Re: New School Trade Conf:

[Clifford Poirot <cpoirot@xxxxxxxxxxx>]

This is very interesting. I'll be looking forward to the publication of the
papers. Did anybody address the consequences/issues involved in alternatives
to free trade policies-i.e. the possibility of the triumph of mercantilism
and aggressive economic nationalism in a zero sum world?

This to my way of thinking is one of the biggest quandaries-the costs of
free trade vs. the costs of aggressiv mercantilism, or worse, autarky.

-----Original Message-----
From: Paul_A [mailto:paul_a@xxxxxxx]
Sent: Thursday, April 24, 2003 3:52 PM
To: pkt@xxxxxxxxxxxxxxxx
Subject: New School Trade Conf:


On Friday the New School/Cepa held a conference on Trade focusing on
heterodox approaches.  It may well prove a landmark conference.  The New
School and Prof. Shaikh did a true service to the academic and policy
community.

We were told many of the papers will soon be available
at
<http://www.newschool.edu/cepa/events/globmyths03.htm>http://www.newschool.e
du/cepa/
and ultimately published as a book.  From what I have seen they will be
well worth going through.  It is worth noting that the conference had
several hundred largely academic and policy professional participants in a
packed auditorium (although I think it was not heavily promoted).

A few themes (my own subjective re-ordering and emphasis).

   How deep a criticism of trade theory and how strong need be corrective
measures?

         A)  Lance Taylor synthesized empirical work (14 country case
studies) and emphasized capital account liberalization as "more grievous" a
policy error than the trade account liberalizations (explicitly echoing
Stiglitz) with capital account liberalizations consistently contributing to
instability and crisis.  Nonetheless he did cite trade liberalization as
creating problems with effective demand, productivity and income
distribution in some cases.

               In perhaps a similar vein, Tom Palley gave a lucid
powerpoint critique of neoclassical trade theory from a Post-Keynesian
perspective.  He pointed out the limitations of critiques within the n/c
tradition that use special cases such as dynamic advantage (infant
industry), changing patterns of demand, surplus labor/loser compensation
issues.  Rather he felt that issues such as hysterisis (path dependency,
'history matters'), price stickiness, and startup costs were more decisive.

         B)  John Weeks' paper, also started from an empirical perspective
(Latin America) but added foreign direct investment liberalization to
Taylor's 'no-no' list of capital liberalization. Perhaps more importantly,
he also emphasized evidence that a pro-trade liberalization policy may
actually enhance 'crowding out' of the domestic economy by the external
sector - i.e. liberalization and trade promotion have structurally weakened
national economies in Latin America through changes that are deeper than
just inadequate effective demand.  Interestingly, in the discussion period,
Weeks also spoke to the 1979/1980 Shaikh paper on trade theory (the one
discussed on Pen-l last week) as absolutely seminal.

         In a similar vein Ajit Singh presented a review of recent
empirical and theoretical work to show that not just short term financial
account liberalization would be hurtful but that unselective FDI and long
term account liberalization would also have poor results.  In addition to
financial fragility, industrial policy (technology transfer, spillover
effects) and development policy mitigated against capital account
liberalization.  In the discussion, Singh also stressed selective, managed
trade; he also contrasted the UK industrial sector experience with the US
attributing the latter to unique benefits from trade with the 3rd world.

            Anwar Shaikh set out to debunk the myth that free trade as
automatically produces mutual benefits (subject to proper market
functioning).  Historically and today all standard trade theory (including
Hecksher-Ohlin-Samuelson) rests on a theory of comparative costs (which
leads to comparative advantage).  These versions of free trade theory rely
on equilibrating price mechanisms (from quantity theory of money to
exchange rates) to move trade from a situation of an absolute advantage to
the stronger (lower cost producer) to a situation where both parties
benefit.  Shaikh shows these mechanisms not to work - ultimately selling
costs remain linked to production costs.  Therefore, under "free"
trade  there will be 'absolute advantage' - i.e. those who start off with
initial advantages retain and strengthen those advantages while the weaker
have these deficiencies further reinforced.  Distinctive to this approach
is that the shortcomings of "free trade" are is inherent in the process of
competition, domestic or international - not a consequence of more narrow
market failures.  Just as "free trade inherently leads to increased
concentration and centralization; trade inherently requires strategic
selectivity and management if the weaker party is to benefit.  Shaikh then
gives an historical overview of actual trade policies and practices to show
that countries have intuitively or consciously understood their interests
were more along these lines.

There were also papers on trade and: profit rates, gender, labor markets,
statistics, and historical theory and practice.

Once again I think we owe a "debt" of gratitude (sorry) to our New School
colleagues for a job well done.  The forthcoming book will be worth looking
for.

Paul