Wouldn’t it be delicious if, as predicted by Martin Prince on The Simpsons, Jadgish Bhagwati finally wins the economics “Nobel” prize next week? In today’s United States, full-throated advocates of multilateral trade liberalisation suddenly seem almost pitiful. They have quickly become marginalised figures, shouting into the gale. Exigencies forced upon the national elite by competitive decline mean that even the “multilateralist” wing of state managers - from the Treasury Secretary to the President and the “New Democrats” in Congress – no longer likes the idea of the world’s low-cost producers competing with domestic firms.
Formerly favoured instruments like the WTO have (except where TRIPS are concerned) lost their appeal. The Doha round is abandoned. In the last week, the House of Representatives has shown its disdain for the WTO, and its growing taste for discriminatory measures against China. (In recent years, protectionist measures worldwide have targeted firms from China more than those of any other country.) This includes a string of spurious anti-dumping and countervailing-duty petitions. Opinion makers have joined in. Paul Krugman has decided “there are worse things than trade conflict.” Robert Samuelson says:
[Trade] war with China… seems to be where we’re headed and probably should be where we are headed…Confronting China’s export subsidies risks a similar tit-for-tat cycle at a time when the global economic recovery is weak. This is a risk, unfortunately, we need to take…As the old order’s main architect and guardian, the United States faces a dreadful choice: resist Chinese ambitions and risk a trade war in which everyone loses; or do nothing and let China remake the trading system. The first would be dangerous; the second, potentially disastrous.
Given this setting, it would be terribly funny and sporting for Bhagwati to be given the prize. The odds are long, though, on the academy anticipating the joke and delivering the punchline.
“Did it work? Anyone? Anyone know the effects? It did not work, and the United States sank deeper into the – Great Depression.”