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1、CHAPTER 11 CONTROVERSIES IN TRADE POLICYChapter OrganizationSophisticated Arguments for Activist Trade PolicyTechnology and ExternalitiesImperfect Competition and Strategic Trade PolicyCase Study: When the Chips Were UpGlobalization and Low-Wage LaborThe Anti-Globalization MovementTrade and Wages Re
2、visitedLabor Standards and Trade NegotiationsEnvironmental and Cultural IssuesThe WTO and National IndependenceCase Study: The Shipbreakers of AlangSummaryCHAPTER OVERVIEWWhile the text has shown why, in general, free trade is a good policy, this chapter considers two controversies in trade policy t
3、hat challenge free trade. The first regards strategic trade policy. Proponents of such activist government trade intervention argue that certain industries are desirable and may be under funded by markets or dominated by imperfect competition and warrant some government intervention. The second cont
4、roversy regards the recent debate over the effects of globalization on workers, the environment, and sovereignty. While the anti-globalization arguments often lack sound structure, their visceral nature demonstrates that the spread of trade is extremely troubling to some groups.As seen in the previo
5、us chapters, activist trade policy may be justified if there are market failures. One important type of market failure involves externalities present in high-technology industries due to their knowledge creation. Existence of externalities associated with research and development and high technology
6、 make the private return to investing in these activities less than their social return. This means that the private sector will tend to invest less in high technology sectors than is socially optimal. While their may be some case for intervention, the difficulties in targeting the correct industry
7、and understanding the quantitative size of the externality make effective intervention complicated. To address this market failure of insufficient knowledge creation, the first best policy may be to directly support research and development in all industries. Still, while it is a judgment call, the
8、technology spillover case for industrial policy probably has better footing in solid economics than any other argument. Another set of market failures arises when imperfect competition exists. Strategic trade policy by a government can work to deter investment and production by foreign firms and rai
9、se the profits of domestic firms. An example is provided in the text which illustrates the case where the increase in profits following the imposition of a subsidy can actually exceed the cost of a subsidy to an imperfectly competitive industry. While this is a valid theoretical argument for strateg
10、ic policy, it is nonetheless open to criticism in choosing the industries which should be subsidized and the levels of subsidies to these industries. These criticisms are associated with the practical aspects of insufficient information and the threat of foreign retaliation. The case study on the at
11、tempts to promote the semiconductor chips industry shows that neither excess returns nor knowledge spillovers necessarily materialize even in industries that seem perfect for activist trade policy.The second section of the chapter examines the anti-globalization movement. In particular, it examines
12、the concerns over low wages in poor countries. Standard analysis suggests trade should help poor countries, and, in particular, help the abundant factor (labor) in those countries. Protests in Seattle, which shut down WTO negotiations, and subsequent demonstrations at other meetings showed, though,
13、that protestors either did not understand or did not agree with this analysis. The concern over low wages in poor countries is a revision of arguments in chapter 2. Analysis in the current chapter shows again that trade should help the purchasing power of all workers and that if anyone is hurt, it i
14、s the workers in labor scarce countries. The low wages in export sectors of poor countries are higher than they would be without the export-oriented manufacturing and while the situation of these workers may be more visible than before, that does no make it worse. Practically, the policy issue is wh
15、ether or not labor standards should be part of trade pacts. While such standards may act in ways similar to a domestic minimum wage, developing countries fear they would be used as a protectionist tool.Anti-globalization protestors were by no means united in their cause. There were also strong conce
16、rns that export manufacturing in developing countries was bad for the environment. Again, the issue is whether these concerns should be addressed by tying environmental standards into trade negotiations, and the open question is whether this can be done without destroying the export industries in developing countries. Finally, globalization raises questions of cultural independence and national sovereignty. Speci
