In response to my summary on trade and prices, DM asks an important question, which goes right to the heart of the debate on globalization:
Let us say an new barber moves into my neighborhood. He offers the same quality service as my old barber, but is cheaper. So I use the new barber.
A factory in China can make the the same socks, but for less than a factory in North Carolina. So I decide to buy my socks from China.
Why is it that Dani wants interfere with my sock purchases, but not where I get my haircut?
First of all, let me be clear that I am not advocating that we interfere with purchases of socks from China (or anywhere else) as a rule. But I do believe there are circumstances under which such an interference would be warranted--and that is why DM's question is germane. Elaborating on why gives me an opportunity to revisit a theme I have already written on.
DM thinks we should not apply a different set of standards to exchanges involving international trade than we do to those that are purely domestic. I agree! What I think he overlooks is that in fact we do encumber domestic exchanges with a lot of restrictions, and in some cases even outright prohibitions. Domestic laws prevent you from selling yourself into bondage, to hire out your children for factory work, to flout minimum wage requirements, to exceed maximum hours of work, to employ workers in conditions that violate mandated health and safety requirements, and so on. DM's new barber would not remain in business long were he not to comply with standards set by the local health board--regardless of whether DM would want to use him or not. These are instances of what the political philosopher Michael Walzer has called "blocked exchanges." In each of these instances, one could have made an argument that it is improper for the state to come in between two consenting adults. Maybe DM thinks these domestic restrictions should be removed as well. But no matter. The point is that restrictions do exist in domestic exchanges as well. Individuals are never completely free to sign certain contracts.
The reasons that we routinely restrict and regulate domestic exchanges are manifold. Sometimes we do so to uphold deeply held norms and values (as with anti-slavery laws). Sometimes we want to redress bargaining imbalances (as with a lot of labor legislation). Sometimes we worry about informational shortcomings (as with health and safety standards). When we try to disassociate international trade from such concerns, we in fact create a double standard: it is not OK for me to displace American workers by employing child labor at home, but it becomes OK for me to do the same by employing child labor abroad. (A society may of course choose to condone the latter after due consideration of the alternatives for children in the exporting country; my argument is just that there cannot be an automatic presumption to that effect.)
There are of course many instances when international trade does not impinge on social and moral considerations at home, and such difficulties do not arise. But treating international trade just like domestic exchanges does raise difficult questions of fairness and distributive justice. It is hardly a solid justification for free trade.
dr
you might also mention
exchange rate distortions
and further notions of social progress
as measured in hours to produce an item or service
might be going backward
after cross border trade commences
if wage rates "over there "
are sufficiently lower
of course global productivity might be rising as under employed folks over there join the new wage based production sector
Posted by: paine | April 30, 2007 at 07:47 PM
This is exactly the point made in France against the "Polish plumber": he provides the same service more cheaply because he is prepared to accept less social benefits.
The argument used is often that the newcomer shouldn't be allowed in for his own good, which is patently nonsense (as with your point about the potential benefit to the exporting country from having lower labour standards).
The tricky bit is that every person (or interest group, or region, or country) has their own view of what is acceptable, often going beyond minimums set by laws and regulations.
Political systems provide mechanisms for translating those expectations and pressures into new laws and regulations.
Posted by: GA | May 01, 2007 at 05:45 AM
This is a very nice post. The general point is that there are two distinguishing characteristics of international trade compared to domestic trade. One is that it involves trade across governance regimes, with the consequences you have emphasized. The other is that it involves trade across currency regimes (at least in most cases). This can have macroeconomic consequences (positive and negative) for societies that do not arise when trade occurs within a currency, and it can also justify intervention.
It never ceases to amaze me that economists will resort to models in which there is nothing international about trade at all, and then use them to argue that international trade is no different from any other. It gives tautological thinking a bad name.
Posted by: Peter | May 01, 2007 at 07:42 AM
Do you think that we do not use child labor in developed countries because there are laws against it, or because our economies have created enough wealth so that families no longer have to require their children to work? I think a problem with your argument is that by denying other less developed countries the ability to employ child labor (at least by denying consumers the right to purchase their output), we can consign those countries to a lesser developed status (while forcing families there to starve or depend on prostitution, etc., in order to survive).
