The Economist ⁽⁶⁾

Free-trade economists question the widely held view that the removal of rich country subsides will benefit the least developed countries. Read full article Abstract: BURKINA FASO, in west Africa, depends on cotton for about 40% of its merchandise exports. Alas, prices are not always what they might be. According to the International Cotton Advisory Committee, a body that advises governments, world prices would have been about 26% higher in the 2001-02 season were it not for the $4 billion in subsidies America lavished on its cotton growers. Farming upland cotton in the United States was once about separating lint from seed. Now, it is a convenient method for parting the American taxpayer from his money. 

Might the new wave of outsourcing to poor countries be different from trade in manufacturing, and make rich countries poorer? A paper by Jagdish Bhagwati, author of a recent book on globalisation, Arvind Panagariya, his colleague at Columbia University, and T.N. Srinivasan of Yale provides more help. They show, also using classical trade models, that outsourcing is no different in economic terms from the trade that has been going on since Ricardo's time. The standard results still hold. Read full article Abstract: WHEN David Ricardo, a 19th-century economist, criticised England's protectionist corn laws, he based his argument on the notion of “comparative costs”, these days called comparative advantage. The idea, in brief, is that all countries can raise their living standards through specialisation and trade. Even if one country can make everything more cheaply than every other it still gains from focusing on the goods in which its relative advantage is greatest—ie, in which it has a comparative advantage—and importing the rest. But trade in Mr Ricardo's day involved grain sent by ship from Germany, not computer code sent by…

Read full article (external link) Read full article (pdf) Economics Focus column of the Economist, December 14, 2000, which covered the paper The Case Against Export Subsidies by Arvind Panagariya.

(Full text and external link unavailable) (Letter in Economist) You note that Mexican exports to the United States have surged in the past two years. You also note that only 117,000 Ameri­can workers have come forward to claim the benefits offered to those displaced by NAFTA. These facts together strongly suggest that much of the NAFTA-induced growth in Mexico's exports has come at the expense of other countries and thus con­stitutes trade diversion.

(Full text and external link unavailable) (Letter in Economist) Criss-crossing FTAs are replacing non-discriminatory tariffs with a spaghetti bowl whereby tariffs vary according to the ostensible origin of the product...FTAs also lead to increased protection against outside coun­tries, turning even an initial movement towards free trade into a movement away from it.