Philippe Legrain

Madhouse economics

Ha-Joon Chang's suggestion that the world needs a dose of protectionism to tide it through the global recession is utterly misguided. Read my new article for Prospect here.

The economics of the madhouse

The failures of global finance have brought the world economy to its knees, threatening a re-run of the Great Depression of the 1930s. Such a terrible outcome is much more likely if policymakers follow Ha-Joon Chang’s suggestion that the world needs a dose of protectionism to see it through these troubled times.

Around the world, we are witnessing the devastating impact of globalisation going into reverse. What was once a virtuous circle of rising trade and booming economic growth has become a vicious spiral of collapsing demand and plunging exports. The question is: how to break this spiral? The answer, in my view, is coordinated government action to boost global demand, combining large fiscal stimulus packages, unconventional monetary policy measures, and the nationalisation and restructuring of zombie banks that are dragging the economy down with them. Chang, in contrast, favours limited protectionism—in effect, a tax on imports.

This should ring alarm bells among people who may be tempted by the siren song of protectionism. Most governments are scrambling to boost spending and /cut/ taxes to stimulate demand. David Cameron’s Conservatives oppose such a fiscal stimulus. Chang goes one step further: he is proposing a (selective) tax hike instead. The immediate impact would be to reduce people’s purchasing power in a highly regressive way. And since Chang proposes that all governments agree to raise their import taxes, demand would be dealt a further knock by the fall in demand for our exports. Higher taxes and lower exports as a cure for the global recession? This is the economics of the madhouse.

Chang is surely aware of this. After all, even he concedes that an all-out trade war would be a bad thing. But the difference between limited protectionism and a trade war is a matter of degree: the former would involve fewer casualties, for sure, but it would not lead to economic resurrection. And history shows that limited protectionism is often a precursor to much larger conflicts.

Chang claims that rising protectionism in the 1930s was not as harmful as is often claimed. It is true that trade collapsed for several reasons, including falling demand. But protectionism greatly amplified the damage. According to a study by Jakob Madsen of Monash University (Trade Barriers and the Collapse of World Trade During the Great Depression), world trade declined 14% in inflation-adjusted terms between 1929 and 1932 due to declining incomes, 8% because of policy-induced tariff increases, 5% due to deflation-induced tariff increases (when prices are falling, a tariff of, say, £1 per item rises in real terms), and a further 6% because of the imposition of non-tariff barriers. So, most of the collapse in trade was due to rising protectionism rather than falling demand.

Nor did protectionism save jobs. Research by Doug Irwin of Dartmouth College, the leading US trade historian, concludes that “The Smoot-Hawley tariff of 1930, for example, significantly reduced imports but failed to create jobs overall because exports fell almost one-for-one with imports, resulting in employment losses in those industries.”

Clearly, then, the costs of protectionism are large. Yet Chang claims that “temporary” protectionism would have a big benefit: it would provide breathing space for companies and workers to reinvent themselves. But that too is dubious. Protectionism does not provide the right incentives for businesses and workers to adapt. Companies that have a captive local market tend to milk it, rather than seeking out more competitive markets overseas—especially if they are prevented from doing so by others’ protectionism. And while protectionism may start off as a “temporary” response to the crisis, companies that benefit from it have every incentive to find new reasons to maintain it, and to devote their energies to lobbying politicians to that end. Just look at Europe’s Common Agricultural Policy, which was originally designed to prevent Europeans starving. The last thing we need is a CAP writ-large.

Protectionism would obstruct the world economy from adjusting, rather than encouraging it. There is, for instance, huge overcapacity in the US and European car industries. If each country acts to prop up their carmakers, none will thrive. Only if the least efficient shrink can the carmarkers that produce the cars people actually want to buy thrive. Chang’s prescription is also bizarre considering his main focus is aiding developing countries. If the EU keeps out foreign cars, India’s Tata Motors and his native South Korea’s Hyundai, Daewoo and Kia will suffer.

