Bankers Win, Workers Lose

Free traders are ecstatic. Negotiators at the 9th World Trade Organization ministerial conference in Bali cheered, hugged, and wept at what they see as the successful culmination of their recent round of talks. “A giant step for businesses large and small,” enthused the CEO of UPS. The well-regarded Fung Business Intelligence Centre announced that the agreement among the 159 WTO members “will not only restore confidence in the multilateral trading system, but also boost world GDP by nearly $1 trillion and generate 21 million jobs.”

“Joy unbounded, with wealth surrounded,” to borrow from Gilbert and Sullivan. The joy is easy to understand. Any agreement reached after years of bickering takes on out-size proportions, witness the joy last week when Democrats and Republicans reached a budget agreement. Never mind that the Ryan-Murray deal can have little fiscal impact. From little compromises mighty agreements of consequence grow seems to be the general belief. The fact of deal is more important than the facts in a deal. Hence the joy unbounded in Bali and, separately, here in Washington.

Unfortunately, joy unbounded will not necessarily leave us “with wealth surrounded.” The WTO agreement is a modest one, aimed primarily at facilitating the cross-border movement of goods by reducing customs delays at national borders. Richer countries will provide less developed ones with resources with which to train border agents and, presumably, reduce their temptation and ability to look to bribes to supplement their meagre incomes. All to the good. But I am reminded of a British economist, who shall remain nameless lest his superiors at the international agency to which he has been seconded demonstrate that in their circles candor is not widely appreciated. He warned me that estimates of the economic effect of trade deals are handed down from above to staff economists who only then develop data-laden reports to support their bosses’ press releases.

The fact is that the trade facilitation deal just reached in Bali is of little real consequence, other than as proof that minor deals can be reached. The Wall Street Journal’s description throws a bit of cold water on the celebrants, “A scaled-back package…, a modest break-through in the trade discussion that began in 2001 in Doha, Qatar….[It] still needs formal ratification by all 159 WTO members and could take months, or even years, to come into effect.”

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