The broader point is that with free trade, these countries with less regulatory and tax burdens will force the developed countries to lower their regulatory and tax burdens as well. It sounds like you are trying to provide an intellectual argument to allow onerous western systems to remain in place.
Posted by: john | May 01, 2007 at 12:14 PM
Good domestic regulations are those which enhance domestic society. Your work, Professor Rodrik, emphasizes the importance of institutional arrangements tailored to a specific country's needs. So why refuse to trade with countries with do not have similar regulations to ours, unless those regulations would enhance those societies?
Maybe because we feel it undermines domestic regulations (by forcing us to deregulate) or harms our economy (if we don't deregulate). But refusing to trade with these countries will undermine the foreign regulatory structure or harm their economies. If the country is poorer, harm to its economy will have a greater human impact than harm to ours. In the same way, harm to its regulatory structure will be worse than harm to ours.
Of course, if we believe that the threat of trade restrictions will promote positive regulations in other countries, we should do so. Otherwise, I do not see how it is ethical to restrict imports from poor countries with different regulatory structures from ours.
Posted by: Brent | May 01, 2007 at 12:35 PM
Dear Professor Rodrik - thank you for this weblog. I look forward to following your blog.
I think we all agree that more international trade would be good for the world as a whole, particularly if it is accompanied by measures to protect social equity. My concern, perhaps misplaced, is that the developed world seems to preach "free trade" to the rest of the world when it suits them, and then withdraw to "regulated trade" when it suits them. Like "Coca Cola" or "Olympics", "free trade" is a brand with its own brand equity, and can be employed for good or for ill. It would be desirable to get the brand concept right and in this regard, "free trade" could mean many things to many people. The meaning may possibly evolve over time, but it's important that its target audience does not feel betrayed. Perhaps the solution is to champion "free trade" plus domestic measures to protect social equity, rather than champion "regulated trade".
Posted by: KY Choong | May 01, 2007 at 06:57 PM
We do not use child labor? Really? What about migrant labor's children working in the vegetable fields. Our law allows exception to the Amish community from child labor regulation on cultural and religious ground. Why could we not accord the same courtesy to poor countries on survival ground? Isn't this double standard? Instead, we get evengelical and do not realize the unintended consequence of our behavior. Our sanction on child labor only leads to worst outcome as these children work in much more exploitative profession such as being a scavenger or prostitute. This is an example of 'bounded morality." We are telling poor countries we do not want your children to produce my soccer balls, but they can work as a prostitute.
Posted by: Asif Dowla | May 01, 2007 at 09:44 PM
Other coutries will develop their own norms of course. But, in accepting trade from nations that don't apply similar labor laws, health and safety regulation, minimum wage, child labor rules, etc., we place our products at competitive disadvantage. We create pressure to remove the regulations that protect domestic workers from dangerous conditions and unfair treatment. The free trade movement of the last 20 years set the stage for conditions that have throttled American manufacturing and diminished organized labor. The net result is a increased concentration of wealth, stagnant workers' wages, increasing financial insecurity, less free time and a drive to dismantle the federal and state regulatory apparatus. At some point the loss of good jobs and the dismantling of American industrial capacity becomes a national security issue. Today you can't buy and American made TV, PC or DVD player. We will still be able to make our own military hardware in 20 years? Or will building the complex electronics required be an offshore activity?
Posted by: Arnoldo | May 02, 2007 at 08:34 AM
Arnoldo, when the US loses more by importing from these poor countries than the poor countries lose from being cut off, I might be in favor of restrictions on this kind of trade. We are not at that point, however, especially in terms of military technology.
Posted by: Brent | May 02, 2007 at 01:55 PM
"First of all, let me be clear that I am not advocating that we interfere with purchases of socks from China (or anywhere else) as a rule."
Interfere being a broad word, I ask "Why not?". Technology allows us to do some powerful things, and the security requirements of the post-9/11 era actually allow us to leverage the deployed technology.
Why can't this be an economic question? (I happen to find the "Economists' blindsopts" tag interesting in this case). Let's continue to use socks as an example. If today there is a tariff of N (may be zero in many cases) why not set that tariff in order to produce competitive industries? Why not set a default (high) value, and allow importers to reduce the default by performing source-tracing of their materials (similar to a negative VAT, in some ways). If they can show the factories are clean, non-polluting, etc., then the tariff reduces. If the factory meets US standards, the tariff is zero.
