FT Letters: Today's rich nations became rich thanks to strong trade protection
- From: Coatzocoalcos <coatzocoalcos8@xxxxxxxxxxx>
- Date: Sat, 21 Jul 2007 13:33:14 GMT
Today's rich nations became rich thanks to strong trade protection;
ASIA EDITION]
PROF ROBERT H WADE. Financial Times. London (UK): Jul 17, 2007. pg. 8
From Prof Robert H. Wade.
Sir, Grant Aldonas, former US undersecretary of commerce for international
trade, lays out a four-part arrangement for making a fresh start on the Doha
trade negotiations ("A fresh free trade agenda for Doha", July 13). Some of
his specific suggestions make good collective sense; but not the central
thrust for completely free trade in goods and services.
The argument that the movement to free trade in goods and services will
produce significant gains in economic growth for today's developing
countries rests on the theory of comparative advantage and on the
observation that the rich countries now have low average protection. But the
theory of comparative advantage is about efficiency in the short-term use of
given resources. It cannot legitimately be extended to cover the separate
issue of economic growth, or how to increase investible resources over time.
Today's rich countries became rich in conjunction with levels of protection
much higher than those that prevail today. Britain became the leading
industrial economy in the 18th century with high protection, which it
sustained until it was the leading industrial economy by the mid-19th
century. The US was one of the most protectionist countries in the world
during the 19th and 20th centuries (to the 1920s); and it was also about the
fastest- growing.
Austria, Finland, France, Germany, Sweden, Japan, and (post 1955- 1960)
Taiwan and South Korea all grew fast with high levels of protection. Only
after these countries achieved catch-up or better did they start saying that
free trade best for everyone.
There are good theoretical and empirical reasons why protection and
subsidies are, in the general case, a necessary (but not sufficient)
condition for catch-up. Free trade encourages more specialisation in
commodities rather than diversification in industry and services. It would
be the height of folly for countries such as Pakistan and Indonesia to
follow Mr Aldonas' suggestion that they sign up for immediate free trade "to
gain a step on their larger regional rivals, China and India".
Robert H. Wade,
Development Studies Institute,
London School of Economics,
London WC2A 2AE, UK
.
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