By Daniel Altman | International Herald Tribune
Published: September 12, 2006
Efforts by leading industrial and developing nations to resuscitate global free trade talks known as the Doha round fizzled last weekend in Rio de Janeiro. But globalization marches on. The International Herald Tribune’s global economics columnist, Daniel Altman, recently moderated an online discussion between readers and Jagdish Bhagwati, a leading trade theorist at Columbia University and senior fellow for international economics at the Council on Foreign Relations.
Here are some questions and excerpts from Bhagwati’s responses posted at blogs.iht.com/globalization.
Q: We in the developing world (especially sub-Saharan Africa), considered as the poorest of the poor, do not understand this concept of globalization. Do you have a universally accepted definition of that term, which is still a mystery to some of us?
Bob Kirenga, Uganda
A: For clarity, we need to remember that economic globalization, defined as increased integration of the national into the international economy, has at least five distinct aspects: trade; direct foreign investment (or what is sometimes simply called “multinationals”); short-term capital flows (which were at the heart of the Asian financial crisis in the 1990s); international flows of humanity; and technology transfer (which includes the problem of patents and generics which has central importance for the poor countries). So, when you see polls that say a majority of our respondents think globalization is good or bad, just dismiss the results (unless, of course, they support your views, I often add mischievously) as nonsense.
For the poor countries, including yours, the major problem generally speaking has not been that globalization in trade and in direct foreign investment (DFI) has been bad for you.
It is rather that globalization has passed you by as far as DFI is concerned and that your ability to take advantage of trade opportunities – the way the Far Eastern countries such as South Korea did – has been constrained by domestic factors that include governance difficulties.
Now that Africa is getting its political act together, I am confident that Africa will join the rest of us (I am from India) in being able to use globalization as part of a reform agenda that would advance prosperity, increase skill formation and be a force in reducing poverty and distress among the poor.
Q: What should economic science care about: growth, or more challenging questions about the impact of economic activities on the environment?
Pierre Kohler, Switzerland
A: First, as I noted in a Scientific American debate many years ago, there used to be a tension between trade economists and environmentalists because trade economists usually saw governments, which typically surrendered to protectionism, as creating market failure, whereas environmentalists were dealing with pollution where the polluter generally did not have to pay for the pollution, and hence governments were seen as creating a missing market and therefore eliminating market failure. Good environmentalists and trade economists are now on the same wavelength.
Second, we have to distinguish between domestic pollution (e.g. where I use the cellphone on an airplane and create noise pollution for my fellow passengers but not beyond) and cross-border or international pollution, which may be bilateral or “plurilateral” (e.g. acid rain) or fully multilateral and global (like ozone layer depletion and global warming).
Finally, economists are deeply involved in seeking to put the Kyoto Protocol right as it comes up for renewal, without U.S. Senate ratification to date.
Q: Do you think the World Trade Organization has finally hit the bottom in the process of liberalization, and that instead, countries will turn to free trade areas?
Jeong Yeon Ryu, South Korea
A: The architects of the General Agreement on Tariffs and Trade (the precursor to the WTO), looking at the degeneration of the world trading system in the 1930s into protectionism and discriminatory trade, had vowed: Never again. They had made nondiscrimination, and its embodiment in the Most Favored Nation clause (which guarantees to every member the lowest tariff by any member), the central principle of GATT. But they had allowed for an exception in the case of free trade areas (FTAs) and customs unions. I am sure they thought this would be used rarely. But today, there are over 300 FTAs formed or announced, and they are multiplying by the week! The culprits in this game were the Europeans. But the Americans, led by the former U.S. trade representative, Robert Zoellick, joined in actively, and now Asians are busy doing their own bilaterals as well.
These Preferential Trade Agreements, among other problems, have created a chaotic system of preferences. I have called it the “spaghetti bowl” problem, since eating spaghetti makes a mess for my tie and shirt! The Asians now call it the “noodle bowl” problem.
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