Given the desire for sealed containers in international shipment (alreday driven by national security), general technology (so many industries are already have electronic relationships, adding new data isn't hard), and some reasonable level of air/water/?? quality measurement, this doesn't seem expensive. I imagine a reasonably priced enforcement system could be developed that wouldn't overburden industry.
Such a solution has the negative perception of exporting our laws, but it does place our local industry on a more level playing field internationally, by equalizing costs.
If you *really* want to go further, then delete the entire US corporate tax system and basically set up a "tax to pollute" system. (Yea, I know this becomes a political hot potato; thus making it impossible) Service industries pay no taxes, which produces a huge incentive to locate knowledge industries (technology development, banking, software development, research) in the US.
Of course, I also have no idea whether a tariff structure of that form would be "WTO-legal"
(Note I don't believe this is "as doable" with child labor or other items where there is a major social component to the decision and we have to avoid making such decisions for others.)
Posted by: Tom P | May 03, 2007 at 02:48 PM
In my opinion, one can not be quantified, but it is important, trade, free or otherwise. Thanks!
Posted by: dunk shoes | March 28, 2010 at 10:20 PM
Judging from this post, I don't think y'all have much to worry about. Thanks for the belly laughs!
Posted by: purchase viagra | April 15, 2010 at 10:33 AM
undoubtedly the most popular beverage in the world, or at least I consider it so. I think apart from that is one of the world's largest companies with a market capital and impressive. excellent item thanks for the post.
Posted by: viagra online | April 15, 2010 at 10:53 AM
People usually say :"Seeing is believing." http://www.tt88times.com
Each attempt has a corresponding gain, in part or obvious, or vague. At least we have the kind of satisfaction After I bought this watch ,in a sense,it means a great deal to me. http://www.fashionhairfu.com
Posted by: rolex watches | April 19, 2010 at 08:55 PM
People usually say :"Seeing is believing." http://www.tt88times.com
Each attempt has a corresponding gain, in part or obvious, or vague. At least we have the kind of satisfaction After I bought this watch ,in a sense,it means a great deal to me. http://www.fashionhairfu.com
Posted by: rolex watches | April 19, 2010 at 08:58 PM
Our Service: We have a dedicated team of customer service executives who are eager to help you save time and money by sharing their knowledge and expertise on http://www.laptopbatteries-shop.com/sony/vgp-bps10.htm Sony vgp-bps10 Battery and related products.Your Satisfaction: Your absolute satisfaction is our top objective. We stand by the quality of our http://www.laptopbatteries-shop.com/HP/pavilion-dv6000.htm HP pavilion dv6000 Battery and offer a 30-day money-back guarantee on all our products, no questions asked. Our products also carry a 12-month full repair or replacement warranty for any form of manufacturing defects.
Posted by: chiry | April 22, 2010 at 01:39 AM
Projecting elections based on exit polls is risky — particularly in an exceptionally close election like this one. Polls are based on samples — in this case 18,000 respondents — and always have some margin of error http://www.kids-healths.com .
Posted by: kids | May 17, 2010 at 02:32 AM
I was so fortunate to encounter the author Thank you very much.
Posted by: asics shoes | May 25, 2010 at 10:37 AM
http://www.sportdaren.com sportdaren
http://www.cargprs.com cargprs
http://www.maternal-child.com maternal-child
http://www.luxurytablewares.com luxurytablewares
Posted by: myhj | May 31, 2010 at 04:59 AM
Your post are so good, I suggest that you can add some videos or something like that!
Posted by: Jordan Hydro | June 04, 2010 at 09:49 PM
Your post are so good, I suggest that you can add some videos or something like that!
Posted by: Jordan Hydro | June 04, 2010 at 09:49 PM
Your post are so good, I suggest that you can add some videos or something like that!
Posted by: Jordan Hydro | June 04, 2010 at 09:49 PM
Shanghai World Expo 2010 opened soon in China, Xinhua News Agency, Shanghai, April 19 -, links of london Seen everywhere from the "Treasure" to the cultural venues in the fiery show rehearsal, links of london charmsand links of london jewelry as one of the exhibits to show the world, links of london jewelry of various styles, links of london braceletquality assurance, excellent after-sales service, product style, the perfect combination of fashion and classic, elegant and noble, all have a unique display of personalized beauty.
