Category Archives: Trade

Donald J. Boudreaux – Free Trade and How it Enriches Us

Donald J. Boudreaux – Free Trade and How it Enriches Us

This 2018 Institute for Economic Affairs monograph is right in Don’s wheelhouse: a clear and principled primer on the economics of trade, and how it benefits people in ways both big and small. Don focuses on the core areas; specialization, comparative advantage, employment, and the trade deficit. If you have only an afternoon to learn trade policy, this is the place to go. For bite-size daily doses of economic education on trade and other economic issues, Don’s Cafe Hayek blog is one of the best in the business.

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Donald J. Boudreaux – Globalization

Donald J. Boudreaux – Globalization

A 2008 book that greatly aided my work on trade during 2018. Highly recommended. Don hits a broad cross-section of trade issues, and plays both offense and defense with impressive skill. One takeaway that similar books don’t offer as clearly is that tradeoffs really are everywhere. Higher trade barriers might benefit some industries, but at the tradeoffs of consumer harm and slower growth. A lower trade deficit means less foreign investment, and less capital for domestic businesses. Don is relentless in consistently applying the economic way of thinking. An excellent example of rigor, clarity, and principle.

Jagdish Bhagwati – In Defense of Globalization

Jagdish Bhagwati – In Defense of Globalization

Bhagwati’s most famous book, published in 2004. A general-level look at globalization. He very clearly explains that the remedy to many global social ills—from child labor to intellectual property theft—is not with trade sanctions. For example, 95 percent of the products of child labor never leave their country of origin, so trade embargoes would do almost nothing to make child labor less profitable. In fact, by slowing growth and reducing other opportunities, such measures make child labor rates worse, not better.

The economic prosperity made possible by globalization and free trade is what allows parents able to afford to send their children to school instead of putting them to work in the farm or factory. Free trade improves lives; trade barriers are at best virtue signaling, and hurt the very people they intend to help.

Bhagwati applies a similar approach to issues across the spectrum, from environmental quality to corporate governance. The book is starting to show its age a bit at this point, but it remains highly relevant.

Jagdish Bhagwati – Free Trade Today

Jagdish Bhagwati – Free Trade Today

Another lecture collection, and a sequel of sorts to Protectionism. His arguments against two current fashions in protectionism—adding trade-unrelated labor and environmental standards to trade agreements, and weaponizing trade barriers to advance other trade-unrelated causes—are needed now more than ever now that a protectionist administration is in power. And his caution against the complexity of today’s thicket of preferential trade agreements has proven prophetic.

Jagdish Bhagwati – Protectionism

Jagdish Bhagwati – Protectionism

A collection of lectures on trade Bhagwati gave in Sweden in the late 1980s. Besides the occasional flash of wit, Bhagwati points out protectionism’s ill fit for a modernizing world economy. Thirty years later, his insights still ring true.

William J. Bernstein – A Splendid Exchange: How Trade Shaped the World

William J. Bernstein – A Splendid Exchange: How Trade Shaped the World

Probably the best book of its kind. A global history of trade from ourearliest hunter-gatherer days until the present. Bernstein tells some good stories,  and knows his economics. He calls out bad actors, such as the Spanish, Dutch, and especially the Portuguese and Belgians. Unlike some other scholars, he doesn’t obsess over them, preferring to attempt to understand than to preach.

Bernstein also highlights the importance of non-human factors such as disease in the story of trade; people have exchanged more than just goods, ideas, and soldiers over the years. Bernstein has a general ethos of kindness and openness, but doesn’t come across as particularly ideological. Pairs well with Douglas Irwin’s Against the Tide, which is an intellectual history of trade, rather than Bernstein’s cultural and narrative history.

U.S.-China Trade Deal at G20 Small Move in Right Direction

Nobody knew what to expect going into the G20 summit in Argentina, especially from a planned meeting between Chinese President Xi Jinping and U.S. President Donald Trump. The headlines coming out of the meeting are largely positive. China is ending its 40 percent tariff on U.S.-made autos, while the U.S. will delay for 90 days a rise in tariffs on $200 billion of Chinese goods from 10 percent to 25 percent, previously scheduled for January 1.

During that 90-day period, the U.S. hopes to convince China to reform a number of its protectionist trade policies. But after that, anything goes.

President Xi is walking back a policy that was only just put in place as a direct retaliation to U.S. tariffs, and is leaving other retaliatory tariffs in place. On the U.S. side, the 10 percent Trump tariff that inspired the retaliations will remain in place.

The takeaway is much the same as from the July meeting between Trump and European Commission President Jean-Claude Juncker. As I noted then:

[N]either side is lowering any barriers. And neither side’s promises involve making things better. They have agreed to not make things worse. But in a bizarre, only-in-this-administration kind of way, nothing is better than nothing.

China aspires to become a global economic power. To become one, it must liberalize. The new U.S. tariffs have pushed China in the opposite direction. Its trade policies are now even more protectionist than before. This is not changing as a result of the meeting.

Moreover, after the 90-day ceasefire expires, China’s government will likely retain its intellectual property theft, forced technology transfer, and government ownership and control policies. On this point, I sincerely hope my prediction is wrong. For as long as they are in place, these policies will hinder poverty eradication in China, while causing difficulties not just with the U.S., but with China’s trading partners throughout the world.

On the U.S. side, President Trump’s trade policies will also remain unchanged. Admittedly, they are stimulating some sectors of the economy. Lobbyists who work on the Commerce Department have reported 879 clients so far this year, up 40 percent since the end of the Obama administration. But intended beneficiaries, such as General Motors and its employees, are finding the Trump tariffs less than helpful.

The G20 summit and the Trump-Xi meeting could have gone much worse. But the headlines should not be so congratulatory. Productive meetings and negotiations would yield not just a ceasefire, but actual disarmament. That remains the goal—for in a trade war, the weapons fire inward.