously setting out on a different path to social and cultural diversity and environmental democracy in an attempt to ensure themselves a modicum of security and material well-being. Large contingents of people in the Third World and even in the wealthy countries are actively attempting to construct their own alternatives. They are creating bold new strategies that not only offer greater possibilities for their own satisfaction but also promise to produce a new set of goods and services that will contribute to improving the quality of life for those who have become trapped in the globalized society while helping to ameliorate the environmental crises that threaten us all. Even as the world's leaders bask in the reflected heat of the preachers of globalization, assuring all who will listen of the unlimited benefits of free trade and integration, vast contingents of workers and peasants and even some renegade professionals and intellectuals are obstreperously bursting into the meetings of the rich and powerful, giving voice to their disenchantment. From the perspective of the South, there is a growing understanding of the costs of the new world order for people who have been dismissed by the powers that be. Especially in Mexico-one of the celebrated heroic participants cementing the conduits of global interchange-an unexpected groundswell of opposition has produced a remarkable proliferation of alternative strategies.

North–South Models of Growth and Trade

The paper surveys the literature that combines growth and trade into models of North–South interaction. We distinguish two strands of growth theory: old (exogenous) and new (endogenous) growth. We also distinguish old trade theory which assumes constant returns to scale and perfect competition, and new trade theory which relaxes both of these assumptions. This gives us four possible combinations of growth and trade theories which provide the basis of the taxonomy employed in our survey. We address the following long–standing issues raised in the literature: first, given that one of the North–South asymmetries is that the North leads in technical progress, how does the South adjust to such changes? Second, can the models explain patterns of trade and income differentials between the regions? Third, do asymmetries mean that standard prescriptions on the mutual benefits of free trade and free movements of capital need to be modified? Finally, can our models explain why the South continues to favour protection of its manufacturing sectors at the same time that barriers within the North are being dismantled? JEL Classification: F43, O41

Deconstructing Rotten Trade : A Dialogue with Jagdish Bhagwati

In this dialogue with the pre-eminent economist Jagdish Bhagwati, we explore the concept of Rotten Trade and the implications it will have for policymakers in both developed and developing countries. While Dr. Bhagwati recognizes the benefits of free trade, he acknowledges the potential dangers that trade in "bads" could pose. Governments, corporations, and consumers must recognize their role in Rotten Trade, and their subsequent responsibilities.

Rethinking WTO Trade Sanctions

The most salient feature of dispute settlement in the World Trade Organization (WTO) is the possibility of authorizing a trade sanction against a scofflaw member government. This feature, however, is a mixed blessing. On the one hand, it fortifies WTO rules and promotes respect for them. On the other hand, it drains away the benefits of free trade and provokes “sanction envy.” Undoubtedly, putting teeth in the WTO was one of the key achievements of the Uruguay Round ending in 1994, and a very significant step in the evolution of international economic law.1 Yet after six years of experience, WTO observers are questioning whether the availability of trade enforcement is sensible.2 This article undertakes an appraisal of trade sanctions as a WTO instrument, and concludes that this practice undermines the trading system. In view of this dysfunction, the article explores alternatives to trade enforcement and points to some softer measures that might have promise.