In Britain’s case, advocating protectionism is particularly perverse. One big reason why the manufacturing sector has shrunk so much in recent years is the pound’s prolonged overvaluation. Now that the pound has collapsed, UK-based exporters, not least its remaining manufacturers, have received a timely boost that will make them more competitive when the global economy recovers. An increase in global protectionism would close off their future export markets.

The real help that companies need to tide them through the crisis is not protectionism but access to finance and broad measures to stimulate demand. These would also boost employment, especially if combined with cuts in payroll taxes and increased help for workers to retrain and find new jobs.

Protectionism watch

After the Omnibus Appropriations Bill signed into law by President Obama scrapped a pilot programme that allowed a small number of Mexican trucking companies to carry cargoes north of the border - as NAFTA requires - Mexico has responded by slapping tariffs of up to 45% on 90 American agricultural and industrial imports.

Renault is to move production of its new Clio from Slovenia back to France, after President Sarkozy granted a bail out to French carmakers on condition they repatriate production from central and eastern Europe. Renault insists the decision is a commercial, rather than a political, one. So much for the EU single market.

Anti-dumping investigations soar

The FT reports. Let's hope the financial crisis doesn't spur a wider outbreak of protectionism

Gordon Brown's reshuffle

Gordon Brown's reshuffle has certainly captured headlines. But what does it mean for the trade and immigration debates?

That Peter Mandelson jumped at the chance to leave his job as EU trade commissioner for a non-job as UK business secretary (which has been stripped of the energy and enterprise portfolios) provides further confirmation that the Doha round is dead.

Meanwhile, the appointment of Phil Woolas as immigration minister is ominous. He told the Guardian that he might ape the Tories and bring in an annual cap on migrants entering Britain.

"We must not pander to racists," he said - of course not, perish the thought - "but it is particularly important that we have a credible policy on population that can reassure people."

What do you think he means? A one-child policy? Leaving the EU? Or even tighter curbs on Africans and Asians coming to Britain?

Why the Doha breakdown matters

Philip Stephens has written an excellent article in the FT about why the Doha breakdown matters. He concludes:

The collapse of Doha, however, speaks to the failure of both sides to own up to the world as it is. On the side of the rich countries, particularly the US but no less many European nations, there is a refusal to acknowledge that globalisation no longer belongs to the west. In previous trade rounds, the rich nations set the rules and the rest could take it or leave it. No longer.

Equally, the new powers now give the impression – and you see this as much in India as China – that they want to be free riders. They are happy to profit from the rules, but unwilling to support the architecture of the system. Doha, in this respect, saw both sides in blindfolds.

The implications reach well beyond trade. The parallel with the need to strike a global bargain on climate change is the obvious one. But there are a host of other areas – think of nuclear non-proliferation, energy security, state failure, terrorism – where the habit of multilateralism offers the only sensible answers. A trade deal in Geneva would have offered a glimmer of hope that world leaders understand this.

How many times can the Doha round collapse?

The WTO's Doha round has collapsed yet again. Like a beaten up boxer, don't expect it to be back on its feet any time soon.

5 Myths about NAFTA

Sen. Hillary Rodham Clinton often likes to take credit for her husband's achievements as president. But then there's NAFTA. Clinton may have been present at the creation of the North American Free Trade Agreement in 1994, but she wants everybody to know that it's not her baby. She now proposes to "fix" the agreement to make trade "work for working families." Sen. Barack Obama, meanwhile, makes the fallout from NAFTA sound downright nuclear, lamenting that "entire cities . . . have been devastated as a consequence of trade agreements that were not adequately structured to make sure that U.S. workers had a fair deal." Despite the heightened rhetoric, he, too, wishes to "fix" the treaty, not nix it. Only the presumptive Republican nominee, Sen. John McCain, would leave NAFTA untouched; his priority is freeing up global trade.

The Democratic rivals have bought into most of the myths that have been peddled about the agreement and have placed their opposition to NAFTA at the center of their campaigns. Here's some information that could help them update their stump speeches.

