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Look behind you

...According to the bicycle theory of world trade, trade liberalisation has to keep moving forwards otherwise it risks falling and failing.

For those who are looking in the right direction, there is an extremely large juggernaut bearing down on the trade system, which is likely to send the (already distinctly wobbly) bicycle crashing to the ground.

The juggernaut is China, a country which has kept a low profile during the Hong Kong meeting, but which nevertheless poses an extraordinary challenge, not just to the world trade system, but to the theory of free trade itself.

... with the rise of China, and the increasing number of TNCs (transnational corporations) which are choosing to base themselves there, attracted by a combination of low wages and increasingly high technical expertise, we are faced with a country that doesn't just have a comparative advantage - but rather an almost absolute advantage in an increasing number of sectors.

But this is a triumph for multinational capital, not for Chinese workers who, as well as suffering from some of the worst labour exploitation on record, are also losing jobs at a phenomenal rate.

... Combine that with growing evidence from China that very soon whole sectors of global trade will be dominated by companies operating out of just one or two countries, and it's clear that the whole free trade project is in question....

Caroline Lucas is the Green party MEP for south-east England

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http://blogs.guardian.co.uk/news/archives/2005/12/19/look_behind_you.html

The theory of comparative advantage, while looking kind of attractive at first sight, has always left a lot to be desired. Of course, African countries have an advantage in producing tropical fruit compared to Europe. That's just common sense and not much of a theory. However, the history of colonial exploitation, which shaped African (and other) economies has produced conditions more or less dictating the kind of development they could undertake.

Yes, I know, the 'good old ceteris paribus assumption' that saves so much of economic theory from being exposed as bunk. Of course, everybody knows that other things are not equal.

quote:

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...After more than 50 years of reaching agreements that have largely helped wealthy industrialized nations like the United States, France, Britain, Germany and Japan, this round of trade talks was supposed to finally put the needs of developing countries at the top of the agenda....

This raises the question of what, exactly, is the point of the W.T.O.?

Free trade is not sustainable unless there's something in it for everyone. If the rich world can't figure out a way to get poor countries on board, then America, Japan and France might as well kiss goodbye any trade liberalization that will help their companies. ...

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http://www.nytimes.com/2005/12/20/opinion/20tue2.html?th=&emc=th&pagewanted=print

My emphases