Free Trade Today By Jagdish Bhagwati
The author of the “Free Trade Today” explains international trade’s or globalization’s advantages. The author also explains an erroneous belief that protectionist allegations have. This author notes that resistance and doubts about free trade are strong despite the actual evidences and indubitable reasons that show the advantages that free trade has. This author describes the two major causes of misperceptions of free trade’s reality. These are contrary to the intuition comparative advantage nature and “infinite weight” that relate to jobs that are lost to foreign competition as well as “Zero weight” that relates to jobs that emerge from this trade. Several jobs opportunities that people lose are the immediate threat to jobs’ owners. The jobs that will emerge are the future projections for people who do not know much about them. The author outlines revolution psychology as well. According to Bhagwati, challenges that accompany change are usually more perceptible when compared to advantages (Bhagwati 5).
Some young idealists have lost ideological homes following the collapse of socialism’s theoretical practicality and these are giving unintelligent responses. However, they still hate capitalism and their wish is that it will collapse. The author notes that the free trade is however, the target of the growing anti-globalization and anti-capitalism agitation among young people who derives from a tyranny of missing alternatives. Communism’s collapse, Fukuyama-led triumphalism that rose in relation to capitalism and markets led to the creation of the intolerable void for idealist young. The social conscience of these idealists is accustomed to a conviction that in all aspects, capitalist causes injustice (5). The implication of this is that they lack a clear capitalism’s understanding. There are opportunities for everybody in capitalism. On the other hand, only individuals with good political connection and the wealthy have opportunities in socialism. Intelligent people who can rise to power positions within the society also have opportunities in socialism (Bhagwati 7).
Keynesian declaration that related to unemployment was as a result of lack of tariffs and aggregate demand. Tariffs can redirect the aggregate demand from the foreign goods to domestic goods. This would reduce unemployment. The demand solution that was provided by Keynesian in 1930s was unsuccessful in minimizing unemployment or ending depression (Bhagwati 18). Monopolistic competition emerged during the 1980s when almost all markets became perfectly competitive or monopolistic. At that time, Japan’s economy which was directed by the government was flourishing. The economy of the US on the other hand was enduring recuperating pressure due to unceasing rise in prices during the 1970s. The Keynesian policies failed in the 1970s leading to increased involvement of the government during the 1980s (Bhagwati 20).
Industrialization was highly valued by the underdeveloped countries. This was not just for economic growth but for modern advancement in the society as well. This reason was seen as being “non economic” and it defended tariffs. At that time, tariffs were seen as being economically onerous. Non-economic objective justified this and it diverted the focus of the debate on identifying the most cost-effective protective measure (Bhagwati 20). There are different categories of imperfections in the market that are as result of fixed rates of wages as well as labor mobility’s limitations. This weakens producers’ capability to accept competitions so as to minimize economic contraction and unemployment. In this regard the author discuses “immiserizing growth” in his work (Bhagwati).
This author has also described several theories in regard to the effects that free trade has on development. Several theories doubt the ability of free trade to generate more growth in different aspects. These theories are related to the models of macroeconomic that have varying results. According to Bhagwati, preponderant evidence of free trade as an issue after the Second World War showed that greater growth is realized from free trade after all (Bhagwati 42). However, there are several new challenges that free trade faces and these target its practices. They include the issues of unjust practices, social fairness as well as environmental effects on international trade and proceedings of dispute resolution in relation to global trade organization (Bhagwati 50).
The remedies of fair trade were inflicted as per the independent evaluations of the type of performance of an unfair trade (Bhagwati 51). Bhagwati sees “aggressive unilateralism” as an exercise with global condemnation and using Section 301 today in a discriminatory and unilateral fashion outside the existing obligation of the trade has been declared practically WTO-illegal. According to the author, Clinton administration’s allegations regarding the remedies of fair trade were correct because the US produces steel because the macroeconomic policy of Europe as well as economic performance were poor and these led to the decline of the prices of steel in Europe (Bhagwati 54). Today, most politicians have become obsessed with unfair trading and are cynically a manipulative lot (Bhagwati 55). The author notes that due to fair trade, people believe that the US is a fair state in its trade while other states are unfair at varying levels. According to this view, free trade is economically unwise and politically naïve (Bhagwati 56).
According to Bhagwati, exports are also important. Exports and imports present win-win activities. There can be more advantages if nations can negotiate for trade barriers’ reduction on the basis of reciprocal. Advantages can be realized due to a sufficient balance of liberation of reciprocal trade to prevent interference with trade terms between the negotiating countries. Negotiations of reciprocal trade are beneficial in regards to export industries’ mobilization so as to establish political balance with protectionist pressure that comes from industries that compete for import (Bhagwati 63).
The author opposes preferential agreements of trade. He observes that these agreements can cause efficiency reduction as well as global welfare that include member countries. Through the division process of the trade, member countries may decline imports from non-member, lower cost states and instead favor costly sources as long as they have eliminated tariffs. Agreements of preferential trade are usually self-replicating because their establishment makes non-member countries to join other agreements to protect themselves (Bhagwati 108). According to the author, poorer countries cannot manage a system of trade that has complicated origin rules and preferences as the guide (Bhagwati 109). WTO and trade treaties are inefficient requirements when it comes to the social agenda subject. With their use, several social objectives can be attained although trade liberation might cause a loss.
Bhagwati is afraid that complicated discrimination by trading blocs might overcome nondiscrimination which is its main tenet and multilateralism. Multilateral agreements may be displaced by the agreements of trading blocs and these would result in an economy that is poorer (Bhagwati 115).
Bhagwati, Jagdish N. Free Trade Today. Princeton, NJ [u.a.: Princeton Univ. Press, 2003. Print.