Wednesday, October 21, 2009

Paul Blustein on the Misadventures of the Most Favored Nations

"Clashing Egos, Inflated Ambitions, and the Great Shambles of the World Trading System"
That's the subtitle of Paul Blustein's book, Misadventures of the Most Favored Nations. How can one not want to pick up a book with that title/subtitle?!

The Washington Post says, "Blustein has thoroughly mastered the craft of breathing life into intrinsically dull material with compelling thematic narrative and delicious character studies." Delicious, indeed.

Paul Blustein came to Georgetown Law today to talk about his book, and it was so fun! He read some pages from his book and at one point he pretended to be an army guy yelling at trade representatives.
Apparently, Americans attending the Doha round were given the password "paging Mr. Black," which meant that there was a terrorist threat and all Americans had to evacuate so they could be taken to navy ships nearby. (To hell with the reps from other countries, right? Haha.)

Blustein talked about the frustrations of different countries during multilateral trade rounds like Doha, and the challenges that must be overcome when negotiating a deal between parties with disparate views and priorities. Towards the end of his lecture, Blustein said he felt that a moratorium should be placed on bilateral trade agreements because they draw attention away from multilateral processes.
I thought this was an interesting statement for him to make since he had spent so much time talking about the doomed nature of multilateral trade rounds. If multilateral rounds are so ineffective, isn't the opportunity cost of focusing on bilateral trade agreements insignificant? Why not focus on the pareto improvements that could be made through bilateral trade agreements rather than those that will never be made through multilateral agreements?
Blustein clarified: Although the WTO has its flaws, countries need to preserve this organization that has done so much to prevent trade wars (through its dispute settlement system). When countries start shifting toward bilateral agreements, there is less of an incentive for them to pursue/cooperate in multilateral agreements that can lead to more benefits at the margin. (He explained all of this much more eloquently that I have...)

I agree that countries need to start thinking about themselves as part of a global community, and not just the European community, or the East Asian community, etc. Like Lant Pritchett said, we need to stop having these "imaginary communities."

The Washington Post says, "Blustein leaves the book's punch line until its final section: The benefits of free trade have been grossly oversold. By the WTO's own accounting, even the utopian elimination of all tariffs would boost world GDP by less than a half-percent, with most of that benefit going to the wealthiest nations." However, it is difficult to swallow this idea after reading pieces like "Ricardo's Difficult Idea" by Paul Krugman.

A friend of Blustein argued that by claiming that the sky is falling, one is only doing more to catalyze the self-prophesied failure of the WTO. It's kind of like deflation - if people go around saying that there is the threat of deflation, even when there is none, we could end up in a deflationary death spiral like Japan's lost decade...

Related Links:
Blustein mentioned Smoot-Hawley at one point and it reminded me of the '93 debate where Gore gives Perot a framed picture of Smoot and Hawley and says, "I framed this so you can put it on your wall if you want to." Ha!

Professor Johnson used to do Ross Perot imitations. Those were fun. (Sigh, I miss Wellesley.)

Greg Mankiw blogged about VAT not too long ago.

In other news:
I'll be blogging about ridiculous things countries have done to discriminate against certain imports. (Are all cows the same?! Are all sardines the same?! What exactly is a "like good?")

Filling out paperwork for my retirement account and health insurance has made me even more depressed about turning 22 this week...Melky Cabrera is only 3 years older than I am and he plays on the best baseball team EVER, AND he has crater like dimples. How am I supposed to beat that?!

Anyway, time for sleep. Tomorrow's Thursday - my favorite day of the week! (b/c I get to go to International Trade and get out of work knowing that the next day is Friday...but I assure you, Friday is not my favorite day of the week. My favorite day of the week is Thursday.)

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