Irwin: Global free trade a boon for poor

by AnnMary Mathew | 11/5/03 6:00am

Economics department chair Douglas Irwin focused on the beneficial consequences of opening international trade barriers and discussed "Free Trade Under Fire," a pro-trade book he authored last year, during a lecture in Dartmouth Hall last night.

"History makes a mockery of the claim that that trade can't work for the poor," Irwin said.

Irwin asserted that lower trade barriers create more trade, which ultimately encourages and stimulates economic growth. "The only time-tested method to reduce poverty is economic development." Irwin said.

During the lecture, Irwin examined the parallel cases of growth in the nations of India and China.

China has opened its markets more extensively than India, Irwin said. He then showed a chronological graph of income levels in the two countries, revealing that income levels in China overcame those of India in the 90s, about three decades after China opened its international markets.

In China, poverty rates fell in recent decades from 28 percent to nine percent. In contrast, in India, poverty rates decreased less quickly, moving from 51 percent to 27 percent over the same time span.

Before the lecture, audience members were given a photocopy of a newspaper article entitled "Two Cheers for Sweatshops." Irwin described sweatshops in third-world countries as a "ticket out of poverty."

He noted that foreign-owned textile firm workers in Vietnam earn wages about 50 percent higher than per capita consumption in that country, and that sweatshop workers in general have an average savings rate of 25 percent.

Irwin further observed that in the 1960s, Nike made shoes in Japan before moving operations to Taiwan and then to developing Southeast Asian countries. Each time, the company moved out because wage rates rose and labor became too expensive as the nation developed.

Irwin also addressed the question of whether international free trade increases inequality. He exhibited a frequency chart showing the incomes of workers without regard to national citizenship. Irwin observed that the chart did not change shape as much as it translated to the right, showing a general movement toward higher income.

"The poor are getting richer," Irwin said.

Irwin also examined ways in which the United States could promote trade.

He advocated opening U.S. textile markets to imports and reducing agricultural subsidies.

Irwin also pointed out that, when asked what the U.S could do to repay Pakistan for its help after Sept. 11, the president of Pakistan requested the reduction of trade barriers, specifically those for textiles.

When asked about the possibly excessive cultural influence of international trade, Irwin acknowledged the concern as a valid one but noted that countries must accept some outside influence if they wish reap the benefits of trade.

In addition to his professorship at Dartmouth, Irwin is also a Research Associate at the National Bureau of Economic Research.