This book is about international trade policy in the 1990s. It deals with the key issues in trade negotiations in recent years and which are likely to be important in the immediate future. Industrial tariffs, quantitative restrictions on trade, so-called unfair trading practices, agricultural protectionism, regionalism and new issues such as trade-related intellectual property rights are all covered.
Nigel Grimwade's aim was to produce a book which would appeal to students at all levels taking specialist courses in subjects such as international economics, international trade and international relations. He has certainly succeeded, and an enormous amount of information is made available. We can read, for example, about all 38 clauses of the General Agreement of Tariffs and Trade signed in 1947 and which has shaped the world trade agenda ever since. Or we can discover estimates of the effective rate of protection for a long list of processed commodities such as preserved seafood and rubber manufactures in the European Union, the United States and Japan.
Inevitably in a book of this kind, a great deal of time is spent in presenting such material. It is extremely useful to have so much contained in a single source, although the very detail and length of presentation involved will deter the nonspecialist from dipping into the volume. The style itself presents no problems, for it is clear and straightforward. Technical expositions of economic theory are kept to a minimum, and the book is certainly accessible to those taking courses in, for example, international relations, who might have little or no economic training.
This is not to say that the book lacks theoretical content - far from it. For an economist, the most fascinating aspects of the book are the nuggets which Grimwade supplies along the way, giving his considered reflections on economic history and on the theoretical approach which offers the best insights into international trade. He provides, for example, an excellent summary of trade policy in the inter-war period as the background to Gatt and the subsequent postwar experience. Grimwade goes on to offer reflections on the political economy of the period. The first world war changed the United States from a net importer to a large net exporter of capital. But this required a policy of low tariffs, not the high ones which the American administration pursued. For only by exporting more goods to the US could the rest of the world earn enough dollars both to continue buying American exports and meet the interest and dividend payments on loans received from the US. This, Grimwade argues, was a major factor contributing to the 1929 financial crisis.
It is probably in international trade where the empirical evidence most strongly confronts conventional economic theory, and it is one of the areas of the discipline which has moved furthest away from the received paradigm. Grimwade dutifully and clearly presents the theoretical arguments in favour of free trade in the standard textbooks. But, as he notes throughout the book, attempts at estimating the loss from tariffs using this framework have often found it to be much smaller than expected.
The key theoretical theme which runs through the book is that any assessment of the consequences of trade policy need to be considered in a dynamic setting, rather than the conventional static way in which welfare gains or losses are measured. For example, protecting the electronics industry might generate important spillover effects in other high-technology, knowledge-intensive sectors of the economy and hence lead to higher growth, which will outweigh the losses incurred by consumers as a result of the tariff. But, as Grimwade notes, taking such factors into account leads to theoretical results which are far less clear cut than those given by the limited view of conventional theory.
One criticism of the book is that too little attention is given to the important concept of strategic trade policy. Grimwade explains the idea well, and notes that general results are very hard to obtain. Not only must each case be examined on its merits, but great uncertainty surrounds any conclusion. We do not, for example, know enough about how firms behave in oligopolistic industries to be certain about how they will respond to an export subsidy of the high-tech sector. But strategic trade policy and the extent to which it justifies government intervention in industry is not merely an intellectual question. The concept of strategic trade is the matter of major current policy divisions in the United States, and the book would have been strengthened if more attention had been paid to it.
Overall, the book contains an enormous amount of information, and familiarises the reader with a wide range of theoretical and policy issues in an accessible way.
Paul Ormerod is chairman, Post-Orthodox Economics, and visiting professor of economics, University of Manchester.
International Trade: A Contemporary Analysis
Author - Nigel Grimwade
ISBN - 0 415 06878 9 and 06879 7
Publisher - Routledge
Price - £60.00 and £17.99
Pages - 386