Thursday, March 29, 2007

More than free trade? (fg)

Yesterday, Alan Blinder, former Federal Reserve Board vice chairman, raised concerns about benefits of free trade. Blinder wonders whether the technology that allowed English-speaking workers in India to do the jobs of American workers at lower wages was "a good thing" for many Americans. This is especially true for the service sector in which over 40 million jobs are at stake shipped out of the country. He concludes that this would be the biggest policy issue for the next generation. The Princeton Univeristy economist proposes to think beyond free trade. "Free trade is good. But there has to be more." You can find the article and the corresponding interview on WSJ online.

In my view, Blinder's concerns have to be taken seriously. However, coping with technology-driven globalization by imposing tariffs or other protections would be surely the wrong advice. First, increased trade always fosters a nation's wealth. Second, Blinder forgets that it is the same technology, i.e. ICT, that promotes strucutral change and the emergence of new industries and branches. These new industries at the same time offer new job opportunities. That is what should be discussed beyond technology-driven offshoring and fears against free trade.