The last World Trade Organization summit illustrated the inability of governments to reach complete free trade agreements. The increasing number of cases of conflict presented to the Dispute Settlement Body of the WTO, shows that there is still a lot to do in the field of cooperation, and a number of agreements to make. These conflicts (mainly between developed countries, especially the USA and the European Union, or between developed countries and emergent countries) arise in many different sectors such as agriculture, aircraft subsidies, textile, etc. Each conflict was proof that even if there is an official consensus on the benefits of economic liberalism, most countries don't accept free trade. The decision makers have to take into account many factors and interests that determine their policy and it is interesting to analyze the differences between the way the authorities justify their action through economic theories and how economists understand these policies and determine which economic paradigm backs them up.
[...] Policies that are in fact economic nationalism If one reads Keynes' works, one is unlikely to find that he promoted protectionism: Keynes had fought protectionist fold in Europe after the First World War. In the contrary, he favored free trade (with international rules and cooperation) and recommended state intervention through fiscal and monetary stimulus but that did not mean any kind of protectionist measures In fact, we should consider that European and American policies in cases like aircraft or agricultural subsidies should simply be analyzed in the frame of the “economic nationalism” paradigm. [...]
[...] The solution: a real embedded liberalism As a result it seems clear that the governments, in the European Union as well as in the United States, have been implementing (and continue to do so) policies inspired by the economic nationalism. The official speech is one that supports liberalism and free trade, but the reality is different: subsidies, regulatory barriers, etc. are means to limit globalization in order to protect certain interests. But the governments don't tell the truth: claiming that they respect Keynesian precepts, their policy should aim at defending citizens' interests. [...]
[...] It is difficult to deny the benefits of the public support to the development of Airbus in Europe. Without this support, the company would never have developed and the market would be monopolistic, dominated by Boeing and this situation would be far all but Pareto efficient. But this can hardly be applied to the defense of the Western textile industry after the dismantling of the Multifiber Agreement (this old industry did not deserve protection anymore) or the protection of the productive agricultural sectors in the EU and the USA. [...]
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