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Introductionbase in one connect the state of bank equity markets in one nation to lending and thuseconomic activity in many. For example, a loss on bank loans in one country reducesthe global banking system’s capital which in turn triggers a global reduction in banklending; a worldwide recession is the result.The author points out that this economic logic provides a solid basis for policy. The keyrole of bank health for the overall economy suggests that government support for thebanking system might be a powerful tool for stabilising real activity in a financial crisis.The global trade regimeThe chapter by Simon Evenett outlines the key factors responsible for the Doha Roundimpasse and argues that scholars ought to devote more attention to analysing suchimpasses. The emphasis here is not on the daily twists and turns of the Doha Roundnegotiations but on the underlying factors that have probably prevented WTO membersfrom reaching a mutually acceptable deal.The WTO is widely regarded as trapped in a deep malaise. Richard Baldwin arguesthat, in fact, the WTO is doing fine when it comes to the 20th century trade for whichit was designed – goods made in one nation’s factories being sold to customers abroad.But, he argues, the WTO’s woes stem from the emergence of ‘21st century trade’(the complex cross-border flows arising from internationalised supply chains) and itsdemand for beyond-WTO disciplines. The WTO’s centrality has been undermined assuch disciplines have emerged in regional trade agreements. The implication is clear.Either the WTO remains relevant for 20th century trade and the basic rules of the road,but irrelevant for 21st century trade; all ‘next generation’ issues will be addressedelsewhere. Or the WTO engages in 21st century trade issues both by crafting newmultilateral disciplines – or at least general guidelines – on matters such as investmentassurances, and by multilateralising some of the new disciplines that have arisen inregional trade agreements. We are presented with a stark choice. The WTO can stay onthe 20th century side-track on to which it has been shunted, or it can engage creatively11
Rethinking Global Economic Governance in Light of the Crisisand constructively in the new range of disciplines necessary to underpin 21st centurytrade.Trade policy poses tough questions for policymakers, but nothing like the problemsarising from migration policy choices. Economists have a hard time explaining thisas they typically work with analytic frameworks where trade and migration havequite similar economic effects. The chapter by Paola Conconi, Giovanni Facchini,Max Steinhardt, and Maurizio Zanardi discusses recent research that examines thesimilarities and differences in voting behaviour in the US Congress on the two issues.What they find is that voting is influenced by the constituency’s skill mix (with theimpact on trade and migration votes going in the same direction), and party affiliationleading to divergent voting patterns (Democrats voting in support of liberal immigrationpolicies but against trade liberalisation). Additionally, the fiscal burden of immigrantsfor a constituency dampens the representative’s enthusiasm for liberal migrationpolicies, but has no impact on trade. The ethnic composition of Congressional districtsalso matters with voting for immigration rising with the district’s share of foreign-borncitizens. Taken together, the authors argue that these effects explain why legislators aremore likely to support opening barriers to goods than to people.International migration and the mobility of labourImmigration policy is back in European headlines although perhaps not as much as onewould expect given the dire economic straits in many European nations. The chapter byTim Hatton admits that economists still do not fully understand how immigration policyevolves, or why it seems so different now than in the past. Current understanding isbased on four factors. First, rising education levels have led to better informed attitudestowards immigration, especially as concerns competition of unskilled immigrants.Second, concerns about the cost of the welfare state are counterbalanced by the waysuch safety nets ease worker-specific adjustments. Third, as international cooperationbecomes more pressing on must-do issues like climate change and security issues,12
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