Book Review: Trade Policy, New Century: The WTO, FTAs and Asia Rising
By Razeen Sally
London: Institute of Economic Affairs, 2008, ISBN 9780255365444, 229 pp., £ 12.50(pbk.)
Based on a classical-liberal approach, in his recent book Razeen Sally provides anaccount of current challenges to free trade and offers solutions that he thinks bestfit to the 21st century developments. He starts with providing a historical backgroundof the issue and giving a summary of the main political and economic arguments infavour of free trade. According to Sally, although ideas about free trade started inthe West –mainly by Adam Smith and David Ricardo, with the argument of absolute and comparative advantages- and were originally exported to the rest of the world,challenges for trade policy today come mainly from Asia.
Most Asian countries, China being the major one, have successfully integrated into the world economy, but this has been done chiefly through unilateral liberalisation, ratherthan with a process of multilateral negotiations. This has also been the situation formost other developing countries. In fact, as the recent stalemate of the Doha Roundand difficulties facing World Trade Organization show, the author argues, the top downliberalisation approach of post-war period which relies on the multilateral institutions,and its decoupling from laissez-faire do not fit 21st century realities.
Sally calls for unilateral liberalisation within the context of small and limited government and criticises “globalization and social democracy” approach which holds that freetrade abroad is compatible with government intervention to remedy domestic marketfailures, arguing that it has been the governments most of the time fail. For example,for the case of infant industries, he argues, in East Asia its record is mixed at best inJapan, South Korea and Taiwan; non-existent in free-trade Hong Kong and Singapore;and failed in South-East Asia (e.g. national car policies in Malaysia and Indonesia).And in Latin America, South Asia and Africa it has been a disaster not dissimilar toindustrial planning in ex-command economies. Therefore, according to Sally, opennessand free trade is necessary for growth and development. He says that the historicalrecord shows that countries that are more open to the world economy perform betterthan those that are less open and no country on earth has seen a sustained rise inliving standards without being open to the world.
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* Published in the First Issue of Journal of Global Analysis (JGA).