Category Archives: Chapter 10

How slippery is the slippery slope of protectionism?

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The sharp downturn in economic activity and world trade has caused many economists to frame analogies with the descending spiral of trade and protectionism in the 1930s.  Under the WTO countries do have flexibility to impose safeguard restrictions, as well as duties to offset unfair trade practices.  Reliance on these policies does seem to rise during economic declines, as shown by the following table presented by Roberta Roberta Piermartini of the WTO.  Nevertheless, the existence of such flexibility may make countries more willing to accept greater liberalization in WTO negotiations.

 

Figure 1. Anti-dumping measures and business cycle

Read her discussion of these measures,  and compare that analysis to the commentary by Chad Bown, who cautions against the long lives of such intervention. Also, consider the prescription for additional steps to avoid a downward spiral suggested by Simon J Evenett and Bernard Hoekman.

Did China’s entry into world trade de-industrialize others?

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The opening of China to the rest of the world that started under the reforms of Deng Xiaoping has been characterized by some as the awakening of the sleeping giant.  Indeed, China is a big country, and the addition of its abundant endowment of unskilled labor to world factor supplies might easily have had a negative effect on other providers of unskilled-labor intensive goods.  Nevertheless, the effects on individual countries may be complex, because China not only created a greater supply of labor intensive goods but also created greater demand for many commodities produced by other developing countries.  A study by Jörg Mayer and Adrian Wood calculate that as big as China is, the balance of these effect on others was not substantial. 

What factors can you suggest that would explain the regional pattern of effects that they report?

Table 1. Changes in logged ratios of
labour-intensive manufacturing to primary output and exports,
1980-2000, unweighted regional averages

  Output (33 countries) Exports (differences)
  1980-1990 1990-2000 Difference For 33 countries For 70 countries
All developing countries 0.14 0.08 -0.06 -0.21 0.07
East Asia (except China)  0.43  0.24  -0.19  -0.45  -0.34
South Asia  0.00  0.29  0.29  0.04  -0.05
Latin America and Caribb  0.10  -0.07  -0.17  0.69  0.39
Middle East and N. Africa  0.21  0.07  -0.14  -1.00  -1.19
Sub-Saharan Africa  -0.08  0.08  016  -0.59  0.45

Source: Wood and Mayer (2009), Table 5.

 

Liberalizing trade in services – how might it happen?

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The claim of mutual benefits from trade liberalization has been particularly difficult to achieve in the case of trade in services. A recent contribution by Patrick Messerlin and Erik van der Marel suggests that if the US and the EU were to initiate negoatiations in this area, that would provide a useful catalyst to broader plurilateral negotiations with a manageable group of eight other major market participants.  Their table below indicates which services might be most amenable to this approach.  Given the large share of the market accounted for by the eight leading countries, the likelihood of inefficient diversion of service trade away from more efficient sources is less likely to occur.  

 Figure 1. Going plurilateral: How many countries make a critical mass?

 

Source: Messerlin and van der Marel (2009).