European Journal of Interdisciplinary Studies From International Trade to Firm Internationalization Stela Crina DIMA dm_stela@yahoo.com Abstract This paper aims to investigate the evolution of economic theories that explain firms’ internationalization and the development of foreign direct investments. Arguments are intended to show that theoretical approaches in this field are rooted in the period of classical theories of the international trade. Theoretic fundamentals regarding the internationalization of the firm comprise of the literature review, mentioning the main theoretical trends based of which present understanding on transnational companies is formulated. Conclusions show that as the complexity of larger companies’ activity increases, the need for a new theoretical development to explain the relationships among different economic actors appears. Also, the evolution of the economic theories shows that a single theory cannot explain by itself the complexity of the present and especially of the future economic environment. Keywords: theories of international trade, theories of foreign direct investment, theories of firm internationalization JEL Classification: F10, F20 Introduction Literature’s development on the transnational companies starts from the theories of international trade, where from, in time, theories on foreign direct investments (FDI) and theories on firm internationalization, two interdependent aspects, came apart. Towards the last half of the century, neither the theories of international trade, nor those of foreign direct investments have been sufficient to describe the movements of the merchandise, services and financial flows of large companies. Theories of firm internationalization became more and more parts of international trade theories, a good example in this respect being the theory of competitive advantages that integrates both macroeconomic (the role of the production factors, the demand) and microeconomic approaches (competitors). Firm’s internationalization was explained by many theorists (Penrose, 1968; Caves, 1969; Kindleberger, 1971; Hymer, 1976; Dunning, 1980, quoted in Morgan and Katsikeas, 1997) by relating it to the competitive mechanism and firm’s behaviour in the circumstances of this mechanism. 1. Theories of International Trade Classical theories of international trade, although not considering firm’s earnings from free trade, but nation’s earnings, constituted a theoretic key start point in the explanation of the internationalisation’s rationales. Advantages offered by specialization, explained by the theories of absolute advantage (Adam Smith, 1776) and of comparative advantage (David Ricardo, 1817), and later by the theory of factor endowments, have been taken and adapted for the level of the firm. The theory of absolute advantage brought to the attention for the first time the possibility 59 Volume 2 ♦ Issue 2 ♦ December 2010 for a country to produce cheaper a given product than another country. In this case, countries’ specialization in the production of goods with smaller costs and the trade of the production surplus was beneficial for both countries. Although it represented a major step in demonstrating the benefits of specialization, Adam Smith’s theory could not offer the same perspectives for the countries that did not poses an absolute advantage for any category of products. From this situation, David Ricardo demonstrated that specialization is possible and beneficial even when a country doesn’t poses and absolute advantage in the production of any good. Resources’ allocation toward those goods that can be obtained cheaper than others and their export can bring benefits to both countries. This was a major demonstration that fundament the theories developed later, regardless of the fact that they confirmed, enriched or contradicted the hypotheses of the comparative advantages theory. At the beginning of the 20th century, two Swedish researchers Ohlin and Hecksher argue that the difference between countries is given by the production factors, and the products are different because of the production factors incorporated. According to the model (Ohlin – Hecksher factor proportion theory), a country holds a comparative advantage and thus will export the product that incorporates the abundant production factors in the respective country. Thus, the more abundant a production factor is, the cheaper it becomes. So, the difference in the production factors is given by the difference in their prices, generating the competitive advantage. Technological developments in the ’60-ies and the substantially ample development of multinationals lead the specialists to look for new theoretical fundamentals that explain the complex evolutions of the international trade. The product life cycle theory developed by Vernon in the ’60-ies proved to be a good frame of reference for explaining and predicting patterns of international trade, but of multinational companies as well. This can be considered the theory that unifies the development of multinational companies, showing without a doubt that trade flows are linked to the international trade (Morgan and Katsikeas, 1997, p. 69). The life cycle theory suggests that a trade cycle begins when a product is made by the mother company, then by its subsidiaries, and then by any other company anywhere in the world, where the production costs are the lowest possible. At the same time, the theory explains how a country that initially appears as an exporter of the products can end as an importer, when the product reaches the last stage of its life cycle. The essence of this theory is influenced by the technological innovations and market expansion. Technology is the main factor in the development and creation of new products, whereas the size and the structure of the market are