The selection of a successor to Robert Zoellick as President of the World Bank was supposed to initiate a new era of open meritocratic competition, breaking the traditional hold that the United States has had on the job. Indeed, Zoellick’s own appointment was widely regarded as “illegitimate” from that perspective. But US President Barack Obama has let the world down even more distressingly with his nomination of Jim Yong Kim for the post.

To begin with, it should have been clear that a most remarkable candidate – Ngozi Okonjo-Iweala – was already at hand. She had impressive credentials: degrees in economics from Harvard and MIT, experience working on a wide variety of development issues as a managing director of the World Bank, and stints as Finance Minister and Foreign Minister of Nigeria. (She also possesses and has amply demonstrated that rarest of qualities: a willingness to fight corruption at the expense of her job.)

Moreover, Okonjo-Iweala is witty, articulate, and no wimp when it comes to taking on shoddy arguments. She is a dream candidate to lead the World Bank.

What, then, does Obama’s choice tell us about the sincerity of his feminist rhetoric? Does he draw the line wherever it suits him? In fact, if Obama and his advisers could not stomach Okonjo-Iweala on the ground that she is not American, surely they could have nominated an American woman who was also vastly superior to Kim for the job.

At least two come to mind: Laura Tyson (my former MIT student), who chaired the President’s Council of Economic Advisers under Bill Clinton, and Lael Brainard, who is both a superb scholar and is now Under Secretary of the Treasury for International Affairs.

Perhaps Obama believed that picking Kim, a Korean-American and public-health specialist who is currently President of Dartmouth College, would advance his immediate security agenda in Seoul (where he arrived immediately after announcing the nomination), as well as America’s medium-term economic agenda in Asia. But one may well ask: Is what is good for the US necessarily good for the world?

In the same vein, American backing for South Korea’s Ban Ki-moon to become United Nations Secretary-General has delivered what the US wants on international economic issues. Whereas Ban’s predecessor, Kofi Annan, was independent enough to endorse efforts to conclude the Doha Round of global trade negotiations, and advance a global compact on immigration (I advised him on both issues), the Obama administration has shied away from these issues. So has Ban.

But perhaps the most compelling factor in Obama’s choice seems to have been a fundamental misunderstanding of what “development” requires. Micro-level policies such as health care, which the Obama administration seems to believe is what “development” policy ought to be, can only go so far. But macro-level policies, such as liberalization of trade and investment, privatization, and so forth, are powerful engines of poverty reduction; indeed, they are among the key components of the reforms that countries like India and China embraced in the mid-1980’s and early 1990’s.

Such reforms turned these countries from stagnation to stellar growth. The anti-reform lobbies reacted by arguing that poverty and inequality had worsened. But new empirical studies show otherwise: growing economies benefit the poor not because wealth “trickles down,” but because growth “pulls up” those at the bottom.

In fact, it is the rapid acceleration of economic growth in the major emerging countries that has reduced poverty, not only directly, through jobs and higher incomes, but also by generating the revenues governments need to undertake the public-health, education, and other programs that sustain poverty reduction – and growth – in the long term. India followed this path. So did Brazil’s former president, Luiz Inácio Lula da Silva – after the reforms undertaken by his predecessor produced the revenues that could then be spent on programs to aid the poor further.

The problem with Kim, and presumably with the Obama administration’s development experts, is that they do not understand that successful development requires big-payoff pro-reform, pro-growth policies, not just small-payoff micro-level policies. Bangladesh has gone down that road, substituting such policies for macro-level reforms, and is developing at a far slower pace than India, where macro-level reforms came first.

Kim is hardly likely to understand this dynamic. A decade ago, he cheered on the tirades against “neoliberal” reforms that, in fact, were the harbingers of higher growth and lower poverty around the world. The World Bank presidency should not be an apprenticeship.

The original article appeared on Project Syndicate.

Sir, In your editorial “The right leader for the World Bank” (March 28) you say that Ngozi Okonjo-Iweala is a hugely preferable candidate to succeed Robert Zoellick, but you nonetheless surrender to Barack Obama’s faux pas in choosing Jim Yong Kim, a healthcare expert, as “inevitable”. Whatever happened to the notion that this time around, we would opt for the “best” candidate? But more can be said.

