Monday, March 26, 2012

Trade games - there are no rules

Clyde Prestowitz in the Financial Times provide a good description of the current trade environment and it is not pretty. The trade game has no rules or the rules change with the players. There is the WTO game and then there is the silent mercantilism trade game. The WTO game is what is generally discussed in the press, by academics and in polite company. 

The real trade game is the silent mercantilism of all countries as they attempt to gain advantage with trade. It can be through manipulation of currencies which seems like what many emerging markets engage in, or it an be through direct subsidies and regulation that enhance trade advantages and restrict competition at home. Academic will not discuss this rough game because this will mean that the premise of free trade will be fractured. Policy experts and diplomats would like to believe that world organizations like the WTO work so they will pretend that the system can handle any trade problems. In reality, every country is a silent mercantilist and it is just a matter of how much the rules are bent. The is an anarchy n trade that will be more out in the open if there is no increase in global growth.

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