generated by the expansion and the type of internationalization adopted by the firm. The new theory of international trade developed by Krugman in the ’70-ies constitutes a critique brought to the classical theories of international trade based on free trade. The supporters of this new theory questioned the positive effects of free trade in the case of infantile industries. An important argument of the new theory is represented by the fact that, using protectionist measures to sustain certain industries for a given period of time, conditions for those industries to become leaders on national and international markets can be created. A good exemplification of this theory is that of the Asian countries like South Korea and Japan, that sustained the representative companies from specific industries to penetrate the international markets and afterwards they became leaders of international level (for instance, the case of Samsung). 60 European Journal of Interdisciplinary Studies Of much interest is the new theory of competitive advantages launched in the last decade of the last century by Michael Porter in his book “The Competitive Advantage of Nations”. Porter’s diamond, as the fundamental elements of the theory were called, represents an economic model that explains why some industries become competitive in certain situations. The diamond has four constitutive elements, plus two factors of influence: production factors, demand, support industries, firm structure and competition at branch level, governmental regulations and the chance. The theory of competitive advantages considers those six elements interact one with each other, allowing the creation of those combinations to enhance competitiveness’ increase. The development of transnational companies from certain countries and industries verify some applications from Michael Porter’s theory. In media, for instance, American firms have a higher level of competitiveness. The come from a market where advanced production factors are very well emphasized, meet a sophisticated demand from buyers with strong purchasing power and requirements, where upstream and downstream industries function without problems, and the competition within the industry is extremely high. Apart from the theories of the international trade, firm’s development was explained by a series of other theories that showed the reasons that could determine a company to expand, not only within the national borders, but also beyond them. The theories of the international trade have failed to explain why firms choose a specific location instead of another, why they prefer the production abroad and not the export towards another country. On the background of the expansion of large firms and the theoretical approaches to analyze market imperfections, a category of theories trying to extend the limits of the international trade theories and to explain foreign direct investments have emerged. 2. Theories of Foreign Direct Investments Market imperfections represent, according to some specialists (Hymer, 1970; Kindleberger,1971, Caves 1969, quoted in Morgan and Katsikeas, 1997) the main factor that determined firm’s internationalization. According to Hymer, market imperfections are of structural nature and come from the deviation from the perfect competition on the final product’s market, as a consequence of an exclusive and permanent control of property rights on technology, access to resources, scale economies, distribution system and product differentiation. Profits decrease, due to competition increase, may lead to the reduction in the number of companies, by mergers and acquisitions, as a way to counteract competition effects (Pitelis and Sugden, 2000). Firms are permanently looking for market opportunities raised by these imperfections in the endowment with production factors and in the production of goods, their decision to invest abroad being considered a strategy to capitalize on the advantages competitors do not poses on those markets. The theory of international production suggests that the ability of a firm to produce abroad depends on the particular attraction of the country of origin in relation to the advantages offered by other markets. The additional element brought by this theory is the identification of multiple factors’ importance in the decision to externalize the production of a company and to proceed with foreign direct investment. Not only the endowment with production factors and their productivity make a company to invest beyond the 61 Volume 2 ♦ Issue 2 ♦ December 2010 borders of its own country, but also the governmental actions that transforms into an attraction factor for investors. Strongly connected to the international production theory was developed the theory of internalization, that introduces the idea that firms wish to create their own internal market to outrun the borders of their country of origin. The internalization implies a form of vertical integration, that includes activities once performed by intermediaries (Morgan and Katsikeas, 1997, p. 70). Location theory - initiated by the German school starting with Johann Heinrich von Thünen at the beginning of the 19th century - , is linked to the geographical location of the economic activity (Crosier, 2001). The base of this theory is given by the answers to the following questions: what economic activity needs to be located, where to and why is that? Thus, as spaces and local and national economic environments open to the global economy, it becomes more obvious that large corporations are the coordinating units of the current economic relations, much more than national economies. And, once with the opening of the national economies, it proves to be possible and advantageous for a corporation to benefit of the existent differences between regions and cities