First, Dr Kim is no more an American than many of us: he was born abroad and is reported to have come here at the age of five. Besides, Americans do not entertain discrimination against foreign-born “intellectual guestworkers”. Dr Okonjo-Iweala has studied with great distinction at Harvard and MIT in economics, has lived in the US for many years, and (I speak from personal experience) she can outwit and outsmart almost any policy economist I know.

Second, how can President Obama bypass an independent-minded African in favour of yet another agreeable Korean – Ban Ki-moon is another one – and keep a straight face?

Third, an administration that prides itself on promoting women is sidelining the most gifted woman candidate for this important job. It makes a mockery of the claims that Mr Obama cares for women whereas Mitt Romney will not.

Finally, and most important of all, the Obama administration mistakenly believes that “development” consists of healthcare, microfinance and other such projects, and not the big high-pay-off “macro-level” policies such as trade. The insidious notion that the former constitutes “development economics” and the latter does not is both wrong and glorifies the less important at the expense of the more important.

The US government has already put an administrator with a background in health in charge of the United States Agency for International Development: Rajiv Shah. At the same time, it has destroyed Doha and encouraged the manufactures fetish and protectionism, which will cost developing countries far more than USAID’s micro projects will benefit them. Dr Okonjo-Iweala will do both “macro” and “micro” projects. But Dr Kim’s healthcare expertise comes with an uncritical embrace of the charges against “neoliberalism”, betraying susceptibility to the anti-reform, anti-growth rhetoric of the 1990s. Caveat emptor.

The original article appeared in Financial Times.

What we need now is a primer on the major misconceptions in the hope that, unlike Gresham’s Law, which says that bad money drives out good money, good economics will drive out bad economics. Four, in particular need to be corrected.

The first misconception is that exports create jobs, while imports do not – a fallacy that the great trade economist Harry Johnson traced to mercantilism, and which the US has resurrected. In fact, in a world where parts and components come from everywhere, interference with imports imperils competitiveness. The success of parcel-delivery companies, for example, depends on imports, which must be brought from the borders inland, as well as on exports.

Second, the credo “Trade, not aid” has given way to the mistaken belief that trade matters less than foreign assistance. The labor constituency, ever fearful of import competition, has undermined trade policy. It has also shifted aid policy in directions that assign priority to areas where the returns to US efforts are relatively minuscule.

Thus, the US State Department has ceased being an advocate of multilateral trade liberalization, despite decades of massive gains from the removal of trade barriers. Instead, its aid arm, the US Agency for International Development, has now retreated into low-yield programs conceived as randomized experiments. That technique impresses Bill Gates, and the new USAID administrator, Rajiv Shah, has experience with it. But, even if all such programs succeeded, their benefits would not add up to a fraction of the documented gains that have accrued from trade and other macro-level policies in which the US has lost interest.

Third, many believe that manufactures deserve preferential support. This is practically the mantra of US President Barack Obama’s administration, and it has cost him the support not only of much of the economics profession, but also of Christina Romer, who chaired his Council of Economic Advisers. In a recent newspaper commentary, she refuted virtually all of the arguments advanced by manufacturing lobbyists for special treatment.

Add to the critiques that of Nobel laureate Robert Solow, a staunch supporter of Obama’s Democratic Party. He agrees that there are activities that yield higher social returns than private returns. The problem, he notes, is that neither he nor anyone else can possibly know which ones they are, whereas the lobbyists claim that they know this precisely.

Proponents of a “manufacturing first” policy argue that “clusters” of businesses are more productive than individual businesses are. But big clustering effects are hard to find. The economists Glenn Ellison and Edward Glaeser have found that clustering is only marginally greater than if businesses are allocated randomly. Besides, it is hard not to accept that, in the economist Frances Cairncross’s famous words, we are increasingly seeing the “death of distance.”

Finally, the financial sector has come to be viewed as the bane of morality. In a world of financial fraud and insider trading, it is easy enough to believe this, and to accept that the financial sector must be taxed. But morality cuts across sectors. There are plenty of honest people in all walks of life, and crooks as well. The quasi-Marxist view that our morality stems from our economic position overlooks the moralizing role of family, religion, culture, and art.

