Re: Re: Re: Re: Re: Re: Keeping focus after the WTO

[Brad De Long <delong@xxxxxxxxxxxxxxxxx>]

> Brad De Long wrote:
> > >
> > >- free trade (as opposed to more limited trade) is irrelevant except
> > >(sometimes) to squeeze the optimal out of the status quo - and has
> > >very small gains even then (Krugman called it economics' dirty little
> > >secret didn't he?)
> >
> > Krugman and Rodrik are on that side of the argument. A whole bunch
> > of other people are on the other side. (I tend to lean toward the
> > anti-Kruman-Rodrik side: without trade how can you buy the capital
> > goods from the industrial core that embody so much of technology?
>
> But the opposite of free trade isn't no trade. The problem for many
> countries is to have enough foreign exchange to buy the capital goods
> they need. It's not just because of the lack of exports (which free
> trade claims to address). It's also because of the increase in
> consumer goods that tend to get imported under free trade both
> because of the growth of a wealthy minority with a tendency to spend
> a large proportion of their incomes on imports...

If controls on imports *were* concentrated on imports of consumer
goods, and *did* preserve scarce foreign exchange for capital
imports, I would agree with you.

But as best as I can tell, only in a relatively few "developmental
states" have trade restrictions been rational from the standpoint of
economic development: too much of the rest of the time import
restrictions are not a way to funnel scarce foreign exchange into
purchasing technology-transferring capital goods, but a way to funnel
scarce foreign exchange into the bank account of the brother-in-law
of the vice-minister of finance.

As Lant Pritchett likes to say, there is nothing worse than state-led
development carried out by an anti-developmental state. Until you can
solve the political problem of shaping trade policy shaped into a
rational form, I think that you are better off making the neoliberal
bet on free trade...


Brad DeLong