in terms of salary levels, market potential, employment regulations, taxation, environmental regulations, local infrastructural facilities and human resources. Thus, firms will choose locations that will maximize their profits, and consumers will choose those locations that will maximize their utility. Although the location theory does not provide criteria to determine a firm to choose the best locations, it can provide details on the ways companies internationalize, at global level, based on the elements associated to the location: tax level, technological transfer’s requirement, political risk, unions’ power, attitude towards foreign companies etc. Demand structure hypothesis, that starts from the classical economic theories (initiated by the one that used the terms demand and supply for the first time - James DenhamSteuart1) and continues with the post-Keynesian approaches of Hicks or Phillips, considers that a similar structure demand existing in two countries will favour the commercial flows between those countries. To exemplify, at the level of the transnational companies, the heading of their investments shows an attraction to those countries with a demand structure similar to that of their home country, rather than to countries with a different demand structure. Trade flows between developed countries dominate the international trade, as foreign direct investments from developed countries target mainly developed countries as well. Transaction costs theory, developed by Ronald Coase in 1937 and afterwards by McManus in 1972, Buckley and Casson in 1976, Brown in 1976 and Hennart in 1977 brought in the discussion the differences between the transactions within the company and those outside the company. Coase argues that although the transactions outside the company cannot be necessarily controlled by the company, those within the company are performed according to company’s interest. Extrapolating this behaviour of the firm, the development of the transnational companies allows the manipulation of the transactions within the company, so as to lower losses. Thus, the concept of the internalisation of the international trade associated with the transnational companies and the way they utilize transfer prices between subsidiaries to maximize profits emerged. 1 In 1767, James Denham-Steuart published Inquiry into the Principles of Political Oeconomy. Actually, this represented the first book on economics published in the world. 62 European Journal of Interdisciplinary Studies An extension of the costs theory was represented by the eclectic theory. The reasons for which transnational companies make foreign direct investments, according to the eclectic theory developed by John Dunning in the ’80-ies do not consider only the structure of the firm, but also some advantages raised by ownership (brand - if owned by the company, managerial capabilities), location (availability of raw materials, salary level, tax level) and the international environment (the advantages of licensing and joint ventures). Known also as the OLI Model (Ownership, Location, Internationalisation), the theory tries to explain the reasons and the motivational power of foreign investments and the way in which resource allocation and the organisational structure of the firm are interconnected. The theory allows the analysis of market advantages, both at the level of firm’s needs and from the perspective of the international environment. Also, with the use of OLI theory one can make a prediction of the areas (countries or regions) where the probability for firms to invest is the highest (Dunning, 1993). Firm-specific advantages (ownership) can be easily transferred in the case of internationalisation, comprising of technology, brand etc. They can generate a higher profit or can contribute to the decrease of the production cost at global level. Unlike a firm that activates in the home market, the one present at international level is confronted with additional costs due to the differences in the legislative environment, the knowledge regarding the external market, the communication costs and the operation at larger distances. Thus, to reduce these costs there must be another advantage for the internationalized firm as opposed to the local firms. These advantages, leveraged by internationalization, translate into abilities raised by the monopoly position (patents, ownership rights for rare resources), technology (innovation and research within the firm that can be easily exported to foreign subsidiaries) or firm’s size (financing is more available, specialisation is more profitable). The advantages that derive from location are, in fact, accessible to everyone. Natural resources, the workforce, the capital, the technology, or the organisational and information systems are available to all competitors. They are exploited and transformed into advantage if their use generates profit and superiority in competing. Location – specific advantages are generated by economic factors (the quality and quantity of the production factor, telecommunications and infrastructure costs, objectives and size of the market), political factors (incentives for foreign direct investments), social and cultural factors (language spoken, cultural diversity, and attitude towards foreign investors). Advantages of internationalization appear when the export costs are much higher than the costs generated by the establishment of a subsidiary. The internationalization is generated by the perception a company has, both internally and externally, regarding the comparison of benefits resulted from the internationalization in relation to the costs it implies. 