Given these misconceptions, protectionism has re-emerged as a formidable foe. In 1999, when the ministerial meeting of the World Trade Organization erupted into bomb threats and mayhem, I asked then-Director-General Mike Moore whether we ought not to be prepared to die for the great cause of free trade. I should have said: we ought at least to be prepared to live for it.

Between old and new muddle, and the certain prospect that the demolition of each bad idea merely allows others to take root and grow in its place, the task of the free trader is never finished.

The original article appeared on Project Syndicate.

In particular, he decried outsourcing: “We will not go back to an economy weakened by outsourcing.” He also celebrated manufacturers: “Tonight, I want to speak about an economy that’s built to last an economy built on manufacturing.” Both are costly fallacies that deserve no quarter from our leadership. They hurt the US economy; they also guarantee that the US will undermine further the world trading system.

Outsourcing is a bogeyman. The deception that Mr Obama buys into goes back to the populist commentator Lou Dobbs, who denounced the companies that bought components from abroad as Benedict Arnolds – the rogue who became a byword for treachery when he changed sides during the American war for independence.

The fact is that Mr Obama is guilty of promoting at least two wrong but prevalent notions. When companies are denounced for “losing” jobs by outsourcing, the fallacy is one of looking at only primary impacts. When Senator Barbara Boxer blamed her rival Carly Fiorina in the last election for eliminating 30,000 jobs at Hewlett-Packard, the proper response would have been: in this fiercely competitive world, Hewlett-Packard would have lost 100,000 jobs if she had not lost 30,000.

Second, there is already evidence that significant insourcing is occurring in parallel. Indian information giants such as Wipro are increasingly outsourcing to the US. Walk down Madison Avenue and you will find that trade in variety or “trade in similar products” is now important and almost everyone is in each other’s markets. Again, Dell has discovered that outsourcing troubleshooting for its computers does not work well: geographical proximity works a lot better.

But if Mr Obama is wet behind the ears on outsourcing, his surrender to the “manufactures fetish” is a disaster. As Bill Emmott, former editor of The Economist, once remarked: “Unless one can drop a product on one’s foot many believe it is not worth making.” The fallacy goes back to Adam Smith who, in a rare lapse into folly in The Wealth of Nations, condemned as unproductive the labours of “churchmen, lawyers, physicians, men of letters of all kinds, players, buffoons, musicians etc”.

Mr Obama’s surrender stems from at least four errors. First, he has bought into the fallacy, promoted by the economist Michael Spence, that manufactures are declining in the US, but his work suffers from conceptual flaws. Take just one problem: services splinter off from manufacturing even as vertical integration yields to specialisation. Over time, manufacturing yields to services. This gigantic change that is taking place has nothing to do with outsourcing.

Second, the notion that manufacturing is more productive than services is not supported by research. Dale Jorgenson, a leading researcher on productivity, has shown that the most progressive sector is retailing, which has been transformed by IT innovation.

Third, the general disillusionment with the financial sector has been seized on by the manufacturing lobby to argue that therefore manufacturing should be supported. But that is a non-sequitur. The value added in the financial sector is probably a quarter at most of the total services sector. Why not opt for DHL, transport and communications, for example, instead of cement mixers?

Finally, the manufacturing sector in the US is already heavily subsidised. With the exception of New Jersey and New York, which compete for the financial sector, the main competition among US states is for attracting manufacturers through generous tax holidays, free land etc. Again a little-known tax provision, Section 199, gives tax relief for “domestic production activities”, which mostly support manufacturing.

So the campaign for more manufacturing is a boondoggle. Jeff Immelt of General Electric, a splendid businessman and confidant of Mr Obama, has succumbed: who would look a freebie in the eye? Clyde Prestowitz, a Republican who earned Bill Clinton’s plaudits in the 1992 campaign, is now celebrating on his blog that Mr Obama is his new convert. Mr Clinton regained his sanity in a year. This time it is likely to be a long slog.

The original article appeared in Financial Times.

This fear is misplaced. At the outset, we have to distinguish between “need” and “demand.” Yes, many African countries need skills. But they are unable to absorb them, owing to several factors associated with economic backwardness.

