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.
Peter Gallagher is student of piano and photography. He was formerly a senior trade official of the Australian government. For some years after leaving government, he consulted to international organizations, governments and business groups on trade and public policy.
He teaches graduate classes at the University of Adelaide on trade research methods and the role of firms in trade and growth and tweets trade (and other) stuff from @pwgallagher