3. Theories of Firm Internationalization The movement to internationalization, as theoretical approach, was needed due to the fact the more and more theorists noticed that the performances in the field of the international trade cannot be explained only by referring to macro-economic phenomena. Firms’ role is very important and it influences the commercial performances of the nations. As opposed to the theories of the international trade and foreign direct investments, the theories of firm internationalization explain how and why a firm engages in foreign activities and how the dynamics of the nature of this behaviour can be conceptualized. 63 Volume 2 ♦ Issue 2 ♦ December 2010 The internationalization can be described as a movement of firm’s operations beyond the borders of the home country, a process of the increase of firm’s implication in complex operations outside national borders. This acceptance of the internationalization process allows the analysis of the multiple activities performed by firms abroad, which are of extreme complexity: from licensing, to franchising, to joint ventures or mergers and acquisitions. The theory of firm internationalization allowed the broadening of new horizons for the analysis of the corporative phenomenon: management, marketing, finances or human resources. If at macro-economic level, between the firms that perform activities at international level distinctions are not made, at micro-economic level, management and marketing strategies identify particularities specific to each internationalisation level. Firm internationalization theories analyze the factors that generate the advance firms win in the process of internationalization, the stages firms cover in the process of internationalization, and the elements that define the internationalization behaviour of firms. A model for firm internationalization is represented by the Uppsala Model, developed by the Swedish researchers (Blomstermo and DeoSharma, 2003). They consider that the internationalization process is an evolutionary and sequential one, which develops as the firm becomes more and more involved on the international market. According to the approach of the Swedish theorists, firms enter foreign markets in a gradual way, in accordance to the level of knowledge and the information accumulated about the destination market. Firms gain knowledge and experience from their activity on the internal market, and, at a certain point, turn to external markets. The external markets have different degrees of attractiveness, in accordance to the geographical and cultural proximity to the home country. The Uppsala Model considers that the firms starts the approach of the international markets with the usage of the traditional export methods to countries closer from the perspective of geographical and cultural proximity, gradually developing complex ways to operate, at firm level, at destination country level, and towards geographical and cultural more distant countries. There can be distinguished four such methods for market penetration: irregular export, export through an agent, subsidiary and production. The lack of information and knowledge about the international markets represents a major obstacle in the way of internationalization, but this can be overcome by researching the peculiarities of the target markets. The decisions regarding the investment arrangements are made as the degree of non-information decreases. The more the firm knows about a foreign market, the perceived risk is lower. As consequence, the level of investments increases. The level of knowledge about the new market directly influences firm’s involvement, generating a certain degree of involvement towards the external market. Innovation-related internationalization taxonomies examines the way in which firms progress in the process of internationalization and suggest that this process is a sequence of stages with stagnation periods, influenced by the degree of involvement in the global economy. Over these static periods, firms accumulate the needed resources to reply to the challenges launched by the international environment and to pass to the next level (Morgan and Katsikeas, 1997). Innovation allows firms to obtain new products with superior features and to decrease costs by developing new production processes and production technologies etc. In this way, using innovation, firms obtain advantages that allow them to be competitive in international environments distinct from that of the home country. The higher the level of 64 European Journal of Interdisciplinary Studies innovation absorption is, the competitive ability increases and firma expand on markets even more different than the origin market (Stoian and Zaharia, 2009). The synthesis of the main theories that lead from the international trade to the internationalization of large firms is presented in Table 1 below. Table no. 1. Main theoretical approaches that lead to the explanation of the development of transnational companies Theories Absolute advantage theory Comparative advantage theory Factor proportion theory Product life cycle theory New theory of international trade Competitive advantage theory Market imperfections theory International production theories: Demand structure theory Location theory Eclectic theory Internalization theory - Transaction costs theory Uppsala Model Innovation-related Emphasis International trade theories Countries win if they specialize in the production of goods for which they hold an absolute cost advantage. Countries win if they specialize in the production of goods for which they hold a comparative cost advantage. Countries tend to specialize in the production of those goods that intensively use the most abundant production factors. Different stages: production and export to a foreign country, external production, external production for export, product import from abroad. Utilizing protectionist measures to develop an important industrial base in some industries