Policy Papers (36)

Miracles and Debacles: Do Free-trade Skeptics have a Case?

Read paper [Revised March 2004] Evidence gives developing countries little reason to prefer protection over free trade. Trade has been an integral part of all growth miracles (defined ass countries that have grown at 3 percent or more in per-capita terms on a sustained basis) during the last 40 years. At the same time, there is no evidence linking the debacles (defined as countries that experiences a decline in the per-capita income on a sustained basis) to trade. Nor has trade contributed to increased poverty; on the contrary, openness and growth are invariably accompanied by a reduction in poverty. Even the assertions by the World Bank that globalization-driven fast growth during the 1990s has not served the poor well, leaving the absolute number of the poor unchanged at 1.2 billion are based on faulty evidence.

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India’s Trade Reform: Progress, Impact and Future Strategy

Read paper I offer a comprehensive analysis of India's trade policy, particularly since 1991, and its impact on the economy. I provide evidence showing that trade liberalization has had a major impact on the quality and availability of goods and on services growth. The evidence on productivity growth in the industrial sector varies across studies, however. I also explain why India lags behind China and what India must do to catch up. The strategy for future liberalization, including a possible U.S.-India free trade area, is discussed.

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India in the 1980s and 1990s: A Triumph of Reforms

Read paper [Substantially revised version of "India in the 1980s: Weak Reforms, Fragile Growth"] Bradford DeLong and Dani Rodrik have argued that reforms in India cannot be credited with higher growth because growth rate had crossed the 5 percent mark in the 1980s, well before the launch of the July 1991 reforms. This is wrong reading of the Indian experience for two reasons. First, liberalization was already under way during the 1980s and it played a crucial role in stimulating growth during that decade. Second, growth in the 1980s was fragile and unsustainable. The more systematic and systemic reforms of the 1990s, discussed in detail in this paper, gave rise to more sustainable growth. The paper concludes with a discussion of why the growth rate in India nevertheless continues to trail that of China.

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Think Again: International Trade

Read paper (Foreign Policy, November/December, 2003) Why have disagreements between rich and poor nations stalled the global trading system? Because vapid debates over "fair trade" obscure some inconvenient facts: First, notwithstanding their demands for equity, poor countries are more protectionist than advanced economies. Second, if rich nations cut their self-defeating agricultural subsidies, their own publics would benefit, but consumers in many poor countries would not. Finally, despite criticisms to the contrary, the WTO can help promote economic development in low-income countries—but only if rich nations let the global body do its job.

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