Monday, June 26, 2006

Waiting for Doha

The Times (London) 26 June, Editorial:

“Yet the case for free trade needs to be made again and again, because jobs lost to foreign competition are more obvious to the public than opportunities created by Adam Smith’s “hidden hand”. And politicians rarely make themselves popular by urging people to embrace competition and change.

The need to act has seldom been more urgent. The health of the postwar trading system is at stake. After nearly five years of phoney war, the Doha round of global trade negotiations has degenerated into a destructive and unwinnable battle of fixed positions, mainly, though not exclusively, between the EU and the United States. Without bold leadership, there is scant hope of peace breaking out by December. Soon thereafter, George W. Bush’s “fast track” negotiating authority from Congress will expire and it will be too late to avert a costly and
time-defeating defeat.”

Fair point made about long-term versus short-tem perceptions. I am not sure what is meant by Adam Smith’s “hidden hand”, but if it’s a reference to the unintended, unplanned and unconscious motivation that operates as a long term process to arrive at unintended outcomes it is not appropriate in this context.

Politicians cannot bring the benefits of free trade about by legislation; they can legislate to remove the tariff barriers they imposed in the first place, but from then on it is up to individuals to act in ways that extend trade and the division of labour. And Smith was mindful of the costs this policy could impose on the losers as well as the benefits to the gainers, and recommended that the policy be pursued with a sense of ‘common humanity’, and gradually over whatever period was found necessary.

Bold strokes by governments are lauded in theory, but given that governments were the original cause of the problems that the Doha round is supposed to be addressing, I am not sure, even if the ‘bold leaders’ stepped up to the plate before December, that there would be much evidence that the intended benefits would manifest themselves quickly, or, and this is a relief, that the expected losses and their associated problems would appear quickly either.

Economies do not change by human fiat (except for the worse); they take their time. Racy, almost panicky, editorials in the Times always read well. But come the end of December, and the Doha round rapidly becomes forgotten, I am not expecting any really dramatic changes in these matters.


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