1 NAFTA has transformed the U.S. economy.

Hardly. Critics rightly point out that NAFTA's economic benefits were oversold, but they're wrong to heap the blame for all America's woes on it. NAFTA, which expanded the existing Canadian-U.S. free-trade area to Mexico, has had only a marginal effect on the U.S. economy. Yes, exports to Mexico have more than tripled since 1993 -- but at $161 billion last year, they still account for only 1.1 percent of the economy. Considering that total U.S. exports have more than doubled over the same period, to more than $1.6 trillion a year, the boost from NAFTA is just a trifle.

Though imports from Mexico have risen nearly five-fold since 1993 -- potentially threatening some U.S. businesses -- they only amounted to $230 billion in 2007, or less than 1.7 percent of the $14 trillion U.S. economy. That's peanuts. And for all the fears of factories being shipped south on the back of an 18-wheeler, the total U.S. investment in Mexican factories and offices adds up to a mere $75 billion. Mexico received just $19 billion in foreign direct investment in 2006, while the United States attracted $175 billion. Thus, the "giant sucking sound" that Texas businessman and independent presidential candidate H. Ross Perot heard back in the 1990s doesn't sound so giant after all. But the benefits of NAFTA don't seem so remarkable, either.

2 NAFTA has put countless Americans out of work.

Not really. Obama claims that NAFTA has destroyed a million American jobs. Suppose he's right. Total employment still rose by 27 million jobs between 1993 and 2007, to 137.6 million, and the unemployment rate has fallen. At worst, then, NAFTA has cost only a tiny minority of American workers their jobs. And even that is a one-sided view. As Mexico opened its economy to U.S. trade and investment, NAFTA created new American jobs, too.

NAFTA critics also decry the trade deficit with Mexico, but at $70 billion a year, it accounts for only 0.5 percent of the U.S. economy. These figures should quiet NAFTA foes, who point to lost jobs and stagnant manufacturing wages, as well as boosters, who trumpet claims of rising output and record-high exports. The fact is, NAFTA has had only a fractional impact on these trends. Mexico's biggest impact on the U.S. labor market is not through trade, but through immigration. And the money that Mexican migrants send home contributes more to the Mexican economy than foreign direct investment does.

3 "Fixing" NAFTA would be easy and cost-free.

Not so. Any changes would require a lengthy and complex renegotiation with Canada and Mexico. As Canada's prime minister, Stephen Harper, has pointed out, "Of course, if any American government ever chose to make the mistake of opening [NAFTA], we would have some things we would want to talk about as well." Just the threat of pulling out of NAFTA would do some damage, too. Far from boosting America's international reputation -- something all presidential candidates agree is important -- it would fan fears that the United States is an unreliable ally and discourage foreign governments from committing to future agreements with Washington. The slim chance of concluding the World Trade Organization's Doha round of global trade talks would vanish. And if the next president wants, for instance, Mexico's help in dealing with immigration reform and Canada's hand in combating terrorism, then blaming America's friendly neighbors for its perceived woes is hardly the way to start.

4 Making NAFTA's labor and environmental regulations stricter would benefit U.S. workers.

Probably not. Clinton wants to make the treaty's labor and environmental provisions "far tougher and absolutely binding" and to require that all future trade agreements include similar language. The stated purpose is to raise labor and environmental standards around the world and to make it harder for companies to ship jobs to countries where workers have fewer protections than in the United States. But America's trading partners would probably see the move as covert protectionism -- since when have the Teamsters cared about Mexican wildlife? -- and may retaliate. Meanwhile, consumers would probably resent the increased cost of their imports.

In any case, tough social clauses could backfire on the United States. Canada's labor and environmental standards are generally higher than the United States', and Canadians could claim that lax American standards amount to unfair competition. Given that Canada and Mexico have joined global efforts to curb climate change, they might wish to restrict American imports if the United States continues to hold back. And Mexican workers arguably have stronger labor rights than Americans: Unlike the United States, Mexico has ratified most of the International Labor Organization's conventions on core labor standards, including those on freedom of association, collective bargaining and employment discrimination. If the United States bashes Mexican labor practices, what's to stop Mexico from objecting to American imports produced in non-unionized factories?

