NCPA - National Center for Policy Analysis

Baghwati Takes a Balanced Look at Free Trade

March 30, 2004

Globalization and free trade are often blamed for economic ills, but in his book, "In Defense of Globalization," Jagdish Bhagwati, a trade theorist and professor at Columbia University, defends free trade as a tool for poor countries to fight poverty.

According to Bhagwati:

  • Labor-saving technical progress, not competition from low-wage nations is responsible for the slow recovery of the U.S. economy.
  • The concern of U.S. labor unions for working conditions in other countries is due to their fear of jobs going overseas -- in very poor countries with low productivity, companies could not earn a profit if they were to pay higher wages.
  • The main priority for free trade should be to enhance growth and reduce poverty in developing countries -- China and India are such examples of the benefits of free trade.

Bhagwati, however, notes that free trade has limits, and faults unrestricted flows of capital into countries with under-developed financial institutions as a reason for the Asian monetary crisis.

Moreover, he acknowledges that free trade is not a cure-all, and he urges countries to open up their borders while simultaneously working to solve their own domestic problems.

Source: Peter Coy, "The Convictions of a Convert," BusinessWeek, March 22, 2004; based upon: Jagdish Bhagwati, "In Defense of Globalization," Oxford Press, March 2004.

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