Posted by: adda | June 13, 2010 at 09:57 PM
Shanghai World Expo 2010 opened soon in China, Xinhua News Agency, Shanghai, April 19 -, links of london Seen everywhere from the "Treasure" to the cultural venues in the fiery show rehearsal, links of london charmsand links of london jewelry as one of the exhibits to show the world, links of london jewelry of various styles, links of london braceletquality assurance, excellent after-sales service, product style, the perfect combination of fashion and classic, elegant and noble, all have a unique display of personalized beauty.
Posted by: adda | June 13, 2010 at 09:57 PM
I am a senior student too, I Love this post as i love study english, This article is to my feelings, thanks for your sharing, hoping to see more useful content.
Posted by: mbt shoes | August 18, 2010 at 10:32 AM
Your post are so good, I suggest that you can add some videos or something like that!
Posted by: louis vuitton delightful | September 02, 2010 at 07:00 AM
That's great that you think in this way there's many times that people get boring reading a book.
Posted by: Drilling additives | October 21, 2010 at 09:35 AM
raf
Thanks a lot.
Posted by: Account Deleted | January 23, 2011 at 01:19 PM
Good domestic regulations are those which enhance domestic society. Your work, Professor Rodrik, emphasizes the importance of institutional arrangements tailored to a specific Global news online country's needs. So why refuse to trade with countries with do not have similar regulations to ours, unless those regulations would enhance those societies?
Posted by: Account Deleted | February 06, 2011 at 04:12 PM
We are China online Wholesale Beads store, thanks a lot
Posted by: Jzzacoo | February 16, 2011 at 02:23 AM
I liked this article. It was so great.
http://www.thethomasonline.com/
Posted by: Account Deleted | February 25, 2011 at 10:03 PM
http://www.raf.web.tr
Thanks a lot for article.
Posted by: Account Deleted | March 04, 2011 at 10:38 AM
Trade is one of the most powerful forces linking our lives, and a source of unprecedented wealth. Yet millions of the world's poorest people are being left behind.
Property Management Firms
Property Investment USA
Posted by: Account Deleted | March 31, 2011 at 11:57 AM
Despite bans on certain pesticides and their replacement
by others considered less hazardous, the widespread
use of these substances in agriculture continues
to threaten the environment and the health of millions
of people.
Software Development Firm
Posted by: Account Deleted | April 16, 2011 at 10:04 AM
http://www.rolexparty.com/
dstfsdf
Posted by: Account Deleted | April 22, 2011 at 06:56 AM
It is mixed with countless of the breath of life, with a blade of grass, wild daisies, insects, even the little animal feces of content atmosphere. I sometimes like jia baoyu, as well as looking at girls witless squatted down looked at those long myriad weeds of dirt in a daze.
http://www.coachusaonline.com/
Posted by: Mbtmbtshoes | May 07, 2011 at 08:40 PM
celikraf
celikraf
Thanks ... I like it ;)
Posted by: Account Deleted | June 01, 2011 at 08:21 AM
This is very true.I lost my weight just made changes in food ,taking all vegetarian and of low carb This helped me a lot and I suggest everyone
Hotels in oostende
Posted by: Account Deleted | June 05, 2011 at 06:00 AM
Raf
raf
Thanks to you ...
Posted by: Account Deleted | June 09, 2011 at 01:21 PM
Raf
raf
Raf,raf sistemleri ....
Posted by: Account Deleted | June 12, 2011 at 02:15 PM
Many places and centers offer business and trade promotions to both buyers and supplier.What about the differences in skill intensities across industries? The job losses in the relatively unskilled-labor intensive battery industry should have little effect on the relatively skilled-labor intensive machinery
sexshop
sexyshop
sexshop online
Posted by: Account Deleted | July 19, 2011 at 07:42 PM
Hey great stuff, thank you for sharing this useful information and i will let know my friends as well.
organic seo service
Posted by: Account Deleted | October 13, 2011 at 03:19 PM
It does not matter about others, but as far I am concern it should all be simple, so we should not be worried too much, I am lucky that I work with OctaFX broker, it has lovely rebate service program, so that helps me trade so much better with been able to earn 15 dollars profits per lot size trade, it gives me the kind of freedom and control that I always love to have to become a really successful trader.
Posted by: Mind Time | August 27, 2015 at 02:21 PM