Dani Rodrik offers some criticisms of my piece on free trade in rice:
Cowen argues that freer trade in food commodities such as rice would boost global supplies and help reduce prices. He is probably right about the first, but not about the second.
I'll put the rest under the fold...
The main point of my piece is that inter- and intra-national
restrictions on trade in rice are bad, not that free trade reduces
the price of rice for everyone. Consider a simple analogy: if the quality of
Interstate 95 declined, the price of barbecue in North Carolina might
fall, namely because people like me wouldn’t drive to go eat there. Yet few
people would argue that a nation can do better feeding itself by
lowering the quality of its roads or for that matter littering its
harbor with dangerous rocks or for that matter imposing export restrictions. It doesn’t knock down the trade argument, as an empirical claim, to cite the existence of pecuniary externalities.
Maybe Rodrik has in mind the commonly-heard argument that eliminating the agricultural subsidies of rich countries would produce vast benefits for poor countries. I’ve criticized that claim myself; my column is careful to argue that the poor countries are the worst protectionists, often internally as well as externally.
Here is a related part of Rodrik’s critique:
Freer trade would reduce prices of food (relative to other prices) only
in countries that are food importers. Food exporters would experience
a rise in the relative price of food, and there is simply no way of
escaping that reality.
The great strength of Rodrik’s work is how much he stresses the
context-dependent nature of economic arguments and how "one size fits
all" is often an oversimplification. So beware when anyone writes "there is simply no way of
escaping that reality." Increasing returns are one way of escaping that reality. Would the price of cars be lower in Japan today, if the Japanese had placed heavy export restrictions on Toyota autos? Probably not. (Constant returns, by the way, are another means of escaping from that reality.) Now rice production may or may not be subject to increasing returns, but surely rice trade is a positive-sum game and also has broadly pro-egalitarian effects.
Trade really is an issue where a) economists have something to say and b) human lives are on the line. If Rodrik wishes to argue, "Indonesia should ban the export of rice," then by all means he should just come right out and say so. Let’s have that debate. But if not, I wonder if he could see his way toward using his considerable influence and writing eight simple words:
"The world should have free trade in rice."