Probing the After-Myth of Seattle

FOR THE OFFICIAL PARTICIPANTS, the third ministerial meeting of the World Trade Organization (WTO) in Seattle in December 1999 failed spectacularly, with tens of thousands of protestors battling thousands of police. After the long anticipated Battle in Seattle, journalists fretted about the apparent debacle in Seattle, leaders of civil society organizations proclaimed the dawn of a new era, and serious academics in proliferating symposia began to refer to the post-Seattle era as they had once talked about the post-cold war 'new world order.' The flamboyant French farmer, Jose Bove, claimed that 'public opinion has already made its decision: the WTO and the way it works are already condemned today by the majority of citizens.'(f.1) Canada's minister for international trade could 'say with more certainty than ever that we are in a very, very different kind of world than we were. I think Seattle has really crystallized a lot of forces, emotions, tensions and creative evolutions that have been in the air for the last 50 years.'(f.2)The public protests were only one of the battles in Seattle, and arguably not the most important contributor to the failure of the WTO meeting,(f.3) but the after myth of the street battle shapes how scholars, practitioners, and journalists write about the evolving politics of global governance. Internationalists who think that globalization is a 'good thing' worry about growing North American 'globaphobia.' Some experts think that a misinformed public can be 'educated,' while many in the business community think that improved marketing efforts would convince the public of the benefits of free trade.(f.4) Some trade officials think that international organizations must now have glass walls. Members of civil society organizations say that the public has made it clear that the era of corporate rule must come to an end, and Sylvia Ostry wonders if trade policy suffers from the end of what V.O. Key, Jr, called the 'permissive consensus' in international affairs of the earlier postwar decades, that is, the freedom governments had to act as they saw fit in international affairs.(f.5) Others dismiss the Cassandras and claim that since some public polls show that support for trade is undiminished, Seattle was merely a tempest in a Starbucks cup.In this article we want to probe one aspect of the post-Seattle mythology: do Canadians support active engagement in the economic institutions of global governance? The policy aspects of the question are pressing because of the possible perception, created by activists, that the public thinks globalization, its supposed agents in multinational firms, and their putative agents in the WTO, the International Monetary Fund (IMF), and the World Bank have gone too far. The Canadian trade agenda is heavy, with the prospect of new negotiations in the WTO, new regional negotiations, and further Team Canada missions. The Summit of the Americans in Quebec City in April 2001 attracted large protests and the promised aggressive response from security forces. How deep is the support among the Canadian public for present agreements, and how much support is there for new ones? Part of the answer to these questions can be found in public opinion data.The new mythology about decreasing levels of public support for global governance may have a solid qualitative foundation in protest and activism, but an analysis of available survey research on international trade shows that, in Canada at least, it has little quantitative basis. We find that 'Seattle' had few roots in, or impact on, mass opinion in Canada, although many of the concerns raised by protesters speak to underlying public values that could be mobilized if the Canadian government were to pursue new trade agreements.Our conclusion does not imply that the protests in Seattle had no political implications. In fact, elites may have been more strongly affected than the general public. American studies of public opinion and international affairs indicate that both officials and politicians tend to look to the media and interest groups for indications of public opinion and to reject polling results that suggest the public might hold different views. …

Is Knowledge Enough? — Realising the Benefits of Free Trade

Is Knowledge Enough? — Realising the Benefits of Free Trade

On the Environmental Externalities of Global Trade

In the study of international political economy, there is little discussion on how economic development affects the global environment. Yet natural degradation can be one of the most pervasive and longest lasting consequences of development. Too often these consequences are simply catalogued without sufficient consideration given to their social, political and economic causes. Global deforestation, this study's litmus test of environmental lateral pressure, is examined in relation to domestic GNP, population growth, and a variable constructed for this study, namely tradeconnected GNP, which accounts for the trade effects among nations. This model specifically addresses the ongoing debate between economists and environmentalists over the costs and benefits of free trade. Economists defend free trade by citing evidence that domestic GNP increases, spurred on by the gains from trade, reduce environmental degradation as richer countries become better able to address such concerns. This study replicates these results, but then it tests trade effects directly and finds that they increase rather than decrease patterns of global deforestation.

The free trade adventure: the Uruguay round and globalism--a critique

The 1994 Uruguay Round agreement of the General Agreement on Tariffs and Trade has been heralded as one of the greatest trade agreements in history. However, to some observers it is the road to economic, social and environmental ruin, while to others it represents little more than the creation of a world-dominating bureaucracy which will be controlled entirely by giant transnational corporations. This text outlines the social, political and economic climate in which the 7-year Uruguay Round negotiations took place. It examines the implications and likely outcomes of the round in the wider context of the contemporary thrust towards global free trade and economic globalization. Arguing that although global free trade is the current goal of ruling elites, there will be widespread resistance to it; that the benefits of free trade will be less and the costs more than free trade advocates claim; and that the many arguments against free trade and the sustainable and equitable alternatives to it have been deliberately ignored by mainstream economic doctrines.

The impact of the U.S.—canada free trade agreement on the large and small U.S. firms in the textiles, computer, oil & gas, and auto industries

This paper investigates the potential impact of the U.S.—Canada free trade agreement on large and small firms in the U.S. textile, oil and gas, computer, and auto industries by utilizing a methodology involving stock price data. The large firms in the textile, oil and gas, and computer industries had the most pronounced impact. In general, the potential benefits of free trade appear to increase with size and the bigger firms exhibit larger potential benefits. The significant abnormal risk adjusted changes in the value of stocks indicate that the market viewed the prospect of free trade with Canada favorably for the textile and computer industries, but less favorably for the auto and the oil and gas industry. The results of the ex-ante methodology are consistent with the ex-post U.S.—Canada trade data on surpluses in the textile and computer industries, and trade deficits in the oil and automobile industries, that persisted after the enactment of the treaty.

