Left Flank

Skeptical environmentalist Bjorn Lomberg pities the demise of the Doha Round and the rise of sentiments fearing global warming at any cost.

When the Doha trade round was launched shortly after September 11, 2001, there was plenty of international goodwill. But a recent Financial Times/Harris poll in the US, Germany, France, the United Kingdom, Italy, and Spain found people nearly three times more likely to say that globalization is negative than positive.

Recently, the Copenhagen Consensus project gathered some of the world’s leading economists to decide how to do the most good for the planet in a world of finite resources. The panel ‫ including five Nobel laureates ‫ found that one of the single best actions the planet could take would be completing the Doha negotiations. They based their conclusions on new research for the Copenhagen Consensus project by Australian economist Kym Anderson.

Anderson showed that if developing countries cut their tariffs by the same proportion as high-income countries, and services and investment were also liberalized, the annual global gains could climb to $120 billion, with $17 billion going to the world's poorest countries by 2015.

This is a respectable sum, and certainly a benefit that the international community should try to achieve. But what we often fail to realize is that the story only starts here. As economies open up, as countries do what they do best, competition and innovation drive up rates of growth.

More competition means that previously sheltered companies must shape up and become more productive, innovating simply to survive. Having more open economies allows more trade in innovation, so that new companies can almost instantly use smart ideas from around the globe. Instead of every closed market having to re-invent the wheel, once is enough to get everyone’s economy going.

This means that over time, the advantage of moving toward freer trade grows dramatically bigger: the $120 billion benefit in 2015 grows to many trillions of dollars of annual benefits by the end of the century. And the benefits would increasingly accrue to the developing world, which would achieve the biggest boosts to growth rates.

We have seen three very visible cases of such growth boosts in three different decades. South Korea liberalized trade in 1965, Chile in 1974, and India in 1991; all saw annual growth rates increase by several percentage points thereafter.

If we recast these benefits as annual installments, a realistic Doha outcome could increase global income by more than $3 trillion every year throughout this century. And about $2.5 trillion annually would go to today’s developing countries every year, or $500 a year on average for each individual in the third world, almost half of whom now survive on less than $2 a day.

There would, of course, be costs. Freer trade would force some industries to downsize or close, although more industries would expand, and for some people and communities, the transition would be difficult. Yet the overall benefits of a successful Doha Round would likely be hundreds of times greater than these costs.

It is interesting to contrast global skepticism about free trade with support for expensive, inefficient methods to combat global warming. Many argue that we should act, even if such action will have no benefit for the next decades, because it will help lessen the impact of global warming by the century’s end.

But free trade also promises few benefits now and huge benefits in the future. Moreover, if we could stop global warming (which we can’t), the benefit for future generations would be one-tenth or less of the benefit of freer trade (which we certainly can achieve). Still, there are few celebrity campaigners calling on politicians to sort out the Doha Round.

Global fear about free trade leaves the planet at risk of missing out on the extraordinary benefits that it offers. Free trade is good not only for big corporations, or for job growth. It is simply good.

Joseph S. Nye argues that technological fixes in any one country are not enough to reduce emissions.

There are two basic instruments to reduce carbon emissions and thus mitigate global warming. Technological innovation and increased energy efficiency have considerable potential. For example, carbon sequestration allows the capture and storage of carbon in underground geological formations and deep oceans. Thus, less CO2 gets released into the atmosphere.

But technological innovation alone is unlikely to be sufficient. The other basic instrument includes economic incentives and disincentives. The so-called emissions trading system aims to control carbon emissions by allocating tradable permits. A carbon tax has also been proposed as a method to reduce consumption of fossil fuels.

Not everyone will embrace such instruments. In 2007, China surpassed the US as the world’s leading CO2 emitter. But China points out that on a per capita basis, US emissions are five times higher. China, India, and other countries argue that economic development in rich countries caused most of the existing problem, and it is only fair that developing countries should not have to reduce their emissions until they reach the rich countries’ levels of emissions. But this is a formula for global disaster. The world’s climate is affected by total emissions, regardless of their origin.

China uses coal, a particularly CO2-intensive fuel, for 70% of its commercial energy supply, while coal accounts for a third of America’s total energy. China is now estimated to build two new coal-fired power plants each week.

Coal is cheap and widely available in China, which is important as the country scrambles for energy resources to keep its many energy-intensive industries running. Given that the bombs, bullets, and embargoes of traditional security policy are irrelevant, what can the US and other rich countries do about this security threat?

A 2007 report from the International Energy Agency (created after the 1973 oil crisis to provide policy advice to industrial countries) urged a cooperative approach to helping China and India become more energy efficient. In other words, to prevent dangerous climate change and promote their own security, the US and other rich countries may have to forge a partnership with China, India, and others to develop creative ideas, technologies, and policies.

Peter at The Duck reminds readers of the larger cycle leading to higher food prices worldwide.

To recap, this implicates:

• Global Warming causing a drought
• High oil prices, raising costs for farmers, shippers, and sellers
• Ethanol and bio-fuels (meant to reduce the first two) sucking corn off the market
• Farm subsidies distorting food prices
• Lack of open markets
• Development in large countries (China, India) leading to increased meat consumption
• Integrated global commodities markets, allowing for speculation

Add in Australia's water pricing policies.

So, I assume the solution will be just as complicated. That hasn't stopped Tyler Cowen form trying to advocate one: «...governments are making matters worse by constraining what farmers can store and export.»

Yet, Dani Rodrik comes along and complicates the picture again.

I am puzzled more generally by how the commentary on the world food crisis misses this basic point. It's all about how the price rise is an unmitigated disaster for the world's poor, with nary a comment on the fact that some of the beneficiaries are also among the world's poorest. (Some of you will say that all the price increase is absorbed by margins, with little of it showing at the farm gate--but I doubt that is true.) The panic on the part of governments is understandable. They are much more sensitive to the urban poor, who can create greater havoc than the rural poor. But what about the rest of us?