It is a privilege and a challenge to be asked to review such a massive work. This volume is 1,000 pages long and has 30 chapters. It does what it says on the tin: it is a comprehensive handbook that anyone teaching studying or writing on the subject would find really useful. Reviewing it is not easy, and I have chosen to begin with comments about the book as a whole, followed by a discussion of individual chapters.
The book invites a natural comparison with a 2001 volume edited by English, Hoekman and Mattoo, entitled The WTO, Trade and Development, published by the World Bank. There are some important differences with that earlier collection. This book has longer and more in-depth chapters, about 30 pages each, and, whilst the WTO is quite well covered, it is not the heart of the book. Readers interested specifically in the WTO should refer to the separate Handbook on The World Trade Organization (2012), published by Oxford University Press (OUP).
This Handbook is based on material used for a two- to three-week course taught by the Columbia School of International and Public Affairs and the World Bank Institute. The editors suggest that the volume might be useful as a textbook for courses on International Trade or International Political Economy at both graduate and advanced undergraduate levels. This is not entirely unrealistic, since the level of the chapters is in almost all cases very carefully targeted to provide explanation of fairly advanced material in a non-technical way.
The authors are nearly all economists and include many distinguished names in addition to the editors, including Arvind Panagariya, Tim Josling, Aaditya Mattoo, Patrick Messerlin, Spencer Henson, and T. N. Srinavasan (names picked at random). Other authors include trade lawyers, for instance Joel Trachtman, Robert Howse, and Steve Charnowitz. The group of authors is confined to these two disciplines – for instance, there are no political scientists or international relations scholars among the authors.
The volume is divided into four parts. Part I covers the global trading system and features two chapters, one on the multilateral system and one on preferential agreements. Part II addresses international trade theory and contains a chapter on Ricardian/Heckscher–Ohlin theory as well as another chapter on trade with economies of scale. Part III contains 11 chapters on the principles of trade policy. Finally, Part IV has 14 chapters on various aspects of trade negotiations.
The economics chapters are written for an audience that is economically literate but non-specialist. The theoretical part is comprehensive, but quite brief. In fact, most of the book is about empirics and policy. There are substantive chapters on trade and inequality, migration, trade and growth, data sources as well as basic modelling methods. There is good coverage of all the main negotiating issues including agriculture, standards, investment, environmental policy, and intellectual property. The book highlights the need to take into account both income distribution and efficiency, though different authors place a different weight on these two aspects.
But are there any obvious gaps? It would be misleading to complain that the book is wholly one-sided. Although the volume is far from monolithic in tone and is not exclusively ‘neoliberal’, there is no representation of what one might consider ‘mainstream non-mainstream’ authors. The 2001 volume by English et al. (referred to above) included a chapter by Dani Rodrik and, whilst there are copious references to him in the index and a few to Stiglitz, there is no explicitly ‘critical’ view included here. The present volume includes an interesting chapter on export promotion schemes by Solomon Samen that provides certain non-mainstream perspectives; however, the general tone is set by the two Panagariya chapters which reflect orthodox economic thinking. As one might expect from a World Bank-sponsored volume, the emphasis is mainly on multilateral negotiations, but far from exclusively so. J.-C. Maur (Part IV, Chapter 17) gives a balanced account of the potential gains from ‘deep integration’ in free trade agreements, that is, provisions on domestic regulatory issues. The gap in this section of the volume is probably that, while the section includes a chapter on Mercosur and NAFTA, there is very little analysis of European Union (EU) bilateral agreements except in passing in Maur's chapter. Indeed, in the index, more space is devoted to provisions of EFTA's preferential deals than those of the EU.
Other elements not analyzed in any detail are multinational firms, textiles and clothing, as well as the newly fashionable areas of vertical specialization and value chains, and ‘new economic geography’ models of economic convergence and polarization. Additionally, I felt that, whilst there is plenty of empirical material in boxes and graphs and tables, a case could be made for more in-depth country narratives.
The only other critical comment one might make is that, whilst the editors' introduction and most policy chapters were updated to 2013, some of the chapters do not appear to have been much revised from the original teaching materials, which in some cases go back to 2007.
For anyone considering buying this book or ordering it for the library, there is in fact a very good summary of the tone and main conclusions of each chapter in the long introduction to the book. This summary was available at the time of writing for free download from the OUP website, at http://ukcatalogue.oup.com/product/9780199680405.do.
The rest of this review will be devoted to comments on some of the chapters that struck me most, based on a purely personal selection and not on a ranking by merit. Unfortunately, there are too many substantive policy chapters to do justice to.
