Last week saw what we all hope may be the final curtain falling on the drama of the Doha "development" round of World Trade Organization negotiations. I put the word development in quotes because it's been obvious to those of us who have been following this from the start that the Doha round has nothing to do with development.
The shocking thing about last week's developments is not the fact that the U.S. and other developed nations were not able to push through their agenda - with elections in the U.S. and India coming up, that outcome was the odds on favorite. The shocking thing is how few people - including many mainstream economists see this as a bad thing.
In this article, economist Dani Roderik argues that the breakdown in consensus among those who touted free trade as the solution to all things may indicate the end of the globalization project as we know it.
Though all of them are content to see Doha's failure, these economists diverge in their rationale as to why that failure may not be a bad thing.
So we have Paul Samuelson, the author of the postwar era's landmark economics textbook, reminding his fellow economists that China's gains in globalization may well come at the expense of the United States; Paul Krugman, today's foremost international trade theorist, arguing that trade with low-income countries is no longer too small to have an effect on inequality; Alan Blinder, a former U.S. Federal Reserve vice chairman, worrying that international outsourcing will cause unprecedented dislocations for the US labor force; Martin Wolf, the Financial Times columnist and one of the most articulate advocates of globalization, writing of his disappointment with how financial globalization has turned out; and Larry Summers, the U.S. Treasury chief and the Clinton administration's "Mr. Globalization," musing about the dangers of a race to the bottom in national regulations and the need for international labor standards.
For me the striking thing is that most of these arguments - including those about the dangers of outsourcing, the dangers of rampant speculation caused by fiscal liberalization, and the race to the bottom - were articulated by social movements around the world from the moment the WTO came into existence in 1995.
So has history proven us right or have economists suddenly started paying attention to the facts? I think neither. For the first time since the fall of the Soviet Union, the U.S. is feeling threatened in its position of the sole global super power. China, India, and Asia as a whole represent a counter-balance of sorts, and these economies look a lot stronger than that of the U.S. which is plagued by a housing crisis, a weak dollar, and overextension in Iraq, Afghanistan and elsewhere. When the U.S. is not always able to dictate the rules in its own favor, protectionism may not be such a bad thing after all...
For more on trade, protectionism and development, be sure to check out Ha-Joon Chang's Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism.
And here's a short video on what's wrong with the current round of failed negotiations from our friends in the Philippines.