allows these industries to dominate the global market. Advantages are given not by the endowment with production factors, but by the availability of advanced production factors and the degree of competitiveness of an economy. Foreign direct investment theories Market imperfections are structural and come from the deviations from the perfect competition on the market of the final product, as a consequence of an exclusivist and permanent control on the rights of property on technology, access to resources, scale economies, distribution system and product differentiation. - Investments direction shows a higher attraction to the countries with a similar demand structure to that in the country of origin, in relation to countries with a different demand structure - What economic activity needs to be located, where and why? - The reasons for localization are linked to several advantages generated by ownership, firm’s location and the international environment The development of transnational companies allows the manipulation of the transactions within the firm, so as to minimize losses Internationalization theories of the firm Firms penetrate foreign markets in a gradual way, in accordance to the level of knowledge and information they accumulate about the destination market The internationalization process is a stepwise Credited writers Adam Smith, 1776 Ricardo, 1817 Hecksher and Ohlin, 1933 Vernon, 1966 Krugman, 1970 Porter, 1990 Hymer, 1970 Hicks, 1939 Phillips, 1958 Weber, 1929 Dunning, 1980 Ronald Coase, 1937 Buckley and Casson, 1976, 1985 Johanson and Wiedersheim-Paul, 1975 Bilkey and Tesar, 65 Volume 2 ♦ Issue 2 ♦ December 2010 internationalization taxonomies process, with stagnation periods, over which firms utilize innovation to respond to the challenges launched by the international environment and to move to the next level. 1977, Cavusgil, 1980, Czinkota, 1982, Lim, 1991, Rao and Naidu, 1992 Source: Prepared by the author after Morgan and Katsikeas, 1997, p.70 Conclusions Classical theories of the international trade lead to the idea that the fundament of the international trade is given by the differences that exist in production and in the endowment with resources. In general, they tried to explain how and why the trade between two countries develops and what earnings could be obtained as a result of specialization. The removal of monopoly and the emergence of an increasing number of firms lead to the development of the theories on the international trade which, this time, made clear reference to certain industries, or to certain companies. More than that, some theoretical approaches of the international trade set the theoretical base for firm internationalization theories. On the background of the expansion of large firms and of the theoretical approaches that have analyzed market imperfections, a new category of theories has emerged that tried to expand the limits of the theories on the international trade and to explain foreign direct investments. The move to internationalization as a theoretical approach was needed due to the fact that more theorists noticed the performances in the field of the international trade cannot be explained only in relation to the macro-economic phenomena. Firms’ role is very important and influences the commercial performances of nations. As opposed to the theories of the international trade and foreign direct investments, the theories of firm internationalization explain how and why a firm engages in foreign activities and how the dynamics of the nature of this behaviour can be conceptualized. It is obvious that as the complexity of large firms’ activity increases, the need for new theoretical development capable to explain the relationships between different economic actors appears. Also, from the evolution of the economic theories it results that a single theory is unable to explain the complexity of the present and future economic environment. References [1]. Blomstermo, A., Deo Sharma, D. (2003): “Learning in the Internationalization Process of Firms”, http://books.google.com/books?id=e_gkLdF1ocwC&printsec=frontcover#v=onepage&q=&f=false [2]. Crosier, S., von Thünen, J.H., (2001): “Balancing Land-Use Allocation with Transport Cost”, http://www.csiss.org/classics/content/9 [3]. Dunning, J. H. (1993): “Multinational Entreprise and the Global Economy”, Edison- Wesley Publishing Company, Wokingham, England. [4]. Morgan, R.E. and Katsikeas, C.S. (1997): “Theories of International Trade, Foreign Direct Investment and Firm Internationalization: a Critique”, MCB University Press, http://www.standrews.ac.uk/business/distance/Economics/Reading/Critique_trade_theories.pdf [5]. Pitelis, C. and Sugden, R. (editors) (2000): “The Nature of the Transnational Firm”, http://books.google.com/books?id=mXjeiQYR088C&printsec=frontcover#v=onepage&q=&f=false [6]. Stoian, C. and Zaharia, R.M. (2009): “Corporate social responsibility in Romania: trends, drivers, challenges and opportunities”, International Journal of Economics and Business Research, 1(4), pp. 422 – 437. 