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• Recognizing that international air transportation accounts for 1-2% of greenhouse gas emissions – one-tenth as much as ground transportation – would help prevent an overemphasis on localizing production that sacrifices important production efficiencies.
• Recognizing that foreign aid accounts for just 1% of the U.S. federal budget – instead of the 30% or so that Americans tend to guess – can helps build support for more cross-border aid.
World 3.0 recounts the track records of numerous companies in adapting – or failing to adapt – to this semi-globalized world, where attention to national differences can still spell the difference between success and failure.
Perhaps most intriguing for USCIB members are Ghemawat’s policy prescriptions. Here he places the emphasis on the importance of more or less unilateral decisions by national governments.
Interestingly, he contends that trade liberalization by itself offers limited prospects for growth. Success in the Doha Round, he says, would lift global GDP by a mere 0.1 percent, and even the complete elimination of trade barriers would raise growth by only 0.5 percent.
In contrast, Ghemawat contends that very rapid increases in integration undertaken unilaterally or by small groups of governments could spur far greater growth. One example, says Ghemewat, is Mexico under NAFTA, where the single biggest benefit of integration with the U.S. and Canada has been to drastically reduce the price-setting power of oligopolies.
Ghemewat says governments can foster integration at both the national and global levels through policies such as improved infrastructure and education. Poor road and port infrastructure in his native India, for example, is a huge constraint on growth, because it limits access to global markets.
Ghemewat criticizes the view that deregulation is the best way to achieve growth. “A hands-off approach to regulation is untenable,” he says. Minimum wage laws, for example, help reduce inequality.
And while popular perceptions of globalization’s impact on unemployment are vastly out of line with reality, Ghemewat stresses the importance of improving the social-safety net for people who are negatively affected. He’s skeptical about trade adjustment assistance laws, and says improved unemployment benefits, access to health care, and education are a better approach.
World 3.0 makes for fascinating reading, and while you may not agree with everything Ghemawat prescribes, he presents a very convincing case that there is still a long, long way to go before the world is truly flat.
Staff contact: Jonathan Huneke
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