Risking free trade: the politics of trade in Britain, Canada, Mexico, and the United States

Titans or Behemoths: The Multilateral Development Banks, volume 5, by Roy Culpeper (Ottawa: North-South Institute, 1997, xx, 191pp).Risking Free Trade: The Politics of Trade in Britain, Canada, Mexico, and the United States by Michael Lusztig (Pittsburgh PA: University of Pittsburgh Press, 1996, x, 180pp).Who Elected the Bankers? Surveillance and Control in the World Economy by Louis W. Pauly (London and Ithaca NY: Cornell University Press, 1997, XIV, 184pp, US$25.00).The New World Order in International Finance, edited by Geoffrey R.D. Underhill (New York: St Martin's, 1997, XVII, 331pp, US$49.95).The accelerated integration of the world economy and its impact on citizens, on the ability to govern, and on the present structure of international organizations have led to a plethora of studies in most social science disciplines. Historians point out that capital and trade reached similar levels of integration in the decades leading up to the first world war. However, the speed at which change is taking place today is unprecedented. Several issues have been explored in depth, including the impact of liberalized trade on wages and unemployment of blue collar workers in industrial countries; of freer trade and capital flows on the environment; of capital flows on the ability of states to conduct their own monetary, fiscal, and social policies. There are also analyses of or prescriptions for the national and international regulatory regimes, if any, that are necessary in the new global environment. Regrettably, and as always, there is little communication among scholars of various disciplines.The books under review here make important contributions to the growing literature and can be read with interest regardless of the disciplinary background of the reader. With some exceptions, annoying jargon is kept to a minimum. Three of the books deal with international lending and finance, but I will begin with the fourth.Lusztig's exploration of the question of why countries liberalize trade is not particularly interesting to a traditionally trained economist because the answer is obvious. Countries act in that manner because it is in their interest to do so. Most introductory economics textbooks devote a chapter to the benefits of free trade by explaining comparative advantage: if each country produces and exports those products which it produces relatively efficiently, the world and each country will be better off in the sense that the value of output and, therefore, total income (gross domestic product) will increase. However, most of them by-pass the problem of trade liberalization: the way it creates gainers and losers in each country and the unhappiness of workers in those industries which are losing their protection at the prospect of becoming unemployed or of being paid less. The main beneficiaries are consumers and resources employed in the export industries. While in theory the gainers compensate the losers, in reality this does not often happen. The losers are more likely to distrust and therefore attempt to block any move towards free trade. Democratic governments, which have to be re-elected, are sensitive to such pressures. Economists have begun to look seriously at these problems, most promisingly through a transaction cost approach focussing on impediments to the development of efficient markets.(f.1)Lusztig takes a political science approach, arguing that free trade may be achieved as a by-product of a pursuit of other objectives or a means to their realization. In a sense free trade may be one of the bargaining chips thrown in to achieve something else. He argues that existing theories ignore this possibility.In Lusztig's model, trade liberalization refers only to policies which remove direct import barriers affecting at least one-third of total trade volume - an arbitrary figure which he does not defend - and which constitute clear departures from past policies and are politically controversial. …

Effective protection and investment incentives in Egypt and Jordan during the transition to free trade With Europe

This paper assesses the possible impact of a Euro-Mediterranean Agreement (EMA) on Egypt and Jordan and identifies policy options that will increase the benefits of free trade with Europe. The extent to which these countries will benefit from an EMA depends greatly on the investment response and thus on improvements in the investment climate. The latter will be determined by many factors. This paper focuses on three such factors: the modalities of the tariff reduction strategy that will be pursued, the extent to which transaction costs may be reduced, and upgrading the quality and lowering the costs of intermediate service inputs through greater competition. Many of the policy and institutional changes that are required are not or are only in part covered by the EMA.