66 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Article Trade, globalization and uneven development: Entanglements of geographical political economy Progress in Human Geography 36(1) 44–71 ª The Author(s) 2012 Reprints and permission: sagepub.co.uk/journalsPermissions.nav 10.1177/0309132511407953 phg.sagepub.com Eric Sheppard University of Minnesota, USA Abstract Mainstream geographical economics propagates the free trade doctrine, presenting capitalism as entailing, but capable of overcoming, uneven geographical development. Geographers have failed to engage with the international trade theories that rationalize this, or develop alternatives. Beginning with the entanglements through which trade happens, I examine how theories rationalizing the free trade doctrine isolate trade, mobilizing a narrow sociospatial ontology. Marxisant trade theories offer important critiques, but are similarly marred by limited sociospatial ontologies. By contrast, attending to the entanglements of trade, geographical political economy can decenter the free trade doctrine, creating space for taking seriously alternative trading imaginaries and practices. Keywords free trade doctrine, geographical economics, international trade, political economy, uneven development I Introduction Comparative advantage is the best example of an economic principle that is undeniably true but not obvious to intelligent people. (Samuelson, 1969) In a word, the free trade system hastens the social revolution. It is in this revolutionary sense alone, gentlemen, that I vote in favor of free trade. (Marx, 1848) Since the mid-18th century practically every self-styled economist or political economist of global repute has found it important to examine the free trade doctrine (the claim that unrestricted international trade is beneficial, in principle, for all participants). Samuelson’s view has trumped that of Marx, as is evident in geographical economics (economics’ ‘new economic geography’). Thus Richard Baldwin utilizes Paul Krugman’s theory of geography, trade and development to conclude that a historical downward trend in transportation costs accounts for both the historical polarization in economic well-being between north and south, and its current putative (re)convergence. In this narrative, prior to the 17th and 18th centuries high transport costs prevented global divisions of labor. Between 1846 and 1914, ‘globalization 1’ lowered transportation costs to the point where a geographical specialization of manufacturing, in the first world, was the stable global equilibrium outcome: ‘as history would have it, the North won at the South’s expense’ (Baldwin, Corresponding author: Department of Geography, University of Minnesota, 414 Social Sciences Building, 267 19th Avenue South, Minneapolis, MN 55455, USA Email: shepp001@umn.edu Sheppard 2006: 13).1 After a ‘counter-globalization’ interregnum between 1929 and 1945, ‘globalization 2’ has further lowered communications costs to the point where a geographical specialization of manufacturing is no longer the equilibrium outcome. This is why, he argues, we are currently experiencing the (re)industrialization of the global South – toward the new equilibrium. The 2009 World Development Report makes essentially the same argument: that all territories follow a common Kuznetsian path of economic development (Kuznets, 1955, 1966; World Bank, 2008): Sociospatial inequality initially increases under capitalism, only to reconverge toward sociospatial equity as development proceeds. Key to this are free trade, falling transportation costs, and eliminating spatial bias in state policy. Geographers have had remarkably little to say about global trade, however. Beyond being a gap in the literature, this aversion is complicit in reproducing the hegemonic discourse that free trade can overcome uneven geographical development. Mainstream international trade theory rationalizes an account of globalizing capitalism’s capacity to make prosperity ubiquitous that few economic geographers endorse: geographers generally assert that neoliberalization exacerbates uneven geographical development. It is thus remarkable that Anglophone economic geographers, who have invested much into studying other vectors of economic globalization, have had so little to say about the quintessentially geographical processes of international trade. In a 1986 survey, James McConnell already lamented ‘how puzzling it seems that so little attention has been given by geographers to this important topic’, although ‘we can be somewhat optimistic about the attention geographers are likely to give to international trade’ (McConnell, 1986: 477, 481). By 1994, Richard Grant was able to document increased attention, although ‘few have been able to specify an overall theory and framework for geographical inquiry’ (Grant, 1994: 299, seeking to articulate such a theory himself). Yet, 45 a current survey still finds international trade to be a ‘relatively unexplored topic by economic geographers’ (Andresen, 2010: 94). Using the ‘broadest definition of international trade’ Grant (1994: 299) counted some 50 articles by geographers between 1980 and 1994; Andresen lists 19 further articles since. The ISI citation database includes 27 geography articles between 1986 and 1994 whose title, abstract, bibliography or keywords contain the string ‘international trade’, growing to 151 between 1995 and 2009 (tripling from three annually, on average, to ten). Temporal trends in citation counts are inevitably plagued by the shifting scope of and detail contained within the ISI database, making ratios a more reliable measure of influence. Comparing numbers of articles published containing ‘international trade’ in economics and geography journals, on average economists have published 95% of the total. Indeed, during the very period when trade economists, following Krugman (1991), took to including ‘geography’ in their analysis, the ratio of geography to economics articles fell (Figure 1). Examining this geographical literature of the last two decades, four publication clusters dominate: (1) those who take up various propositions emanating from mainstream international trade theory, seeking to determine whether a consideration of geography complicates or confirms these propositions (e.g. Hanink, 1988, 1991; Hanink and Cromley, 2005); (2) those who have followed Johnston’s (1976) lead in seeking to trace geographical patterns of trade and their relation to broader geopolitical trends (e.g. Gaile and Grant, 1989; Gibb and Michalak, 1996; Grant, 1993; Michalak and Gibb, 