In India in the 1950’s and 1960’s – a time when many professionals were emigrating – working conditions were deplorable. Bureaucrats decided whether we could go abroad for conferences. Heads of departments carried inordinate power. So, no surprise, many of us left. We Hindus may believe in an infinity of lifetimes, but we maximize our welfare in this one, just like everyone else.

Besides, simply holding people back, even if feasible, would do little for their countries. The “brain” is not a static concept. Trapped in Kinshasa, under appalling conditions, the brain will drain away in less time than it takes to get to New York.

Moreover, keeping people at home is easier said than done. In many poor countries, except those like India and South Korea, which have now developed superb educational institutions, the brightest citizens receive their education abroad. The challenge, then, is to prevent them from staying there and settling down.

But, in any event, emigration restrictions today would violate a human right enshrined in current international treaties. But would immigration restrictions work instead, as proposed by some developed-country organizations, which worry about the “brain drain”?

Here, human-rights concerns pose serious difficulties. Could we really say to a Ghanaian doctor that she must return to her country while an immigrant Russian doctor is allowed to settle down and start a new life? This is likely to run afoul of anti-discrimination principles and constitutional provisions in countries like the United States.

The proper response to the outflow of skilled manpower from poor countries, especially those in Africa, is to be found in a different direction. Given that outflows of skilled workers cannot be restricted – and, indeed, should not be – we must devise institutional mechanisms to work with it. This means adopting a “diaspora” model, which implies four policy proposals.

First, stop crying over the fact that the diaspora is not returning home. Instead, nurture the loyalty of professionals settling abroad, so that they assist their home countries in a variety of ways. Thus, they may be offered voting rights. Restrictions on investment and land purchases can be dropped. And immigration experts like me have proposed since the 1970’s that schemes be developed to enable the academic diaspora to run workshops aimed at bringing teachers up to the best international standards.

Second, while the diaspora should be integrated through more rights, its members also ought to accept obligations that put them on an equal footing with those who remain behind. I suggested in the 1970’s that a tax be levied on citizens abroad. Known as the “Bhagwati Tax,” it is of course “the American way”: US citizens and permanent residents abroad, like those at home, must pay federal taxes.

Third, because skills are necessary for nearly all activities in most of Africa, here and now, we need to organize ways to supply such skills to these countries. I have long argued that, because many in rich countries are retiring while still in sound health, and because altruism increases with age, we could organize a Grey Peace Corps of senior citizens to share their skills in countries whose own trained professionals prefer to settle abroad.

Finally, foreign aid should be used to expand training massively for Africans in all the essential fields in rich countries like the US, the United Kingdom, France, and the Netherlands. They would add to the diaspora, while the Grey Peace Corps would help to fill current needs. When development has taken off, and conditions have improved sufficiently to attract people back to their homelands, the hugely increased diaspora would indeed return, as they have done in India, South Korea, and China.

Together, these policies would benefit Africa both immediately and in the long run. Sentimental handwringing over the “brain drain,” and foolish attempts at restricting people’s mobility, will not.

The original article appeared on Project Syndicate.

The TPP is being sold in the US to a compliant media and unsuspecting public as evidence of American leadership on trade. But the opposite is true, and it is important that those who care about the global trading system know what is happening. One hopes that this knowledge will trigger what I call the “Dracula effect”: expose that which would prefer to remain hidden to sunlight and it will shrivel up and die.

The TPP is a testament to the ability of US industrial lobbies, Congress, and presidents to obfuscate public policy. It is widely understood today that free-trade agreements (FTAs), whether bilateral or plurilateral (among more than two countries but fewer than all) are built on discrimination. That is why economists typically call them preferential-trade agreements (PTAs). And that is why the US government’s public-relations machine calls what is in fact a discriminatory plurilateral FTA, a “partnership” invoking a false aura of cooperation and cosmopolitanism.

Countries are, in principle, free to join the TPP. Japan and Canada have said they plan to do so. But a closer look reveals that China is not a part of this agenda. The TPP is also a political response to China’s new aggressiveness, built therefore in a spirit of confrontation and containment, not of cooperation.

