By Arvind Panagariya
Free Trade and Prosperity:
- First book-length defense of free trade with the developing countries at its center;
- Shows how openness has been critical to growth and poverty reduction;
- A systematic critique of import substitution industrialization and infant industry protection;
- Exposes the myths of growth through industrial policy and protection by free trade critics;
- Documents compelling empirical evidence linking the volume of trade causally to high per capita income;
- A detailed examination of the experience of Singapore, Taiwan, South Korea, China and India demonstrating that trade openness has been a central element in their rapid growth and success in poverty alleviation
Arguments for protection and against free trade have seen a revival in developed countries such as the United States and Great Britain as well as developing countries such as India. Given the clear benefits trade openness has brought everywhere, this is a surprising development. The benefits of free trade are especially great for emerging market economies.
Free Trade and Prosperity offers the first full-scale defense of pro-free-trade policies with developing countries at its center. Arvind Panagariya, a professor at Columbia University and former top economic advisor to the government of India, supplies a historically informed analysis of many longstanding but flawed arguments for protection. He starts with an insightful overview of the positive case for free trade, and then closely examines the various contentions of protectionists. One protectionist argument is that "infant" industries need time to grow and become competitive, and thus should be sheltered. Other arguments are that emerging markets are especially prone to coordination failures, they are in need of diversification of their production structures, and they suffer from market imperfections. The panoply of protectionist arguments, including those for import substitution industrialization, fails when subject to close logical and empirical scrutiny.
Free trade and outward-oriented policies are preconditions to both sustained rapid growth and poverty alleviation in developing countries. Panagariya provides compelling evidence demonstrating the failures of protectionism and the promise of free trade using detailed case studies of successful countries such as Singapore, Taiwan, South Korea, China and India. Low or declining barriers to free trade and high or rising shares of trade in total income have been key elements in the sustained rapid growth and poverty alleviation in these countries and many others.
Free trade is like oxygen: the benefits are ubiquitous and not noticed until they are no longer there. Free Trade and Prosperity is an essential reminder of the costs of protectionism.
"In conclusion, in this volume, Panagariya has excellently culminated the first full-scale defence of pro-free trade policies in the context of developing economies where the cross-country evidence reveals a strong association between trade openness and growth. He sets the stage through the historically informed analysis of the argument towards free trade followed by a systematic amalgamation and revisits of theoretical concepts backed by empirics which have evolved from the lacuna of the existing literature of international trade. This volume is an important value addition to the existing trade economics literature and compels the readers and economists as well as the political scientists, sociologists, anthropologists and journalists to revisit the arguments of free trade with new analytical dimensions."
- Interview with Panagariya on the occasion of the publication of the book, website of Columbia University, 30 May 2019.
- Podcast with Paagariya talking about the book, The Economics Detective, 21 June 2019
About Arvind Panagariya
Arvind Panagariya is Professor of Economics and the Jagdish Bhagwati Professor of Indian Political Economy at Columbia University. From January 2015 to August 2017, he served as the first Vice Chairman of the NITI Aayog, Government of India in the rank of a Cabinet Minister. Previously he was Chief Economist of the Asian Development Bank. He is the author of India: The Emerging Giant (2008, OUP) and his columns have appeared in the Financial Times, Wall Street Journal and India Today.
Table of Contents of Free Trade and Prosperity
- Setting the Stage
Part I - Questioning the Protectionists' Arguments
- The Mirage of Infant Industry Protection
- Other Common Arguments for Protection
- The Positive Case for Trade Openness
Part II - Trade, Growth, Poverty and Inequality
- Trade Openness and Growth: Exposing the Critics' Specious Arguments
- Trade Openness and Sustained Rapid Growth: Miracles and Debacles
- Trade Openness and Poverty: Exposing the Critics' Specious Arguments
- Trade Openness and Poverty: The Empirical Evidence
- Trade Openness and Inequality
Part III - Miracles of Yesteryear
- The Uncontroversial Cases of Hong Kong and Singapore
- Taiwan: An Early Triumph of Outward Orientation
- South Korea: From Basket Case to Middle Income
Part IV - Miracles of Today
- India: From Near Autarky to Near Free Trade