Rodrik's 'Straight Talk on Trade'

AP
In "Straight Talk on Trade: Ideas for a Sane World Economy," Rodrik argues that most economists ignored what their own scholarship had made clear:
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Dani Rodrik

Many mainstream economists say they’re appalled by President Donald Trump’s threats to trash trade agreements and tax imports in a drive to shrink America’s bulging trade deficits.

Yet economists themselves bear some blame for the backlash against free trade and globalization that helped propel Trump to the White House and Britain to abandon the European Union.

So says Dani Rodrik in a provocative new book. In “Straight Talk on Trade: Ideas for a Sane World Economy,” Rodrik argues that most economists ignored what their own scholarship had made clear: That global free trade, for all its benefits, inevitably ends up depressing industries and communities.

Economists kept quiet about this, Rodrik argues, because they feared that any criticism of free trade would empower “protectionist” critics who oppose open trade in nearly all forms. But according to Rodrik, it all backfired: By dodging an honest debate on the pros and cons of open trade, he says, economists perversely “empowered the barbarians” and made it easier for “extremists and demagogues” to win public support.

“Economic theory teaches us that globalization and openness to trade cause a lot of redistribution of income,” Rodrik said, “The flip-side of gains from trade is that some people, some communities, some parts of the country end up becoming worse off. That wasn’t a mystery. That’s what economists were teaching all along.”

The 60-year-old Turkish-born professor of international economy at Harvard’s Kennedy School of Government has cast a critical eye on globalization for years. Rodrik wants to be clear that he supports free trade. But he is critical of what he calls “hyperglobalization” — something he says involves wresting control of commerce from individual governments and handing it to global institutions to spur ever-freer-flowing trade and investment. When many European countries abandoned their own currencies and adopted the euro, for example, they effectively turned their economic policy over to the European Central Bank.

Countries should form their own policies, Rodrik says, guided by the likely impact on workers and communities. If European nations fear the consequences of genetically modified foods for people, for instance, they should be free to ban them — even if the trade-off will be fewer food choices and higher prices.

In Rodrik’s view, recent free-trade deals have evolved from simple efforts to pry open closed markets into complex deals that reward powerful corporations but often cause workers to lose jobs to cheaper labor in countries with lax workplace and environmental safeguards.

Rodrik, points, for example, to the Trans-Pacific Partnership, a deal with 11 Pacific Rim countries that Trump nixed in January. The deal would have served pharmaceutical companies by strengthening patent protections on their drugs, thereby delaying poorer countries’ access to cheaper generics.

Trade deals contain “thousands and thousands of pages of detailed rules,” Rodrik said, “Do we protect labor and affected communities, or do we protect pharmaceutical companies or large multinationals or financial establishments?”


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