The US has been establishing a template for its PTAs that includes several items unrelated to trade. So it is no surprise that the TPP template includes numerous agendas unrelated to trade, such as labor standards and restraints on the use of capital-account controls, many of which preclude China’s accession.

From the outset, the TPP’s supposed openness has been wholly misleading. Towards this end, the TPP was negotiated with the weaker countries like Vietnam, Singapore, and New Zealand, which were easily bamboozled into accepting such conditions. Only then were bigger countries like Japan offered membership on a “take it or leave it” basis.

The PR machine then went into overdrive by calling the inclusion of these extraneous conditions as making the TPP a “high-quality” trade agreement for the twenty-first century, when in fact it was a rip-off by several domestic lobbies.

American regionalism closer to home shows the US now trying to promote the Free Trade Agreement of the Americas (FTAA). But its preferred template was to expand the North America Free Trade Agreement (Canada, Mexico, and the US) to the Andean countries and include huge doses of non-trade-related issues, which they swallowed. This was not acceptable to Brazil, the leading force behind the FTAA, which focuses exclusively on trade issues. Brazil’s former President Luiz Lula Inácio da Silva, one of the world’s great trade-union leaders, rejected the inclusion of labor standards in trade treaties and institutions.

The result of US efforts in South America, therefore, has been to fragment the region into two blocs, and the same is likely to happen in Asia. Ever since the US realized that it had chosen the wrong region to be regional with, it has been trying to win a seat at the Asian table. The US finally got it with the TPP, simply because China had become aggressive in asserting its territorial claims in the South China Sea, the South China Sea, and vis-à-vis India and Japan.

Many Asian countries joined the TPP to “keep the US in the region” in the face of Chinese heavy-handedness. They embraced the US in the same way that East Europeans rushed to join NATO and the European Union in the face of the threat, real or imagined, posed by post-Soviet Russia.

America’s design for Asian trade is inspired by the goal of containing China, and the TPP template effectively excludes it, owing to the non-trade-related conditions imposed by US lobbies. The only way that a Chinese merger with the TPP could gain credibility would be to make all non-trade-related provisions optional. Of course, the US lobbies would have none of it.

The original article appeared on Project Syndicate.

India’s shopkeepers today invite a similar, if different, opprobrium. By opposing retail sector reform, they and their political supporters in the BJP, Trianmool Congress and the communists, are not merely sabotaging this important reform. They are also throwing up roadblocks to the deepening and broadening of the post-1991 reforms that is so badly needed today.

But if the UPA government is to overcome the shopkeepers’ opposition, the different issues which have brought diverse groups together against the proposed reform must be distinguished and refuted vigorously by the UPA government’s leaders. What are they?

First, there is the fear that the small ‘mom-and-pop’ retailers, who number in the millions, will be crushed. This is a common fear when restrictions on the expansion of the larger retailers, even when entirely domestically owned, are proposed. When the Japanese restrictions on such expansion were repealed under US pressure, there was a similar fear. But little of what had been feared transpired. Supachai Panitchpakdi, secretary general of UNCTAD, told one of us (Bhagwati) recently that when he had overseen similar Thai reform as deputy prime minister, there had been widespread such fears; again they proved groundless. The same is true of China. What enables the little shopkeepers to survive, even flourish?

In the absence of refrigerators and cars, most Indian customers do their shopping daily and from local stores ‘down the road’ or ‘around the corner’. It is impossible also to establish personal rapport, which many consumers seek, with a Wal-Mart employee, the way one can with the local storekeeper.

Second, the proposed Indian reform additionally raises the traditional bogeyman about foreign direct investment (FDI) because the opening of the large stores is linked to the entry of foreign multi-brand retail giants such as Wal-Mart, Tesco and Carrefour. India today is perhaps the only developing country where the jaundiced view of FDI persists; everywhere else it has been consigned to the dust-bin. In fact, most developing countries today compete to attract FDI.

The anti-FDI attitudes are held particularly by populist NGO leaders whose assertions have little credibility but a big megaphone effect. Quite typical is the articulate Vandana Shiva, who has raised several objections to the reform of the retail sector. Take just one example: “First, the model of FDI in multi-brand retail has completely failed. The failure has been established in the West. Why else do you have the Occupy Wall Street protests?”

