Fear mongering by free traders

Here is what I do not understand.  Why is it that anyone who says that the gains from the next trade agreement are not huge, that there are real social and distributional issues we need to confront before we strike the next trade deal, and that perhaps we need to rethink the basis of the multilateral trade regime in light of the severe legitimacy problems which it has run into--all true propositions--is immediately branded as a protectionist who wants to set the clock back?

That is the treatment that Hillary Clinton is presently getting, thanks to an interview she gave to the FT. Here is Peter Mandelson, the EU trade commissioner, as quoted in today's FT:

Politicians have a huge responsibility not to overstate the risks attached to open investment, because we have nothing to gain from a protectionist turn in global markets.

It seems likely that we are entering a period of relative vulnerability for the global economy and perversely, that is of course the moment when the logic of protectionism is most tempting. 

That is why I would argue that Hillary Clinton’s doubts about the value of a Doha trade deal are misplaced.

In other words, you are a protectionist because you have doubts that the current setup for trade agreements is working. Further, you are being irresponsible because the fragile state of the world economy requires more trade agreements rather than a rethink. 

What is outlandish about all of this is that no respectable economic model suggests the completion of Doha will add more than 1 percent to world GDP some ten years out--and this under the most favorable circumstances. The mental model that people like Mandelson seem to have is that the moment you take a breather on trade agreements, the whole world trade regime will collapse.  There is little to justify this "bicycle theory" at the present time.      

Indeed the only serious risk from not completing Doha or additional regional trade agreements is that free traders would take their own rhetoric seriously and react in unproductive ways that prove self-fulfilling.

Comments

[cljo]

I think the answer is a reluctance to throw it all away. Millions of man-hours of work, thousands of individuals, thousands of relationships made, and yes, thousands of bureaucratics niches carved out. The WTO and the associated national trade-policy structures are bureaucracies like any other and "bureaucratic patriotism" has to play at least some role.

I think people also recognize that trade-policy advancement has always been a near-run thing. To "start over" is to possibly never get started again.

[cljo]

I should make the point that whether or not the "bicycle theory" is justified is immaterial. If Mandelson and the rest believe it is the case, then it becomes a self-fulfilling prophecy.

[jdw]

It is interesting to see how different commentators respond to Senator Clinton's comments. After reading the interview it's hard for me to see how anyone can know for sure what she means. Her trade timeout could come from concerns about fairness, thogh the only examples she offers are environmental and labor protections in trade deals. These could be used to make trade more fair, or they could be protectionism in another guise. People seem to read what they want or expect into her comments

[Holger Siebrecht]

This is not apropos the post but I did want to extend my congratulations for making Arnold Kling's list of best economics book of the year

http://www.marginalrevolution.com/marginalrevolution/2007/12/the-best-econom.html

[alex]

Dani Rodrik: "Why is it that anyone who says ... is immediately branded as a protectionist who wants to set the clock back?

You said it yourself - there are barbarians on both sides.

[gordon]

The excessive reaction to any criticism of free trade opens the door to "strategic protectionism". That means adopting a protectionist stance in order to persuade the free traders to make the concessions on social, distributional and legitimacy issues which they would never make if those concessions were all you asked for in the first place. If you have to wave the protectionist flag before they will listen, so be it.

[Justin Whitney]

Great !!! Excellent site. :)
Thanks so much. Pleasant to me.

[s]

Wonderful post. Why is that dogma oviates commen sense in all things political. When does the "the alternatives are worxse" argument finally put to death. It appears the freee traders spendt too much time studying economic and too little time studying finance. Apparently the other side of the coin doesn;t matter: we will see.

[Ben Hyde]

There is a huge divide in modern politics between the left and the right. So the rhetoric is more than vigorous. Large doses of vitriol are always close at hand. To first order the right is aligned with large economic interests and the left with the smaller ones. It has taken years to build a consensus within the intelegencia that free trade may well be a good thing across the wealth distribution. That, for example, the creative destruction of wiping out small merchants is compensated by Walmart's prices. To suggest the costs/benefits (distruction/creation) are not evenly distributed; and that possibly small economic actors suffer more costs and capture fewer benefits throws the whole enterprise right into the heart of what polarized the left v.s. the right.

[hari]

Could it be that -

*HRC is politically positioning her campaign to win the election.

*What she does later, like all politicians, is a different matter...

*Bottom line is to get passed Obama and win!

[PJ]

Professor Rodrik, what does your 'mental model' predict will happen if we 'take a breather' on trade negotiations?

You can't criticise the 'bicycle theory' without presenting a better alternative.