1997; O’Loughlin, 1993; Poon, 1997; Poon and Pandit, 1996; Poon et al., 2000; Shin, 2002); (3) those who shift the resolution of trade analysis from nation states to subnational localities, seeking to determine how subnational geographies articulate with international trade (e.g. Andresen, 2009; Baldwin and Brown, 2004; 46 Progress in Human Geography 36(1) Figure 1. Articles containing ‘international trade’ Source: ISI-Thompson database Boschma and Iammarino, 2009; Breau, 2007; Erickson and Hayward, 1992; Hayter, 1992; McConnell, 1997; Rigby and Breau, 2008; Storper, 1992); and (4) those who discuss international trade without addressing mainstream trade theory at all (e.g. Coe and Yeung, 2001; Hughes, 2006). These are small literatures when compared to the efflorescence of conceptual case studies examining various aspects of the international movement of commodities that never discuss trade theory. These range from analyses of commodity chains (e.g. Cook et al., 2004), to fair trade and alternative food networks (e.g. Whatmore and Thorne, 1997), Sheppard and foreign direct investment and global production networks (Coe et al., 2004; Hess and Yeung, 2006; Liu and Dicken, 2006). Trade theorists no doubt regard such case studies as offering interesting local color, of little relevance to their core theoretical propositions (cf. Overman, 2004). What accounts for geographers’ strange silence on the theories and discourses of international trade? No doubt it partly reflects a desire to avoid becoming sucked into the strange attractor created by trade theory. Theories justifying the free trade doctrine have been subject to almost two centuries of criticism, inside and outside economics, criticism that is absorbed as cautionary tales, exceptions that prove the rule, without undermining the consensus surrounding the doctrine (Irwin, 1996; McGovern, 1994; Sheppard, 2005). As Amin and Thrift (2000: 8) argue, ‘we need to think seriously about whom we as economic geographers want to play out with’. Second, the relentlessly mathematical and statistical nature of the literature on international trade is a source of discomfort, given a (mistaken, in my view) tendency to see quantification as incompatible with critical theory. A third, obvious criticism is that the empirical data available for analyzing international trade are plagued by the deep problem of all ‘state-istics’: methodological nationalism (Agnew, 1994; Brenner, 2004; Taylor, 1996). There is a cost, however, to avoiding engaging with mainstream international trade theory, particularly now that it is integrated into a geographical economics that has gained unprecedented attention for ‘economic geography’ among global policy-making elites (Brakman et al., 2009; Fujita et al., 1999). No matter how quixotic it may seem to challenge mainstream trade theory, our collective failure to do so unintentionally reproduces its hegemony. In this paper, I take steps toward a geographical theorization of global trade that makes possible very different conclusions about trade, globalization and uneven development than those offered in 47 mainstream economics. My argument proceeds in four stages. First, I tease out the many entanglements of trade, which mainstream trade theory slices through in order to draw its conclusions. Second, I summarize the genealogy of the mainstream theory, identifying its ‘hard-core’ propositions and limited sociospatial ontology, and discussing how geography has entered into this scholarship during the past two decades (and its implications). Third, I summarize attempts to articulate Marxian and post-Keynesian critiques from within political economy. Fourth, I lay out some principles for a theory of global trade that is consistent with the sociospatial ontology of geographical political economy, and how this provides grounds for the proposition that capitalism characterized by unrestricted trade reproduces, rather than resolves, conditions of uneven geographical development. II Slicing through the entanglements of trade The movement of commodities across space is, of course, an incredibly complex entanglement of the (more-than-) capitalist space economy. If we could visualize and animate these flows, they would flicker across the landscape, interconnecting bodies, firms, markets, neighborhoods, cities, regions and countries in ways that reflect, reproduce and transform the connectivities of economy and their place-based imprints. The genius of mainstream trade theory (and economics) has been its willingness to cut this Gordian knot, disentangling trade from its relational determinants with the effect of rationalizing the free trade doctrine. In order to highlight the impact of this disentanglement on how trade is envisioned (Buck-Morss, 1995), I summarize here some salient entanglements, conspicuous by their absence from or marginalization by mainstream theory. First, there are the entanglements of economy: the complex ways in which various economic 48 activities are interlaced through commodity trade. François Quesnay envisioned this as the tableau e´conomique in 1759, an idea central to Marx’s puzzling about how capitalism can create value and reproduce itself in volume three of Das Kapital. Wassily Leontief formalized these as an input-output table, given spatial expression by Walter Isard (Isard, 1951; Leontief, 1928; Marx, 1896 [1972]; Quesnay, 1753–1758). This conception of the production of commodities by means of commodities has caused all manners of headaches for neoclassical (and Marxian) theories of growth, distribution and value (cf. Barnes, 1996; Harcourt, 1972; Sheppard and Barnes, 1990; Sraffa, 1960). Second, there are the entanglements of space. The complex spatialities of commodity trade are reduced to international flows, aggregated by national economy and sector, and measured by