Every one of the three statements is false. FDI in multi-brand retail has definitely not failed: the sales by such stores have grown in several developing countries. For example, Wal-Mart and Carrefour made large investments in China in the mid-1990s, and are today prosperous companies that employ thousands of workers, sell in local markets, and procure products to sell overseas. Wal-Mart and Carrefour have also succeeded in Brazil, where they have substantial investments.

With rare exceptions, as with Wal-Mart in Germany, FDI multi-brand stores have flourished in the West as well. Carrefour and Tesco have not failed in the US; Wal-Mart has not failed in the UK.

Again, it takes a heroic imagination to believe that the disparate Occupy Wall Street protesters have FDI multi-brand retailers as their targets. Surely, these retail stores, by bringing cheaper goods into the US, help consumers cope with the stagnant wages at work, an effect that is pro-poor, not pro-rich!

Unlike in the West, we also have to see the major multi-brand retailers, not just from the viewpoint of imports, but also from the perspective of our exports. The evidence is extremely strong that the productivity in agriculture, and attendant prosperity in the countryside, follows the entry of such retailers who can introduce refrigeration, storage and other productivity-enhancing changes that small retailers cannot manage.

Retail reform therefore is a win-win proposition. But the ineptitude of the government lies in not making this case forcefully. It is also surprising that dissidents like Mamata Banerjee were not won over before the launch of the initiative, or that Sonia and Rahul Gandhi were not among the prominent Congress leaders brought in to support the proposal, leaving the prime minister to twist in the wind when the going predictably got tough. If the UPA government was itself plagued by hostility from some and lukewarm support from others within its own leadership, the reform was doomed.

In the end, this debacle points to a lesson larger than itself: a government plagued by absence of shared objectives and strategies to take India forward is unlikely to deliver.

Bhagwati is the university professor of economics and law and Kohli is the Ira Leon Rennert professor of business at Columbia University.

The original article appeared in Times of India.

Indeed, the extravagance of these conferences seems to grow, rather than shrink, as their dismal results become more apparent. COP-15 in Copenhagen lasted 12 days, and is estimated to have attracted 15,000 delegates and 5,000 journalists. The carbon emissions created by so many people flying to Denmark was real, while the emissions targets that the conference sought remained beyond reach. That will be true in Durban as well – and on an even greater scale.

The real problem is that the expectations concerning meaningful action on climate change, as opposed to gimmicks such as US President Barack Obama’s last-minute arrival and minuscule gestures in Copenhagen, are now lower than ever. There are two problems that cannot be wished away.

First, the United States under Obama’s ineffective leadership has drifted yet further into a “What’s in it for me?” attitude on key issues requiring international action. In place of what the economist Charles Kindleberger once called an “altruistic hegemon,” the America that the world now faces is what I call a “selfish hegemon.”

Thus, the US has virtually pulled out of the Doha Round of multilateral trade negotiations, with Obama acquiescing to greedy business lobbies that will not settle unless more of their demands are met. But not only has Obama abandoned Doha; he has also seriously endangered the multilateral trading system by diverting US efforts and resources to discriminatory bilateral trade deals and, most recently, to the Trans-Pacific Partnership, which will principally aid countries that are worried about an aggressive China and seek political security rather than increased trade. The same is true of environmental action: after Australia’s belated ratification of the Kyoto Protocol in 2007, the US remains the only country that has not ratified the agreement.

The second problem is that the sheer weight of the US in international affairs, though diminished nowadays, has nonetheless led to a corruption of the principles that should underpin a new climate-change treaty to succeed the Kyoto Protocol.

For example, unlike the World Trade Organization, whose dispute-settlement mechanism imposes penalties for abandoning negotiated reductions of trade barriers, the targets for emission reductions are not binding and enforceable commitments. The US has not agreed to accept such sanctions for failing to meet emissions targets; but, without penalties, the exercise is largely futile and only encourages cynicism about the effort to combat climate change.

