Free Trade Today.

• Author: Griswold, Daniel T.

Jagdish Bhagwati Princeton and Oxford: Princeton University Press, 2002, 128 pp.

None of the usual jokes about economists apply to Jagdish Bhagwati. The Columbia University professor is as personable, charming, and provocative in print as he is in person, and all those attributes shine through in his new book, Free Trade Today.

Bhagwati's latest book is based on three lectures he delivered recently at the Stockholm School of Economics. That is the same venue where he gave another series of lectures on trade in the late 1980s that became the book Protectionism, a minor classic in the bibliography of free trade. This new book, Bhagwati tells us in the preface, is "a sequel to Protectionism, an equally short, accessible, wide-ranging work that brings the case for free trade to the skeptics and the critics today."

In the first section of the book, Bhagwati explains why free trade is still the first best policy despite two centuries of theoretical challenges. Economists have known since the 1840s that a nation can improve its welfare, in theory at least, by deviating from free trade. If a nation has enough weight in international markets, it can (in theory) force down global prices with a tariff, extracting more producer and revenue gain from the rest of the world than it gives up in lost efficiency or consumer welfare. Or it can (again, in theory) nurture "infant industries" behind a tariff wall to reap greater productivity gains later. In more recent years, we discovered "strategic trade policy," the idea that a country could (once again, in theory) benefit by protecting a strategic industry that could then bring home monopoly profits in the global marketplace.

Most of the justifications for deviating from free trade fit under the banner of "market failure." Free trade would be fine in an ideal world of perfectly competitive markets, the theorists concede, but we all know that markets are hardly ever perfect, and thus free trade is hardly ever the best policy. Bhagwati spends most of this short but pithy book demonstrating that even in this messy, imperfect world, free trade remains, almost always and everywhere, the best policy.

Despite the frequent shouts of "Market Failure!" in our theater of public policy, Bhagwati makes a persuasive case that trade protection is almost never the right fire hose to reach for. First, market failure may be less of a problem than we think. He credits Chicago School economists for employing the tools of...