5 Renegotiating NAFTA should be a priority for the new president.

Absolutely not. With the housing market plunging, the financial system seizing up and the economy apparently shrinking, tinkering with a treaty that governs trade with two of Washington's trading partners is a costly distraction -- whatever your view of NAFTA. The next president will have much bigger things to worry about, such as stopping the economy from going into a tailspin; cushioning the blow for vulnerable Americans who lose their homes, their jobs and their health care in the downturn; and helping frame new regulations that protect the economy against future financial excesses without stifling the market. Compared to all that, changing NAFTA looks like small change.

Like it or hate it, NAFTA is not actually a big deal for the US...

Read my article in the Washington Post here.

How many times can Doha collapse?

World trade talks collapse in acrimony, says the FT. Global trade talks founder, says the WSJ. Latest world trade talks collapse, says the BBC.

Not quite the deal of the century

The US's most significant "free-trade agreement" since NAFTA, the first with an Asian country, with "state-of-the-art" chapters and "unique" provisions - the embattled Bush administration was wheeling out the superlatives to describe the bilateral trade deal clinched with South Korea this morning.

War on Want are wrong to claim Bangladeshi garment workers are exploited

War on Want, a British lobby group, on Friday launched a campaign against Primark, Tesco and Asda for selling cheap clothes made by Bangladeshi workers whom the lobby group claim are exploited because they "regularly work 80 hours a week for just 5p an hour".

I debated the charge that such "sweatshops" are harming Bangladeshi workers in a debate with John Hilary of War on Want on BBC Radio 2's Jeremy Vine show: Listen here

EU fails to mend its protectionist ways

Anti-dumping duties, which unfairly penalise imports that are deemed too cheap, are one of the most pernicious protectionist devices. After all, we ought to be cheering if the cost of imports falls, because it makes the money in our pocket stretch further, not taxing consumers in order to try to prop up less efficient domestic producers.

Doha Round Failure: What Next?

The Center for International Relations has organised an International Affairs Forum on the future of world trade. They ask:

In the wake of the failure of the Doha round, what does the future hold for world trade? What can, and should be done to get negotiations back on track?

My reply follows. To read the other contributors' answers, click here.

Europe takes a small step forward

Most people think Europe's single market already exists: it was created way back in 1992, wasn't it? Unfortunately not. While goods are traded freely across borders within Europe, services are not  - and since they account for over two-thirds of the EU economy, Europe's single market is in effect far from complete.

Indians have reason to cheer

India's drinkers should raise a glass to Peter Mandelson.

Not so lucky number 150

No sooner had Vietnam celebrated its success in becoming the WTO's 150th member than it suffered a setback in its trade relations with Washington: Congress voted against normalising trade relations between the two countries.

The sky war resumes

Here we go again. The US government has today launched yet another salvo in its long-running conflict with the EU over aircraft subsidies, announcing that it is to file a new complaint at the WTO against European subsidies for Airbus. Before you could say "Boeing", Brussels made clear that it would hit back with its own tit-for-tat complaint. So much for the fragile truce that had held since February.

An opportunity for the Democrats on immigration and trade

The Democrats have scored a stunning victory in the midterm Congressional elections. It looks like they have captured control of not only the House of Representatives but also the Senate. Both President Bush and Nancy Pelosi, the incoming speaker of the House, have pledged to work together in a spirit of bipartisanship. Pigs might fly, you will say. But in two areas at least - immigration and trade - they would do well to agree on a common agenda that would benefit both of them, as well as America as a whole.

Lucky number 150

The WTO's 149 members have just agreed to admit lucky number 150: Vietnam.

US gambling ban is illegal

Online gambling is immoral and illegal - except when it takes place within US states, of course; oh, and interstate betting on horse races is also OK. That is the essence of the US's new Unlawful Gambling Enforcement Act, as clear-cut a case of protectionism as there is.

Brussels votes to raise price of shoes

"Grant me chastity and continence, but not yet" - the words are St Augustine's, but they could just as well have been uttered by Peter Mandelson.

A transatlantic FTA?

Germany's Chancellor, Angela Markel, is making noises about reviving the well-worn idea of a transatlantic free-trade area (FTA), and Susan Schwab, America's top trade negotiator, has welcomed the idea too. So might the proposal finally get off the ground?

