Panelists in Davos Say Free Trade Consensus Damaged by Politicians' Inaction on Harms
The ideal of free trade has been imperiled by politicians' inaction in the face of harm by foreign competition, said panelists at a Davos forum on free trade. Roberto Azevedo, director-general of the World Trade Organization, said that free trade is associated with economic growth -- but prosperity also increases the gap between rich and poor. When disparities grow, he said, the answer is not to grow, but to avoid inequality. “The problem is governments are often MIA. They are missing in action. They are seeing inequalities grow, and they do nothing about it,” he said, until there is political upheaval. He said politicians don't consider the economic realities as much as the desire of voters. “An easy answer in the age of disruption is to blame the foreign,” he said. “Imports is an easy target, so why not?”
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Keyu Jin, an economics professor at the London School of Economics who grew up in Beijing, said, “There are losers and winners at different skill levels [in trade], we have to acknowledge that.” She said that losers are concentrated geographically, and when major plants close, those towns “don't really recover.” She said some countries are better than others at easing that pain.
Graciela Marquez Colin, economy minister for Mexico, acknowledged that the economic growth in the north of Mexico that resulted from NAFTA deepened inequality with southern regions. “You cannot ask a trade deal for what it was not designed for,” she said. “We need to add other instruments.“
The panelists also talked about the shortcomings of the WTO, and the American complaint that the international trading system has been unfair to American interests. Azevedo said, “Many of the points they make are valid. Others are not,” but said the trilateral statement from the U.S., Japan and the European Union on how WTO rules should change to address industrial subsidies is a helpful first step.
Jin said that while the rules set up in the mid-'90s were reasonable, countries didn't think about the fact that “emerging markets can graduate from their emerging market class, and they can become huge. So the new system has to take into account the possibility of emerging markets graduating.”