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. FreeTrade and Prosperityoffers 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. This important book is an essential reminder of the costs of protectionism.
Professor Panagariya has produced an extremely thorough and comprehensive treatment of the role of trade in developing countries. In addition to showing that low and declining protection is conducive to growth and poverty reduction, he also addresses critics of this conclusion and counters their arguments. I expect he will convince many people with this eminently readable book. * Alan Deardorff, University of Michigan * This authoritative book brilliantly combines theoretical arguments with a thorough reading of the historical experience to argue the merits of a unilaterally liberal trade regime for developing countries, as a driver of growth and poverty reduction. It is essential reading, especially in these uncertain times when ill-guided populism and anti-trade sentiment threaten to derail globalization altogether (rather than to improve upon it) and forfeit its many gains. * Pravin Krishna, Chung Ju Yung Distinguished Professor of International Economics, Johns Hopkins University * As protectionism is becoming fashionable again, the battles that were waged successfully by free traders against the protectionists of yesterday must be fought again. Panagariya's brilliant book does precisely that. It shows up the intellectual bankruptcy of the new protectionists' myriad assaults on free trade, using impeccable logic and convincing evidence. It is a tour d'horizon and a tour de force. * Jagdish Bhagwati, author of In Defense of Globalization * In this important book, Arvind Panagariya shows-in a clear and accessible way-how freer trade in developing countries has helped them to flourish. Wading into controversial territory in dealing with the Asian Tigers and others, Panagariya takes on critics and makes the case that trade, not industrial policy, is responsible for their success. Highly recommended! * Douglas Irwin, Dartmouth College, author of Clashing over Commerce: A History of U.S. Trade Policy *