Read the full post at The Christian Science Monitor
Andrew W. Lo is the Charles E. and Susan T. Harris Professor, a Professor of Finance, and the Director of the Laboratory for Financial Engineering at the MIT Sloan School of Management.
From The Washington Post
Supporters of the Trans-Pacific Partnership (TPP), a trade agreement under negotiation between the United States and 11 other countries, make this case: Trade between countries is always good, and more trade with more countries is even better. Harvard economist Greg Mankiw goes further in a recent New York Times piece, arguing that anyone opposed to trade deals does not understand elementary economics.
The arguments made by these advocates do not match the reality of the modern world and are not helpful for thinking about what is at stake in the TPP. It’s not a question of understanding economics. It’s a question of knowing precisely what we’re agreeing to when we sign the TPP.
In the simple models of introductory textbooks, countries improve their respective economic outcomes by specializing in their “comparative advantage” — the goods they produce more efficiently than their trade partners — thereby increasing the supply of goods and lowering prices. No government subsidy is involved, nobody cheats, everyone is well-informed about the nature of the deal, and pretty much all parties come out ahead. If anyone loses their job, in those models either they get another good job or they can be fairly compensated by the people who gain extra income.
From Politico Magazine
The Trans-Pacific Partnership is a major potential trade agreement between the United States and 11 countries at very different levels of economic development, including Japan, Mexico and Vietnam. Will the agreement boost U.S. growth, address wage stagnation, help our strategic partners and create legitimate rules for international trade in the 21st century? The answer hangs in the balance.
With negotiations reported to be entering the final stages, it is critical that Congress focus at this point not on how to “fast track” approval of an agreement — through passing Trade Promotion Authority — but on making sure the TPP itself is on the right track.
There is a real choice to be made between two different approaches to international trade.
From the New York Times
The news from Europe, particularly from within the euro zone, seems all bad.
Interest rates on Italian government debt continue to rise. Attempts to put together a “rescue package” at the pan-European level repeatedly fall behind events. And the lack of leadership from Germany and France is palpable – where is the vision or the clarity of thought we would have had from Charles de Gaulle or Konrad Adenauer?
Viewed from the West, China’s new Five-Year Plan, the 12th since the Communist Party took power, has an anachronistic feel. The exercise itself evokes images of a heavy-handed, retrograde state and dour bureaucrats issuing orders from on high.
But beneath the dry, technical language of the document, which the National People’s Congress endorsed this month, is a plan for a socio-political transformation every bit as important and open-ended as the recent economic transformation in China.
Over the past decade, China has turned to exports to drive growth. Leaders have embraced a new kind of global production, in which goods are made of components produced in a variety of places by a variety of companies. For China, this has meant welcoming foreign manufacturers and becoming a global center for export processing.