国际经济学11.doc

Chapter 11Controversies in Trade Policy* This chapter describes two controversies in trade policy that arose in the 1980s and 1990s.1) Strategic trade policy2) Globalization and low-wage labor1 Sophisticated arguments for activist trade policyActivist trade policy is justify only if there is some preexisting domestic market failure.(Chapter 9) Economists identified two kinds of market failure in advanced countries:1) Technology spillover in high-tech industries.2) Monopoly profits in highly concentrated oligopolistic industries.1. Technology and externalitiesHigh-tech industries: investment in knowledge is the key part of the enterprises.Appropriability (MSB) and subsidy(Patent laws provide only weak protection for innovators, thus, under laissez-faire high-tech firms do not receive as strong an incentive to innovate as they should.)(The same as appropriability argument and infant industry protection in developing countries)The problems for government to subsidize the high-tech industries:1) The ability to target the right thing A general subsidy is a pretty blunt instrument.RD subsidyA loose definition or a strict definition?2) The difficulty to quantitative the externalitiesIs the optimal subsidy 10, 20, or 100 percent? No one has a good idea.The problems of appropriability at the level of the nation (as opposed to the firm).2. Imperfect competition and strategic trade policy.In some industries, there are only a few firm in effective competitionOligopoly. Strategic trade policy (subsidy or import tariff) can alter the rules of games to shift excess returns from foreign to domestic firms. Homes income rises at other countries expense.1. The BranderSpencer analysis: Boeing and AirbusAssumption: Two competitors have the same technology; Decision: either to produce 150-seat aircraft or not.Table 11-1 Two-Firm CompetitionBoeingAirbus-5-50100100000ProduceDont produceProduceDont produceWhich firm will actually get the profits? This depend on who gets there firstFirst movement advantage.By subsidizing Airbus (strategic trade policy), the European government can reverse this situation.Table 11-2 Effects of a Subsidy to AirbusBoeingAirbus-5200125100000ProduceDont produceProduceDont produceThe subsidy raises profits by more than the amount of subsidy itself, because of its deterrent effect on foreign competition. 2. Problems with the Brander-Spencer analysisTo make practical use of the theory would require more information than it is likely to be available.1) An alternative caseTable 11-3 Two-Firm Competition: An Alternative CaseBoeingAirbus5-200100125000ProduceDont produceProduceDont produceTable 11-4 Effects of a Subsidy to AirbusBoeingAirbus550125125000ProduceDont produceProduceDont produce2) If one industry is subsidized, it will draw resources from other industries and lead to increases in their costs. Thus, even a policy that succeeds in giving U.S. firms a strategic advantage in one industry will tend to cause strategic disadvantage elsewhere.Strategic policies are beggar-thy-neighbor policies that increase our welfare at other countries expense. These policies therefore risk a trade war that leaves everyone worse off.Politics of trade and industrial policy would prevent use of such subtle analytical tool.Case study: When the chips were up.2 Globalization and low-wage labor The rise of manufactured exports from developing countries is one of the major shifts in world economy over the last generation.1. The anti-globalization movementThe anti-globalization movement: Outrage over low wages and poor working conditions in developing countries.The anti-globalization activists alleged:World trade does harm to workers in developing countries.WTO is riding roughshod over national independence and imposing free trade ideas that hurt workers.(A demonstration disrupted the meeting of the WTO in Seattle in 1999)2. Trade and wages revisitedAn example:Table 11-5 Real Wages(A) Before tradeHigh-tech goods/hourLow-tech goods/hourUnited States11Mexico1/81/2(B) After tradeHigh-tech goods/hourLow-tech goods/hourUnited States12Mexico1/41/12Anti-globalization activists: Trade hurts workers in both advanced and developing countries.In low-tech industries highly paid jobs in the U.S are replaced with lower paid jobs in Mexico.Although Mexico workers are half as productive in low-tech industries as the U.S workers, their wage rate is only 1/4(not 1/2) that of U.S workers.Free trade proponents (economists): Trade actually benefits workers in both advanced and developing countries.Real wages have actually increased in both countries. When labor-abundant countries export labor-intensive manufactured goods like clothing, not only should their national income rise but the distribution of income should shift in favor of labor.3. Labor standard and trade negotiationsWhether and to what extent international trade agreements should also contain provisions aimed at improving wages and working conditions in poor conditions in poor countries.Economists: A system that monitors wages and working conditions and makes the results available to consumers. (“Certified goods”).Advanced countries: Formal labor standards as part of trade agreements. (“Minimum” wage rate). Developing countries: Labor standards in trade would inevitably be used as a protectionist tool, which is similar to the way anti-dumping legislation has been used.4. Environmental and cultural issuesWhether trade agreements should include environment standards.Proponents: Such agreements can lead to at least modest improvements in the environment.Opponents: attaching environment standards to trade agreements will in effect shut down potential export industries in poor countries, which cannot afford to maintain anything like Western standards.The growing integration of markets has led to a homogenization of culture around the world. Much but not all of this homogenization is also Americaniz