Mandelson's weasel words

Doha is not yet dead and buried, but already the European Union is rushing to pursue new bilateral trade agreements instead.

We should go beyond the EU’s existing bilateral free trade agreements, by setting out the case for new free trade agreements designed to deliver more open markets and fairer trading conditions in new areas of growth, particularly in Asia.

says Peter Mandelson, the EU's trade commissioner. India, South Korea and the ASEAN countries are already said to be in his sights.

Inefficient markets

Doha derailed — who to blame?
So much for the lofty rhetoric about freeing trade and aiding development; when it came to the crunch, governments instead bowed to corporate protectionism. Thus the Doha round — launched after 9/11 as WTO members rallied around America in a show of unity — has collapsed in acrimony, with most blaming the US for its demise. This is not fair. America was guilty mainly of being too ambitious: it offered to prune its agricultural subsidies if others sheared their farm tariffs, but India and the EU refused.

America alone is not to blame for Doha collapse

The world's trade negotiators cannot seem to agree on much these days, but on one thing there is near-unanimity: the United States is responsible for the collapse of the WTO's Doha Round.

Peter Mandelson, the EU's trade commissioner, told the FT:

“If the US continues to demand dollar-for-dollar compensation in market access [cutting agricultural tariffs] for reducing domestic support, no one in the developing world will ever buy that and the EU will not either.”

Kamal Nath, India's fork-tongued commerce minister, said of the US:

“Everybody put something on the table except one country who said ‘we can’t see anything on the table’.”

This is nonsense. Whenever negotiations fail, all sides must take some of the blame. And the US, for good reasons and bad, is guilty mainly of being too ambitious to free up world trade - which is meant to be what the WTO is about.

Inefficient markets

Doha disaster!

The WTO's Doha Round has collapsed. After the failure of negotiators to break the deadlock in the world-trade talks over the weekend, the Round has been indefinitely suspended.

The WTO now risks going the way of the League of Nations in the 1930s and becoming an ineffective sideshow. There would be preferential trade instead of free trade, bilateral agreements rather than multilateral ones, free rein for protectionist actions rather than the discipline of international rules and impartial adjudication, the law of the jungle rather than the rule of law.

Shame on the narrow-minded mercantilists who have betrayed their countries' interests and those of the poor by putting the profits of vested interests ahead of the people's. They may come to rue this day.

Doha breakthough?

G8 summits rarely live up to their exalted billing, but on the sidelines of this weekend's meeting in St Petersburg, the US, the EU and the leaders of China, India, Brazil and Mexico all gave their backing for reaching an ambitious and balanced framework Doha Round agreement within a month. The deadlock may finally be broken. Pascal Lamy now has a strong mandate to bang heads together and reach the outlines of a deal to free up world trade by mid-August,

I'm rushing to finish my monthly column for Prospect, so I don't have time to write more now, but I'll add more as soon as I can.

A last, last chance?

As supposedly final deadlines come and go and the Doha Round staggers on, commentators like myself risk sounding like the boy who cried wolf. But July is surely the last chance for WTO members to agree the outlines of a deal - remember that the boy who cried wolf was eventually right. (Despite the high stakes, the chances of trade negotiators cancelling their August holidays are nil.)

Moore sounds Doha rallying cry

My former boss and good friend Mike Moore has written an excellent piece about prospects for the Doha Round, which is unfortunately only available to FT.com subscribers until Mike publishes it on his own website.

Noting that 'If you only read the headlines you would be forgiven for thinking the Doha development trade round had already failed', the man who helped launch the round as WTO director-general argues that 'We can do this'.

He is right. 

The perils of boldness

President Bush rarely intervenes directly in the WTO debate. So it is a sign of how the White House is ratcheting up the pressure for an ambitious Doha Round deal that he talked about it at some length in a speech this week:

Now we're confronted with a really good opportunity, by the way, to deal with global poverty, and that is to complete the Doha Round of the WTO negotiations.  And it's tough sledding right now... The Doha negotiations are at a critical moment.  It is -- in my view, countries in Europe have to make a tough decision on farming.  And the G20 countries have to make a tough decision on manufacturing.  And the United States is prepared to make a tough decision along with them. That's my message to the world.

