What does free trade offer the Americas?

It doesn’t help to exag­ger­ate the case, even for a good cause. bq. “On Tues­day morn­ing [Pres­i­dent Bush] said, “Trade is the most cer­tain path to last­ing pros­per­i­ty.” On Mon­day night he said, “The best way to erad­i­cate pover­ty is to encour­age trade between nations.”

Many lead­ers of the nations at this con­fer­ence dis­agree…” (“NY Times”:http://www.nytimes.com/2004/01/14/international/americas/14LATI.html?ex=1074661200&en=6682ae3106085e6f&ei=5040&partner=MOREOVER) I dis­agree, too. Trade is an impor­tant path to wealth because, among oth­er rea­sons, the spe­cial­iza­tion due to trade pro­motes productivity—which as Krug­man famous­ly observes is “near­ly every­thing” in the long-run. Those coun­tries whose wealth grows fastest are always among the most open to trade[⇒ relat­ed sto­ry]. There is also “pret­ty good evidence(link to abstract of Dol­lar and Kraay paper)”:ttp://www.worldbank.org/research/growth/Trade5.htm that trade is ben­e­fi­cial to poor peo­ple and lifts their incomes in pro­por­tion to it’s con­tri­bu­tion to over­all growth in an econ­o­my. But on it’s own trade is nev­er enough to reduce income inequal­i­ty or even secure pros­per­i­ty. The evi­dence is over­whelm­ing that com­ple­men­tary poli­cies (macro poli­cies, exchange rate poli­cies, labor and fac­tor mar­ket reg­u­la­tions, com­pe­ti­tion poli­cies, for­eign invest­ment pol­cies) mod­u­late the impact of trade on these basic goals. Here’s a good “trade pol­i­cy primer”:http://poverty.worldbank.org/files/13876_chap13.pdf [pdf file about 300k]on these issues by some real experts. Per­haps the President’s advi­sors should skim.

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