Trade policy as riding bicycles

I think it was Fred Bergsten of the Peterson Institute who first formulated the theory that trade liberalization is like riding a bicycle: you can never stop doing it, because if you do you will fall off, and that will be the end of it. The theory has been used to justify why there had to be a succession of trade negotiation rounds at the GATT/WTO. And now it is used to fend off the argument that further trade liberalization may not be an important priority for the world economy given how open it already is: you need to keep liberalizing, otherwise you risk giving up all the gains. The latest example of this line of reasoning comes from Dan Drezner (in response to a question from Kevin Drum):

The trouble with populism is (mostly) not about the remaining 10% of barriers to trade (though see below), it's about efforts to f$%& up the 90% of barriers that have been dismantled. The Baucus-Grassley-Schumer-Graham bill, for example, isn't about halting new trade openings -- it's about finding new ways to clamp down on existing openness.

Furthermore, this is never going to go away. Protectionism is a great way to reward concentrated interests with diffuse costs, so members of Congress will always have an incentive to act in this way. The current populist mood makes it easier to do it out in the open, but as Daniel Kono has shown, it will also be done behind closed doors as well.

This is why I'm so adamant about trade liberalization -- the status quo never stays the status quo, but creeps back ever so slowly towards economic closure.

As I have said before, beware when economists start talking in metaphors. I don't know whether the Bergsten rule was ever valid, but I am pretty sure it does not apply currently. The notion that if you start putting a few chinks on the existing trade policy architecture, you end up back in the 1930s is quite implausible--and totally unsupported by any empirical evidence that I know of. If the bicycle theory were true, most countries would have long ago driven a protectionist train right through the anti-dumping provisions of the GATT/WTO, a set of rules expressly designed to provide protection where none is needed.

I think the underlying political balance of interests favors an open economy in most countries of the world today, and it will take a major shock to get us back into rampant protectionism.   

Comments

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dani

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why i read this blog every day

"If the bicycle theory were true, most countries would have long ago driven a protectionist train right through the anti-dumping provisions of the GATT/WTO, a set of rules expressly designed to provide protection where none is needed."

[save_the_rustbelt]

I happened to be passing Saginaw Michigan today, and jumped off of I-75 and took a quick tour.

If this is the bounty of globalization we had better stop signing trade deals for awhile. Very grim, and the worst is not over, as the offshoring of auto parts work is just getting started.

Saginaw is paradise compared to Flint.

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I happened to be passing Saginaw Michigan today, and jumped off of I-75 and took a quick tour.

If this is the bounty of globalization we had better stop signing trade deals for awhile. Very grim, and the worst is not over, as the offshoring of auto parts work is just getting started.

Saginaw is paradise compared to Flint.

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I happened to be passing Saginaw Michigan today, and jumped off of I-75 and took a quick tour.

If this is the bounty of globalization we had better stop signing trade deals for awhile. Very grim, and the worst is not over, as the offshoring of auto parts work is just getting started.

Saginaw is paradise compared to Flint.

[Dan Drezner]

Dani, give me a break. I did not use the bicycle metaphor -- instead, I cited the Kono 2006 APSR paper, which is not a metaphor. It has, you know, things like a formal model and actual data, showing that protectionism is likely to take more obscure forms in democratic societies.

I agree with you that the days of Smoot-Hawley are not close. And you are probably less bothered by creeping protectionism than I am. Simply denying its existence by claiming I used a metaphor, though.... well, that's just bad social science.

A final question, Dani -- do you believe that political balance of interests favors an open economy in the United States?

[Dani Rodrik]

Dan --

Yes, I do. Don't you?

[Dani Rodrik]

Paine --

If you are a Marxist, what does that make me?

Thanks for your continuing support and delightful (yet informed) verse.

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