The sceptics are wrong: Freeing trade has boosted growth in China and India

In a comment on my recent post on the contribution of trade liberalisation to Asia's success, Jim takes issue with my contention that

China and India are very powerful examples of the benefits of liberalisation: before they started their reforms, growth was slow, but as they have opened up their economies, growth has accelerated.

He argues that growth speeded up before they opened up, and that their growth since they opened up is not due to freer trade.

Deconstructing Doha

Time is running out for the Doha Round. It's been said so many times, but this time it really is true. To see why, count back from July 2007. That is when President Bush's fast-track authority, which forces Congress to vote on trade deals without the possibility of amending them, is due to expire.

With the president so unpopular, the trade deficit so huge and the prospect of a Democratic majority in Congress by then, the chances of fast-track being renewed are vanishingly slim: it only passed by one vote the last time around.

Should the US act against China for violating workers' rights?

The AFL-CIO, America's biggest trade-union federation, is petitioning the Bush administration to impose economic sanctions against China for violations of workers' rights. The unions claim that the exploitation of Chinese workers is not only morally repugnant, but also economically damaging, alleging that it has cost 1.2 million US workers their jobs. They say this amounts to an unfair trade practice to which the US should respond with trade sanctions against China. But their proposed solution is as wrong-headed as their analysis of the problem.

Is Asia's success due to trade protection?

In a thoughtful comment on my recent Doha post, Matthew argues that

It is simply not the case that the enormous growth of the Asia tigers is evidence of the efficacy of free trade because most of those economies were protected behind trade barriers and currency controls for most of their development and still are.

I started replying in a comment, but then I thought the subject was so important that I would start a new post about it instead.

Dump anti-dumping duties

Peter Mandelson, the EU's trade commissioner, has announced a review of anti-dumping measures. These seek to protect Europeans from imports that the Commission deems unfairly cheap. Personally, I think low-cost foreign products are one of the boons of globalisation - allowing the pound in your pocket to stretch further - as well as being particularly pro-poor, since the dirt-cheap basic goods that the likes of China produce allow poorer people to enjoy a much higher standard of living. Unfortunately, Mandelson is not questioning the flawed protectionist premise behind anti-dumping duties. He just wants to mitigate the harm they do to European companies with investments abroad.

Inefficient markets

It’s up to Lamy

Prospects for the Doha round look grim. Over five years in, and the World Trade Organisation’s 149 members still seem as far apart as they were during the 2003 Cancún debacle. Only the massaging down of expectations by WTO boss Pascal Lamy ahead of the Hong Kong summit last December rescued it from disaster. Now another deadline looms: 30th April, by when an outline deal must be reached if a final agreement is to be struck by the end of the year, ahead of the expiry of Bush’s fast-track authority in 2007. 

A blow for Doha

It's a good day for Rob Portman and a bad one for the Doha Round. After less than a year in the job and just as the WTO negotiations are reaching a crucial juncture, America's top trade negotiator has been promoted to run the White House's budget office. It is understandable that President Bush has turned to a long-time friend and politically savvy former Congressman in his hour of need. But it augurs badly for the Doha Round, since it was precisely because of those qualities that Portman was appointed to clinch (and sell) a deal.

The socialist who can breathe life into free trade

From September 1st, the shaky prospects for freer world trade will rest on the shoulders of a French socialist. With the World Trade Organisation's Doha round deadlocked and little time left to reach agreement, the new man in charge of the WTO, Pascal Lamy, faces a daunting challenge. Unless the former European Union trade commissioner can help break the deadlock and hammer out the outlines of a deal before trade ministers meet in Hong Kong in December, hopes for a successful outcome to the Doha round will fade. That would be a disaster for the world economy and for export-reliant developing countries in particular.

How best to tackle global poverty?

Discussing debt relief and third world development with Noreena Hertz on the Today Programme. Listen here

After Cancún: What future for multilateralism?

