New Frontiers in Free Trade: Globalization's Future and Asia's Rising Role (review)

This book illuminates the path the global economic community has paved towards free trade, with emphasis on the World Trade Organization (WTO), Preferential Trade Agreements (PTAs) and the rising role of China and emerging Asia in the global market. The author does a terrific job in establishing itself as "a little book on a large subject". Essentially, it provides an intuitive, realistic insight into the developments of trade policy in the world as well as in Asia. A comprehensive review of trade policy sheds light on opportunities and challenges the policymakers and practitioners can take on.

Chapter 1 brings the audiences to the helicopter tour of the entire book. This book starts with a primer of the development of thoughts on free trade versus protection in Chapter 2. Chapter 3 pertains to the political economy of trade policy, in which the catalysts of the trade policy reforms are examined. Chapter 4 assesses the developments of the Doha Round WTO. Chapter 5 points to the proliferation of FTAs in Asia as a culprit of rising economic and political imbalances. Chapter 6 argues that trade policy should be bottom-up, and unilateral trade liberalization serves as a key driver of liberalization. Chapter 7 provides forward-looking conclusions and policy implications.

Its underlying criticism is strikingly objective and points to the limitations of the top-down liberalization process whereby the governments trimmed tariff and non-tariff barriers through trade negotiations under WTO and PTAs, as the root cause of the global trade imbalances, the incessant stalemate or even the collapse of the Doha Round negotiations. Liberalism from above has by and large been characterized by "weak provisions", "vague, muddled, and trivial justifications", "little relevance to commercial realities", "little more than symbolic copycatting" and "overlooking lessons from theory, history, and the world around us today", among other bleak facets. The author convincingly shows the evidence that autonomous trade liberalization contributed largely to total tariff reductions. The arguments are compellingly in favour of the bottom-up approach to free trade whereby the plunges in trade restrictions are market-driven and are unilaterally offered by the governments. As an example, "the world's fastest growing economies are those in Asia that have embraced freer trade and global integration unilaterally, without waiting for trade negotiations".

As does the top-down development, the bottom-up liberalism has a severe limitation. At the end of the day, the unilateral attempts in freeing up international trade and flows of capital and labour do not offer any commitment to liberalization. If the bottom-up liberalism is able to eradicate the cross-border barriers unilaterally, it is also able undo the free trade process unilaterally. For instance, the substantial progress on unilateral liberalization was materialized during 1980-90s (Figure 6.1, p. 95) during which the stage of the global economy exhibited an upswing, and the export-led policy had delivered rapid economic growth to the emerging markets in East Asia. However, the past economic slump, especially that in 1930s and the recent global financial crisis, provides an important lesson: The economic downturn could easily spawn (unilateral) protectionism around the globe, thereby reversing unilateral attempts in pushing forward free flows of goods, services and production factors. The bottom-up approach to free trade therefore tends to make the progress on trade liberalization highly susceptible to the stages of the business cycles. In this sense, a more rule-based, legally-binding approach to opening up the domestic markets is needed.

In addition, unilateral trade liberalization is by no means a "one-size-fit-all" impetus for all countries, at least in the short run, since to some countries the removal of trade barriers may not be economically sensible. Even though the bottom-up liberalism has characterized trade policy in resource-rich economies like China and India and small-open economies like Hong Kong, Singapore, Taiwan, Thailand and Malaysia, the counter examples are Cambodia and Laos, and to the lesser...