The Uninventive South? A Quantitative Look at Region and American Inventiveness

The Uninventive South? A Quantitative Look at Region and American Inventiveness DAVID L. CARLTON AND PETER A. COCLANIS Historical economists studying the United States have typically been preoccupied with explaining the American economic success story. With their gaze firmly set on the national level, it is not surpris­ ing that they have stressed the role played by the creation of a highly integrated national economy in furthering growth. Although econo­ mists’ fascination with the benefits of free trade, factor mobility, and the division of labor is justifiable, that same enthusiasm has led them to downplay an important countercurrent, that of persistent dispar­ ities in regional development. Yet, beginning with the SunbeltFrostbelt controversy of the late 1970s, we have seen increasing indi­ cations that, despite the prophets of “convergence,” regions have con­ tinued to matter greatly in our economic life. The major exception to this neglect of region by economic histori­ ans is the American South, whose observers have long been preoccu­ pied with the paradox of persistent regional backwardness in a land of progress. An especially striking instance of this paradox has been the South’s experience with industrialization, particularly prior to World War II.1 Despite impressive growth in manufacturing output Dr. Carlton is associate professor of history at Vanderbilt University. A student of the industrialization of the American South, he is the author of Mill and Town in South Carolina (Baton Rouge, La., 1982) and “The Revolution from Above,’’Journal of American History 77 (1990): 445—75. Dr. Coclanis is associate professor of history at the University of North Carolina at Chapel Hill. His writings deal with southern and comparative agriculture and include The Shadow of a Dream (New York, 1989) and “Distant Thunder,” American Historical Review 98 (1993): 1050-78. The authors would like to thank Stanley Engerman, Robert Gallman, Robert Higgs, Robert Margo, Paul Rhode, Donald Winters, the panelists and audience attending their session at the Orga­ nization of American Historians meeting in Chicago, April 3, 1992, Philip Scranton, and the Technology and Culture referees for their suggestions. 'See, e.g., Gavin Wright, Old South, New South: Revolutions in the Southern Economy since the Civil War (New York, 1986); Warren C. Whatley, “Southern Agrarian Labor Contracts as Impediments to Cotton Mechanization,” Journal of Economic History 47 (March 1987): 45—70; Bruce J. Schulman, From Cotton Belt to Sunbelt: Federal Policy,© 1995 by the Society for the History of Technology. All rights reserved. 0040-165X/95/3602-0005$01.00 302 A Quantitative Look at Region and American Inventiveness 303 in the half century after 1880, the South remained far below national norms not only in income per capita but in a variety of other indexes associated with socioeconomic development. To be sure, the lack of stimulation imparted by manufacturing to southern economic growth was in part a function of its relatively small share of regional employ­ ment; however, it was also in great measure a product of the character of southern industrialization itself. Not only was southern manufac­ turing generally plagued by low output and value added per worker, with resulting low wages, but its industrial structure was heavily skewed toward industries, such as cotton textiles and lumber, whose wealth-producing ability was especially low.* 2 Why was this the case? Were these problems merely functions of lagging development, the recapitulation of a stage passed through earlier by the manufacturing belt? Or was there something about the South—its society, culture, or values—that impeded the region’s progress down the classic indus­ trial road to modernization? In view of the sheer obduracy of southern problems, simple eco­ nomic factors have never seemed sufficient to explain them. While some observers, especially in the 1930s, have looked to constraints from without, for example, “economic colonialism,” as the key to southern industrial underdevelopment, more have been drawn to broadly social and cultural explanations, popularly in images of the “lazy South” and intellectually in visions of the region as an “agrarian” Economic Development, and the Transformation ofthe South, 1938—1980 (New York, 1991); James C. Cobb, Industrialization and Southern Society, 1877—1984 (Lexington, Ky., 1985), and “Beyond Planters and Industrialists: A New Perspective on the New South,” Jour­ nal...

The Uninventive South? A Quantitative Look at Region and American Inventiveness

Historical economists studying the United States have typically been preoccupied with explaining the American economic success story. With their gaze firmly set on the national level, it is not surprising that they have stressed the role played by the creation of a highly integrated national economy in furthering growth. Although economists' fascination with the benefits of free trade, factor mobility, and the division of labor is justifiable, that same enthusiasm has led them to downplay an important countercurrent, that of persistent disparities in regional development. Yet, beginning with the SunbeltFrostbelt controversy of the late 1970s, we have seen increasing indications that, despite the prophets of convergence, regions have continued to matter greatly in our economic life. The major exception to this neglect of region by economic historians is the American South, whose observers have long been preoccupied with the paradox of persistent regional backwardness in a land of progress. An especially striking instance of this paradox has been the South's experience with industrialization, particularly prior to World War II. Despite impressive growth in manufacturing output