Optimists claim that the debacle in Cancún is just a temporary setback. As old trade hands were quick to point out, world trade summits have an unfortunate habit of failing: just cast your mind back to Seattle in 1999, Brussels in 1990 and Montreal in 1988. Eventually, though, negotiators haul the show back onto the road and a deal is clinched. It may happen again this time. But what if the acrimonious breakdown of the World Trade Organisation’s Doha round last September is actually much more serious? We cannot afford to be complacent. If the WTO is in serious trouble, the consequences could be devastating  not just for international trade, development and the world economy, but also for multilateralism and global progressive politics.

Trade at your own risk

Markets do not exist in a vacuum; they operate in a social, political, and legal context. That insight - obvious to thinkers such as Adam Smith and Karl Marx, but forgotten in the zeal to fashion economics into a science more like physics than sociology - lies behind the revival in recent decades of the academic discipline known as “international political economy” (IPE). But although IPE scholars are right to reject a vulgar economism, they often assert the primacy of politics so vigorously that they neglect economics.

The coming collapse of free trade

Last month, when World Trade Organization (WTO) talks in Cancún collapsed in acrimony, the United States responded with a brave face. Though the meeting was seen as the best chance to push forward the Doha round of trade negotiations, which aims to slash trade barriers and boost the global economy, America's negotiators insisted the United States would continue to fight for freer trade. "For over two years, the U.S. has pushed to open markets globally, in our hemisphere, and with sub-regions or individual countries," said Robert Zoellick, the U.S. trade representative. "As WTO members ponder the future, the U.S. will not wait: We will move toward free trade with can-do countries." Zoellick's message is clear: If pesky "won't-do" countries block the multilateral, WTO route to liberalization, they will be left by the wayside. The United States will instead spearhead a push for free trade through bilateral and regional agreements.

The world gets poorer when all we trade are insults

As Churchill might have said, the World Trade Organisation is the worst way of governing the world economy, except for all the others. That is what the seething globaphobic masses and padded ministerial suits who conspired to wreck the WTO’s recent meeting in Cancún may soon find out. With prospects for freeing world trade — the engine of global economic growth over the past 50 years — in tatters for now, the consequences could be devastating. Indeed, finance ministers who are in Dubai for the World Bank/IMF meeting have already been expressing regret for the Cancún debacle.

Rich hypocrites

Oxfam is an antidote to claims that people do not care about politics any longer. They may not be enthused by traditional politics but they turn up in droves to Oxfam events. That is reason enough to pay attention to its new report on world trade rules, Rigged Rules and Double Standards. There is also merit in the charity's arguments. Oxfam says that free trade can benefit rich and poor countries alike, but claims that the rules that govern international trade are rigged in favour of the rich.

Against globaphobia

Perhaps the riots in Seattle marked a turning point for a globalising world. In the past 50 years cross-border trade and investment have boomed, raising living standards across the world and lifting millions out of poverty. But now a backlash against this closer integration has begun. This backlash is surprising. By and large, it comes not from developing countries which were battered when world financial markets seized up in 1997-98, but from rich countries which escaped largely unscathed. It is strongest in the US, the biggest beneficiary of free trade, luxuriating in an economic boom. And its main target is not multinational companies or global banks, but a once obscure regulator with 500 staff and an annual budget of £48m: the World Trade Organisation (WTO).

The human face of globalisation

The New Zealand that Mike Moore grew up in was an insular place. “Even the humble spud was opposed by the merchants and church in its day. A church leader railed against the potato as being a dangerous narcotic, almost as bad as tea. The merchants and farmers wanted to protect their profits... against this dangerous, competitive new crop,” he writes in his latest book, “A Brief History of the Future”. If New Zealand turned its back on the world, the world ignored New Zealand. Ideas did not flow into or out of it. It produced wool, not world leaders. Mr Moore, who takes over at the World Trade Organisation on September 1st, has changed that.

Objection

On a recent trip to Tokyo, Charlene Barshefsky, America’s trade representative, gave her hosts a wigging. She demanded concessions, threatening sanctions if Japan did not reflate, deregulate and curb steel exports. The Japanese shrugged. They have come to expect fighting talk from the woman they call “Dragon Lady”.