J. Int.

Trade & Economic Development

Vol. 14, No. 3, 373-375, September 2005

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Book Review
Challenge to Globalization: Analyzing the Economics
Robert E. Baldwin and Alan Winters (Eds)
Chicago, University of Chicago Press, 2004, xiii + 544 pp.
Perhaps this volume should have been titled Under the Shadow of Seattle:
The Economics of Challenges to Globalization. In reaction to the riots that
broke out at the 1999 WTO (World Trade Organization) meetings in Seattle, a
group of international trade specialists and economists formed the Academic
Consortium on International T"rade (ACIT), defending globalization, pointing
out that behind anti-globalization American rhetoric lurked protectionist
unions concerned about losing jobs to low wage havens in developing countries
(LDCs).
That prominent ACIT participants authored papers appearing in this volume
is hardly incidental to its publication. The basic message of this book is consistent
with the ACIT position. Delocalization of production has not spawned a 'race to
the bottom', DC (developed country) based multinational corporations seeking out
low wage and pollution havens in the LDCs; nor has international mobility of
labour created a 'race to the top', DCs 'cherry picking' the best and brightest
from the LDCs; openness (in terms of trade, liberalization of access to international
markets, and financial inflows) may have fomented volatility and benefited
consumers in the DCs, but it has also favoured both farmers and manufacturers
in the LDCs; the approximately 100 non-governmental organizations
(NGOs) active in Seattle and its aftermath do not really represent the views of
most people towards globalization as revealed in surveys carried out worldwide;
and the global outreach of contemporary markets is exaggerated, regional
integration being a more decisive characteristic of the last half century than
across-the-world sprawl of production - driven by vertical specialization - and of
trade promoted by tariff cutting and institutional liberalization in DCs and LDCs
alike.
To point out that the authors of this volume have an axe to grind does not mean
that they have ground unprofessionally or unscrupulously. To the contrary,
this reader came away impressed by the scholarly care and sophistication
displayed by the authors of the 13 original papers and/or literature reviews
sandwiched between its covers. A veritable laundry list of state-of-the-art
neoclassical models - gravity and economic geography (emphasizing scale economies and transactions costs), factor price equalization Heckscher-Ohlin trade
models with multiple cones, diffusion and endogenous growth, efficiency wage-are
called upon to motivate and find interesting and unexpected results obtained
through statistical decomposition and econometrics. Let me discuss the most
striking findings in terms of four broad categories: delocalization; openness; voice;
and regionalism.
ISSN 0963-8199 Print/1469-9559 Online 2005 Taylor & Francis
DOI: 10.1080/09638190500204219

374 Book Review

Opponents of globalization argue underlying delocalization is a desire on the part
of DC corporations to evade the regulations and high labour costs of their home
countries. But the papers assembled in this volume argue:
While the LDC share in polluting industries has risen, the heaviest polluters have
not taken advantage of delocalization because they face relatively high costs to
shipping their products - minerals for instance - to the market,
Vertical specialization - hiving off manufacture of components to distant lands has reduced unskilled labour demand in some DCs (e,g, France) and relative
wages in other DCs (e,g, the US and the UK) but so has skill-based technological
change that has not engendered political opposition,
Opening up emigration opportunities for LDC citizens has stimulated a modest
brain drain from LDCs, At the same time it has raised the expected return to
education, thereby promoting investment in human capital in these countries,
much of which stays at home (partly because DCs are only willing to accept a
limited number of immigrants),
Outward investment of DCs (e,g, the US) tends to go to populous lands abundant
in skilled labour and infrastructure, not low wage labour countries.
The message is unmistakable: delocalization means expanding the reach of markets;
by doing so it has accomplished more good than bad.
The dimensions of openness discussed in this volume include either deregulating
commodity and financial markets, or reshaping regulations to level the playing field
for foreign firms operating in domestic markets. The book yields three generalizations regarding openness:
There is an 'adding up' problem that potentially limits the benefits of liberalization
to countries that unilaterally act: if the other countries supplying the commodity cocoa is the example studied here - also liberalize, international prices for the
commodity drops for all suppliers, benefiting consumers who are mainly
concentrated in the DCs,
Financial openness seems to increase the incidence of financial crises in LDCs;
serious moral hazard problems plague international interventions aimed at
stabilizing shaky financial infrastructures struggling with these crises,
The evidence regarding the relationship between openness and economic growth is
mixed; adopting a liberal trade pohcy is no guarantee that rapid growth will ensue.
It would be fair to say that these conclusions paint a less rosy picture than the ones
involving delocalization.
Wisely, two chapters are devoted to the NGO critics of globalization. Who are
they? Do they represent popular opinion or are they elitist? These chapters conclude:
NGO hostility to globalization is not rooted in popular support,
The principal political cement binding together anti-globalization NGOs is
concern over voice, that is over popular participation and transparency in the
process by which international institutions (the WTO, the World Bank, the
International Monetary Fund) write the rules through which globalization is
channelled. Many critics disparage corruption and regulatory capture evidenced in
the relationships between international agencies and the governments they
negotiate with.
To this reader, the treatment of political voice offered in these chapters is interesting
but unsatisfying because it is not informed by a comprehensive political economy
thesis.

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375

Finally, at least one chapter - devoted to breaking down the expansion in trade of
countries between 1970 and 1997 into foreign market access growth (intra-regional
and extra-regional) and domestic supply improvements - questions the very concept
of globalization itself. It provides convincing evidence that domestic supply
improvements and intra-regional foreign market access growth have dominated
trade growth over the last three decades. Is globalization being trumped by
regionalism? Are regional preferential trade agreements like those binding together
Europe and North America more important than global institutions hke the WTO?
Perhaps the NGO critics are barking up the wrong tree.
In conclusion, whether one agrees or disagrees with the basically pro-globalization
stance of this volume. Challenges to Globalization cannot and should not be ignored
by scholars and policy makers who take a serious interest in post-1970 globalization,
Carl Mosk
University of Victoria