Moreover, abandoning the Kyoto Protocol’s exemption of developing countries from obligations for current emissions, the US has insisted on obligations from China and India that reflect a common form of “taxation” of emissions. But there are persuasive reasons why these countries insist that the obligations must instead reflect per capita emissions, a criterion that would require far greater emission cuts by the US than its leaders now contemplate.

Besides, these countries correctly argue that the tradeoff between action on climate change and poverty reduction is more compelling for them at their level of per capita income, unless they can access newly emerging technologies at low cost. This demand suggests that the US should subsidize the flow of technology to India and China from US firms holding patents, which is highly impractical.

That is where the $100 billion Global Climate Change Fund, promised at the Cancún COP-16 conference, comes in. Unfortunately, even environmental icons like Al Gore in the US are so heavily invested in new green technology that their self-interest is tied up in this fund being spent on developing privately owned new technologies that are protected by patents.

The new “Green Revolution” seeds that the Nobel laureate agronomist Norman Borlaug developed with public money were freely available to all users anywhere. The technology developed by the money spent from the Global Climate Change Fund also should be equally available to all, including India and China, which would then enable them to agree to more emissions cuts.

Indeed, even the contributions to the Fund should have reflected the past damage by the developed countries over the course of a century of carbon emissions – an obligation based on the well-established tort principle that the US has accepted for domestic pollution. But here, too, the US has rejected the idea outright.

Several such sensible ways to design the Kyoto Protocol’s successor treaty have been undermined by efforts to accommodate inappropriate US-led demands and objections, resulting in the impasse that became evident at the COP conferences in Copenhagen and Cancún. Those who do not believe in magic know better than to hope that it will somehow disappear in Durban.

The original article appeared on Project Syndicate.

Evidence of anxiety outside the US has been clear to everyone for almost a year. German Chancellor Angela Merkel and British Prime Minister David Cameron were concerned enough to join with Turkey’s President Abdullah Gül and Indonesia’s President Susilo Bambang Yudhoyono in appointing Peter Sutherland and me as Co-Chairs of a High-Level Trade Experts Group in November 2010. We held a prestigious Panel at Davos with these leaders in January 2011, where, on the occasion of our Interim Report, we gave full-throated support to concluding Doha. But there was no response from the US government.

In September, former British Prime Minister Gordon Brown, former Spanish Prime Minister Felipe González, and former Mexican President Ernesto Zedillo reminded G-20 leaders that in November 2009, at their first meeting in London, they had expressed “a commitment to …conclude the Round in 2010.” And, two weeks ago, the UN met again on the Millennium Development Goals (MDGs). Goal 8 is about instruments such as trade and aid, and MDG 8A commits the UN member nations to “[d]evelop further an open, rule-based, predictable, non-discriminatory trading and financial system.”

But, while practically every country today has embraced preferential Free Trade Agreements, the recent leader in this proliferation is the US. There, Congress and the president apparently have plenty of time to discuss bilateral FTAs with South Korea, Colombia, and Panama, as well as the regional Trans-Pacific Partnership (TPP), but none for negotiating the non-discriminatory Doha Round, which is languishing in its tenth year of talks.

Indeed, it is notable that, while Obama’s State of the Union address in January 2010 at least mentioned Doha, his address in January 2011 did not. Obama confined himself to promoting the pending bilateral agreements with Colombia and other emerging-market countries.

Obama’s regrettable retreat from support for the Doha Round is the result of many factors and fallacies. These were highlighted in an “Open Letter to Obama” that I organized and released, over the signatures of nearly 50 of today’s most influential trade experts worldwide, urging a presidential shift in policy towards Doha.

America’s president is captive to the country’s labor unions, who buy the false narrative that trade with poor countries is increasing the ranks of the poor in the US by driving down wages. In fact, however, there is plenty of evidence for the rival narrative that rapid and deep labor-saving technological change is what is putting pressure on wages, and that imports of cheap labor-intensive goods that US workers consume are actually offsetting that distress.

Again, Washington lobbyists have bought into the absurd claim of trade experts such as Fred Bergsten that the gain from Doha, as it stands now, is a paltry $7 billion or so annually. This ignores the far greater losses that a failed Doha Round would entail, for example, by undermining the World Trade Organization’s credibility as the principal guarantor of rules-based trade, and by leaving trade liberalization entirely to discriminatory liberalization under preferential bilateral agreements. Again, someone needs to tell Obama that imports create jobs, too, and that his emphasis on promoting US exports alone is bad economics.

