Fears of a Post-Industrial Isolationist Era

January 13, 2009

Jagdish Bhagwati had an op-ed in the FT last week entitled “Obama and trade: an alarm sounds” in which he reviews the incoming administration’s trade team and economic advisors and concludes that we may be in for a new wave of protectionism.

Protectionists unite!

Protectionists unite!

For Bhagwati, a Columbia professor and long-standing free-trade acolyte, this is a very, very scary prospect.

In an interesting aspect of his analysis, Bhagwait says that it’s not so much the ideology of the incoming team that poses a threat to the free trade agenda, but rather their relative lack of connections into the institutions that have advanced free trading in the past. He then argues that given the current resurgence of Keynesian statism and the generalized fear about the future of American companies, such ill-connected and unaccomplished trade team will not be strong enough to resist the base protectionist impulses coursing through congress and the private sector.

I’m of two minds about these claims. On the one hand, Bhagwati is notorious for dismissing the importance of sovereignty and state-based critiques of free-market ideology. Given that his defense of a utopian vision of purist globalism was so overblown, his fears are likely to be as well.

At the same time, however, I sympathize with Bhagwati insofar as I fear for the fate of the global political economy if the United States starts aggressively advancing an anti-global agenda.

Since the creation of the WTO in the mid 1990s, the United States has functioned as a hypocritical hegemon, advocating that everybody else drop their trade barriers while staunchly defending its own. This contradictory stance has bred a widespread (and well-deserved) distrust of US negotiators by small and poor developing countries (and by numerous fair trade activists). However, it has also facilitated the maturation of multilateral institutions into increasingly transparent and democratic forums for international policy deliberation.

That’s right, say what you will about the negative, anti-democratic aspects of the WTO and UN governing bodies like WIPO, but it’s hard to deny that they’ve become the closest thing the world’s got to legitimate sites of global governance. As such, they may continue to serve as glorified platforms for the pet ideologies of global elites (usually voiced by US, EU, UK or Japanese negotiators), but they have also given rise to compelling counter-examples of low- and middle-income country collaboration.

So where does that leave me on Bhagwati’s piece? I contend that it’s not worth getting too frightened about the incoming administration’s personnel – they’ll gain access to all the insider connections or information that their predecessors left behind and will more than likely maintain continuity with previous administration positions. Few early signals have suggested that Obama intends to deviate from Clintonian or Bushian (?) trade tactics.

Nevertheless, I share Bhagwati’s concern about the extent of generalized panic about exposure to global markets and competition. An ideologically-driven anti-globalist backlash would be quite disastrous and would probably receive a warm welcome in much of the country. Obama’s trade people will probably be unable to do much to confront this likely turn of events alone. Instead, it will fall to the president and globalist executives in the private sector to take leadership positions against post-industrial isolationism.

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