*The Great Convergence*

The author is Richard Baldwin and the subtitle is Information Technology and the New Globalization.  The new globalization is the vertical geographic spread of the supply chain, as enabled by information technology.  Think iPhone, the components of which are made in a number of different countries.  (By the way, here is a very good Adam Minter piece on why an American-made iPhone would be very difficult to pull off.)  The important form of trade today is data flows, which enable the export of “how to” knowledge to an unprecedented degree.  Here is one excerpt:

Since so much globalization policy was crafted with the Old Globalization in mind, much of the policy response is misshaped or at least suboptimal.  To take a couple of obvious examples, economic institutions like labor unions tend to be organized by sectors and skill groups since that was the level at which the Old Globalization affected economies.  And national education strategies typically seek to train children for promising jobs in promising sectors since the Old Globalization cut a predictable path that defined sunrise and sunset sectors.  Likewise, governments around the world seek to dampen the pain of structural adjustment with policies linked to declines in particular sectors of particular geographic areas (often those that had specialized in sunset sectors).  Most of these policies are inappropriate for today’s globalization, which is more sudden in its impact, more individual in its effects, more uncontrollable for governments, and more unpredictable overall.

Ultimately, there can be no magic solutions to the changed nature of globalization.  The New Globalization makes life harder for governments.  But the intrinsic difficulty is multiplied by the fact that many governments and analysts are using the Old Globalization’s mental model to understand the New Globalization’s effects.

For Baldwin, the case against TPP, from a U.S. point of view, rests on the possibility that it would ease knowledge transfer abroad and thus erode American competitive advantages.  This focus on data flows, by the way, means that most traditional trade statistics are misleading if not outright wrong.  There is much in this book to ponder.


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