Sunday, May 06, 2007

Comparative Dissonance

David Sirota with a heavy duty assist from Byron Dorgan, takes on "comparative advantage"

The fact is, those pushing for basic labor, human rights and environmental standards are the ones most interested in respecting Ricardo's theory of "comparative advantage." If global trade had basic standards, then we would be closer to a situation where natural advantages (soil, geography, minerals, etc.) or even human-supported positive investments (education, infrastructure, etc.) would create real comparative advantages, rather than today's situation where artificial negative problems (bad labor, environmental, or human rights protections) create manipulated advantages.

The other issue is that improved communications and transportation has led to much freer flows of information. So American researchers might do the basic research, Indian engineers may work out the details, and Chinese factory workers assemble the product: all under the umbrella of a European multinational. Ricardo's model is not as directly applicable to 21st century mercantilist corporations as it would be to 18th Century agricultural trade. That isn't to say that free trade may not be a good thing, but the current invocation of Ricardo whenever the trade debate heats up sounds more like tokenism than a really strong argument.

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