“There are so many arguments for protectionism,” said Jagdish Bhagwati at a recent University conference examining the world trade system. “The TPP [Trans-Pacific Partnership] and TTIP [Transatlantic Trade and Investment Partnership] are at risk. If we can’t revive the multilateral trade organizations, what would be the agenda we could embrace?”
Bhagwati, the renowned economist and University Professor at Columbia, was moderating the keynote panel at the September 30 conference “Trade Issues Today.”
Bhagwati turned first to Ernesto Zedillo, a former president of Mexico who now leads the Yale Center for the Study of Globalization.
The trading system has been performing relatively well overall, Zedillo said. Its failures occur, he explained, “because the countries calling the shots have not been willing to make it more advanced.”
For Zedilllo, the biggest priority for global trade lies in protecting and strengthening the World Trade Organization through direct foreign investment.
Bhagwati and Zedillo were just two of several distinguished participants in the event co-sponsored by SIPA, the Jerome A. Chazen Institute for Global Business at Columbia Business School, and SIPA’s Center on Global Economic Governance. Other panelists included Swedish Consul General Leif Pagrotsky, a former industry and trade minister; Arvind Panagariya, a member of India prime minister Narendra Modi’s cabinet who is on leave from SIPA; and economist Alan Krueger of Princeton University, former chairman of President Obama’s Council of Economic Advisers.
In discussing Sweden’s history of successful trade, Pagrotsky explained how his country kept itself open.
“Through allowing less excess for the upper class and more for the lower 30 percent. The Sweden example shows that countries can handle globalization,” he said. “Trade is not a zero-sum game.”
Pagrotsky underscored three strategies that benefited Sweden: abolishing tariffs, democracy, and eight-hour workdays.
For his part, Panagariya offered a perspective on how open trade spurs growth.
“Historically, any rapidly developing country does so with outward-oriented policies,” he said.
Panagariya said India should follow the example of South Korea, where open trading policies and tariff reductions led to rapid growth. While he said that India is “15 years behind China,” he noted that the country had opened significantly to foreign investment.
Bhagwati asked Krueger about U.S. policies for generating equality at both the domestic and international levels if trade were to be cut off.
Krueger said the labor market is a far from perfect system and has many frictions.
“Look how long racial discrimination persisted in the U.S.,” he said.
Noting persistent gaps in education and wages within the United States, Krueger expressed support for moderate increases in the minimum wage; he ventured that doing so would lead to “more jobs, more spending, and less poverty.”
He also emphasized the importance of generating safety nets for citizens through open trade policies and systems like the Affordable Care Act. Such policies are particularly timely, he said, as nontraditional work opportunities with few protections supersede more secure jobs.
He identified a gap in understanding among some Americans: “It’s hard for the public to understand that safety measures and transfers are not a handout.”
An audience member asked about climate change and whether environmental protections should be a part of trade policy.
“The short answer is no,” Zedillo said. “But the largest emitters of carbon should have mandatory participation in offsetting carbon.”
Panagariya agreed, suggesting that the single instrument of trade agreements “cannot be used to solve too many objectives.”
Another question asked about U.S. trade agreements in the context of the major presidential candidates’ proposed policies.
Bhagwati discussed the dangers if the United States were to step back from its trade commitments.
“China is the Gulliver in the world economy. If you shut it off you lose the gains from trade,” he said.
Ernesto Zedillo recalled President Nixon’s action to significantly increase inspections on the U.S.-Mexico border in September 1969: “It was so costly to the United States that it was lifted in 10 days.”
“In countries where people are afraid of change, they are also afraid of trade,” Pagrotsky observed. Nationalism does this too.”
“Leadership is important,” said Panagariya. “A forward-looking approach must be taken, and public opinion will follow”
In concluding remarks, Dean Merit E. Janow of SIPA looked to the November 8 election.
“Whoever becomes U.S. president will have to deal with trade agreements,” she said. “If they do not pass a trade agreement, it will come at a real cost to the U.S.”
— Ginger Whitesell MPA ’17