Free trade and prosperity: how openness helps developing countries grow richer and combat poverty

Table of Contents

Chapter 1 - Setting the Stage
Part I - Questioning the Protectionists' Arguments
Chapter 2 - The Mirage of Infant Industry Protection
Chapter 3 - Other Common Arguments for Protection
Chapter 4 - The Positive Case for Trade Openness

Part II - Trade, Growth, Poverty and Inequality
Chapter 5 - Trade Openness and Growth: Exposing the Critics' Specious Arguments
Chapter 6 - Trade Openness and Sustained Rapid Growth: Miracles and Debacles
Chapter 7 - Trade Openness and Poverty: Exposing the Critics' Specious Arguments
Chapter 8 - Trade Openness and Poverty: The Empirical Evidence
Chapter 9 - Trade Openness and Inequality

Part III - Miracles of Yesteryear
Chapter 10 - The Uncontroversial Cases of Hong Kong and Singapore
Chapter 11 - Taiwan: An Early Triumph of Outward Orientation
Chapter 12 - South Korea: From Basket Case to Middle Income

Part IV - Miracles of Today
Chapter 13 - India: From Near Autarky to Near Free Trade

Arguments against free trade and in favor of protection have a long history when it comes to developing countries, and it is rather surprising that similar assertions have gained increasing appeal in developed countries, including the United States and Great Britain, given the clear benefits openness brings. The benefits are especially great for emerging markets.

Free Trade and Prosperity offers 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 is that "infant" industries need time to grow and become competitive, and thus should be sheltered. Others are that emerging markets are especially prone to coordination failures, beset by specialization and in need of diversification, and they suffer from capital-market imperfections. The panoply of protectionist arguments, including those for import substitution industrialization, fails when subject to close logical and empirical scrutiny. They do so because the costs far outweigh the benefits.

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, including through 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 share of trade in the 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.

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