The pair of chapters by Panagariya and by Lovely and Mitra provide elegant overviews of the state of trade theory. Panagariya gives a fairly straight-forward account of the Ricardian model, and sets out to refute fallacies common among those who do not fully understand it. However, he then goes on to neatly compare this basic view with the Heckscher–Ohlin (HO) approach, showing how many points, including income distribution, are left out by the simple Ricardian approach. Lovely and Mitra tackle scale economies. They cover a lot of ground and include a brief analysis of outsourcing and vertical specialization. This material would be very good for teachers, but would be hard-going as student reading.
Chapter 7 by Adriamanajara, Cadot, and Grether is another very broad survey which covers methods of empirical analysis. It covers the Harmonized System (HS) of trade statistics and how it can be used in a variety of descriptive indicators, such as intra-industry trade indices and trade concentration indicators. The chapter also addresses how to measure countries' underlying comparative advantages using statistical indices of ‘Revealed Comparative Advantage’. It goes on to explain tariff and non-tariff barriers data and also provides an explanation on how to analyze the distributional impact of trade policy using consumption data. The final part of the chapter gives a clear tour d'horizon of the use of gravity models and even the mathematically complex ‘computable general equilibrium’ models for analyzing the economy-wide impact of trade policy changes. It concludes with advice to the would-be modeller: always to start with clear descriptive data analysis and provides tips on how to use the ‘Stata’ statistics software. I think it would be a splendid guide for someone planning to engage in more detailed and extensive analysis of the economy-wide impact of trade policy reform. Not surprisingly, this is one of the longer chapters in the volume, but still extends only over 40 pages.
Batiz-Rivera’ chapter on Trade Poverty Inequality and Growth offers a really elegant survey of material that is not always easy to teach. Batiz-Rivera begins with a clear and unrushed statement of all the issues in the measurement of inequality and poverty within and between countries. The chapter shows how markedly the global $1-a-day poverty count has fallen since 1980, but points out how much of this phenomenon is due to China, and how little poverty has fallen in Africa in recent years. Moreover, the decrease is far less for the $2-a-day indicator. Meanwhile, inequality within most developing countries has risen. Batiz-Rivera moves on to the HO model and shows that this model cannot explain these trends, since we would expect ‘low wage’ labour-intensive activities to prosper the most in developing countries. Although this happened initially, current evidence is consistent with skill-biased technical change in both poor and rich countries. In other words, although in the early stages ‘low-wage’ labour-intensive activities in developing countries benefited from trade openness and unskilled workers gained, we have more recently seen a higher rise in the earnings of skilled than unskilled workers in developing countries. Trade can both reduce poverty and increase inequality: this seeming paradox is not always easy to get across to students, and this essay will be valuable for teachers. In addition, Rivera-Batiz looks at the gender impact of trade expansion suggesting that different countries have had different experiences, with women gaining in some countries where they have been able to get manufacturing jobs, but losing in others as traditional activities have been displaced.
Fink's chapter on TRIPs and TRIPS-plus agreements in FTAs makes clear that enhanced IPR provisions cannot really be justified in terms of long-term benefits to developing countries; rather they are a trade-off, the price for market access exacted by developed negotiating partners. However, Fink also notes that the benefits of negotiated market opening may disappear with the general trend to lower market access barriers, whereas the strengthened IPR disciplines are permanent.
Henson and Jaffee very nicely rehearse an argument they have developed elsewhere on SPS (food safety) norms. We should not think of mandatory safety standards only as ‘barriers’. Rather, these standards have real consumer protection goals as well and can act as catalysts to higher quality for exporters.
Frischtak and Newfarmer cover investor-state dispute settlement provisions, which economists rarely discuss. They argue that there is some evidence that such provisions stimulate investment, but occasionally at a serious price for some developing countries. This should probably be read by those interested in the proposed EU–US TTIP deal. This essay sits alongside a masterly and up-to-date account of the WTO dispute settlement system by Howse.
Economists would also gain by reading the chapter by Trachtman on anti-dumping and safeguards: Trachtman discusses what kind of welfare economics could be discerned behind otherwise seemingly economically irrational anti-dumping measures, going back to Corden's ‘conservative social welfare function’. Charnowitz's chapter on trade and the environment is more legalistic, but raises very important economic questions about the appropriateness of WTO rules as they stand.
Overall, this is a book that anyone teaching trade policy would want in their library. The editors have done a marvellous job and the volume is rewarding and a pleasure to dip into. Nevertheless, its price (£125) probably makes it difficult to use as a core textbook until a paperback edition appears.
