Free trade: Keep pedaling, or crash?

In need of a tuneup: The bicycle theory of trade liberalization.


Andrew Leonard
January 12, 2007 3:41AM (UTC)

I learned today that there is a "bicycle theory" of trade liberalization. It's very simple: It argues that the world must aggressively keep removing barriers to trade, because, in the absence of progress, there will be backsliding. If you stop pedaling your bicycle, you'll fall over. If you stop concluding new trade agreements, protectionism will bloom. As former United States Trade Representative Robert Zoellick said in 2001, "If the trade liberalization process does not move forward, it will, like a bicycle, be pulled down by the political gravity of special interests."

The "bicycle theory" is understandably quite popular among free traders. The concept appears to have been popularized in the 1970s by C. Fred Bergsten, the founder and director of the Peterson Institute for International Economics, a prominent pro-trade think tank. It's also received support from one of the most formidable academic proponents of free trade, Jagdish Bhagwati, who discusses it in his book "Protectionism."

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I saw a reference to it this morning in John Dingell's Trade Diversion blog, and I immediately went searching for more information. I wanted to see some evidence backing up the theory, because it applies directly to the question of how to think about the current stalled status of the Doha "development round" of WTO trade talks, a subject that has been mulled over in this space on a couple of occasions.

How the World Works subscribes to a mildly contrarian take on Doha, which holds that the current standstill is actually a sign of maturity: The developing world is no longer willing to pliantly sign on to deals that screw it over to the advantage of the developed world. This is undoubtedly an oversimplification, but it seems clear that the E.U. and the U.S. can no longer unilaterally call all the shots. There is a new world order, one that includes multiple loci of power.

From a bicycle theory standpoint, a loss of momentum implies an imminent crash, which means any standstill is a catastrophe. And yet, empirical evidence for such a proposition appears to be slim. The vast majority of references to the theory that I've been able to find so far are on the order of "If you believe in the bicycle theory of trade, as I do, then..." Its popularity seems more to do with its metaphorical power than with its quantifiable verifiability.

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But just how potent is that metaphor, really? In my neck of the woods, the San Francisco Bay Area, we have no shortage of exceedingly skilled cyclists. I have long admired their ability to hover, nearly motionless, while waiting for a red light to change at an intersection, without ever putting a foot on the ground, or collapsing in a heap. I've worked for years to master the skill myself -- it's a matter of making minute adjustments in weight distribution and wheel direction, keeping as still as possible, and refusing to panic. I'm no pro, but I'm getting better.

Proponents of the bicycle theory seem to be encouraging a kind of panic. Keep moving, or disaster will overcome us all! Who cares what kind of trade agreement we cook up, anything is better than nothing!

Again, I'd love to see the evidence. But personally, I don't find the metaphor compelling. Maybe that's because I've always inclined toward a more dialectical appreciation of the to-and-fro of world events. Too much momentum in one direction is just as likely to inspire a counter-reaction as is no momentum. Protectionist feeling surges when people, or nations, feel they are getting a raw deal, not because no deals are being made at all. A bad trade agreement would seem more likely to encourage anti-trade fervor than no trade agreement at all.

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Andrew Leonard

Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21.

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