Most of all, Obama is badly served on trade by his senior colleagues. Secretary of State Hillary Clinton, for example, was opposed to trade liberalization when she ran against Obama for president, and advocated a “pause” in free-trade negotiations. She also misinterpreted the great economist Paul Samuelson as a protectionist, when he said nothing of the kind. She has never recanted.

Likewise, now that Warren Buffett is considered to be Obama’s most trusted economic adviser, it is worth recalling that back in 2003 he produced the astonishing prescription that the best way to reduce the US trade deficit was to allow no more imports than it could finance from its export earnings. An amused and alarmed Samuelson drew my attention to this nutty idea. While Buffett’s prescription of higher taxes for America’s wealthy is entirely desirable, will Obama realize that a genius in one area may be a dunce in another?

What we need today is for the world’s leading statesmen to stop pussyfooting and to unite in nudging Obama towards a successful conclusion of the Doha Round. That alone would provide the counterweight to the forces that pull him in the wrong direction. It is still not too late.

The original article appeared on Project Syndicate.

The notion of international trade in health care may seem strange. The issue may also seem far removed from the current policy preoccupations in Washington.

However, we believe it is finally time trade played a central role in the current debt debate.

One of the basic facts that the congressional super committee must confront is that the debt problem is not excessive current deficits, but rather a problem with the longer term budget.

And the main reason for the large projected deficits well into the future is the growth in health care costs. Public sector programs like Medicare and Medicaid will be increasingly unaffordable.

The health care system must be reformed — no easy task. President Obama and Congress sought to do it last year. But it remains to be seen how much the Affordable Care Act will accomplish, if Congress even allows it to take effect.

With the future uncertain, anything that we can do to contain costs significantly in other ways must be exploited.

National debt: What you need to know

We have a partial solution: medical trade, or allowing Americans to take advantage of different forms of international transactions in medical services.

The fact that medical care of comparable quality is available at much lower prices elsewhere in the world can be used to rein in costs in the United States.

The idea holds remarkable promise. Here’s how it could work.

Patients go overseas for major medical procedures: Modern medical facilities in Thailand, India and other countries would allow patients to have procedures like heart bypass surgery for tens of thousands or even hundreds of thousands of dollars less than in U.S. facilities.

Medicare and Medicaid could allow patients to use such facilities. The savings to these programs could be split between the patient and the government. This might mean tens of thousands of dollars for both, even after covering travel costs.

Buy into other countries’ health care systems: Many retirees have family or emotional ties to other countries. They can be given the option to use their Medicare to buy into the health care systems of Canada, Germany or whatever country they choose.

In effect, the money that the U.S. government would have spent on the beneficiary’s Medicare would instead be paid to another country’s government so that it would provide medical care. The difference in the cost of care, which could run into tens of thousands of dollars a year, would be split between the U.S. government and the beneficiary.

Import doctors: The United States could benefit by making it easier for foreign physicians to practice in the United States. This could be done with greater standardization and transparency in testing procedures.

Foreign doctors would still have to meet U.S. standards, but they could train and test for a license in their home countries.

A greater supply of doctors would reduce physicians’ compensation in the United States — and bring it closer to the levels in other wealthy countries.

This would also ease the other problem with last year’s health reform law: While it brings almost all people into insurance coverage, it doesn’t do enough to ensure that those people will find medical personnel who will treat them!

Medical trade where we “export” patients and “import” doctors — just two ways of exploiting medical trade — may seem a strange way to fix the U.S. health care system.

But it is clearly an important avenue that has so far not been taken seriously.

We are used to the notion that competition generated by trade helps consumers and disciplines producers. For example, Japanese competition led to lower car prices and better quality, although people can differ on how they view its impact in lowering wages for domestic auto workers.

International competition can have the same effect on the health care industry. It offers a route around the political power of the health care industry that may succeed in making health care in the United States affordable. 

Dean Baker is co-director of the Center for Economic and Policy Research. Jagdish Bhagwati is University Professor of Economics and Law at Columbia University.