state-istics. Generally, this is reduced to a theory of just two point-like countries of equivalent status, with no transport costs. Subnational interregional trade has received occasional attention, but almost always as a minor subtheme within international trade. Third, there are entanglements with other global flows and connectivities. Commodity trade co-evolves with foreign direct investment, global production networks, international financial trade, migration, and movements of information and knowledge – all largely excluded from international trade theory.2 Fourth, there are trade’s entanglements with the more-thaneconomic. One widely discussed aspect is governance. The horizontal connectivities of international trade are co-implicated with complex multiscalar territorial governance structures: local initiatives to advance global competitiveness, national attempts to influence cross-border flows, and public and private global governance regimes (The Bretton Woods institutions, the World Trade Organization, Trade-Related Aspects of Intellectual Property Rights agreements, corporate governance networks, etc.). Beyond this, a hallmark of Progress in Human Geography 36(1) geographical research has become examining the many ways in which culture, emotion, discourse, and more-than-human materialities are co-implicated with the economic. Fifth, there are capitalism’s entanglements with non-capitalist economic logics. An elementary example is how the production and exchange of commodities for profit is always accompanied by other modalities of production and exchange (e.g. Gibson-Graham, 2006; Gudeman, 2008). These range from Local Exchange Trading Systems (LETS), to global fair trade and international barter (US$12 billion in 2008, www.irta.com; local barter has boomed during the current world economic crisis). Cutting through these entanglements involves a heroic feat of simplification, much lauded in mainstream economics, in the name of scientific parsimony, with the effect of legitimating the free trade doctrine. This disentangled envisioning of trade is illustrated in Figure 2, a representation of cutting-edge trade theory from The New Introduction to Geographical Economics (Brakman et al., 2009). III Mainstream trade theory The mainstream theory has a voluminous literature, but a monolithic genealogy: from Adam Smith to David Ricardo, then Heckscher, Ohlin and Samuelson, and most recently Helpman, Grossman and Krugman (cf. Wong, 1995). Four principal developments have marked this trajectory. First, Smith argued that free trade is always desirable as it extends the market (Smith, 1776). Between two nations, trade would be mutually beneficial if each had an absolute cost advantage in a different product. This was not good news for England, however, where wages and prices were higher than many other nations – and Smith was an ardent proponent of state action to enhance England’s terms of trade (such as the Navigation Acts requiring the use of British ships for moving goods through its Sheppard 49 Capital Labor Intermediate good (A) Intermediate good (B) Sector A varieties (identical cost structure) Sector B varieties (identical cost structure) COUNTRY A COUNTRY B trade Figure 2. Disentangling global trade Source: Brakman et al. (2009): Figure 9.8, p. 374, reproduced by permission Empire). Second, David Ricardo’s theory of comparative advantage finessed this problem, creating the orientation point for all subsequent theory. With given national differences in production technologies, and no international migration, it is advantageous for two nations to trade as long as each specializes in a commodity that they are relatively more efficient at producing, by comparison to the other. This made the potential of mutual gains from trade much more generally applicable: Every nation was seen as having something it could produce relatively efficiently as a result of its particular endowments, with potential gains from trade thus available to all. Ricardo’s theory served as much to propagate Lockean liberalism as it did to ‘prove’ a free trade doctrine that already had become a core liberal principle by the end of the 18th century (cf. Sheppard, 2005). His stylized empirical example, trade between England and Portugal, falsified the historical record of a trading relationship that consistently enriched England and impoverished Portugal (Peet, 2009; Sideri, 1970). Yet it is arguably the most influential argument in mainstream economics (Samuelson, 1969). Third, in the 1930s Heckscher and Ohlin founded the ‘modern’ theory of international trade (formalized by Samuelson), incorporating Ricardo into neoclassical economics (Heckscher, 1919; Ohlin, 1933). Here, comparative advantage is determined by a nation’s relative abundance of production factors, rather than production costs. Assuming the validity of aggregate neoclassical production functions, when a production factor is abundant in a nation, its lower marginal productivity makes it cheaper relative to other production factors, implying that specializing in activities that draw heavily on the locally abundant factor will realize national comparative advantage. For example, nations with abundant labor should 50 Progress in Human Geography 36(1) Table 1. Hard-core propositions of mainstream trade theory Proposition 1 1a 2 2a 3 Description Trade patterns are determined by differences in comparative cost of production ratios between countries Intra-industry trade is explained by the differentiation of products across countries and consumers’ preference for variety Where there are different relative prices across countries, there will be gains from trade in exchanging goods at intermediate price ratios Even in the absence of comparative cost differences, there may still be gains from intra-industry trade, in terms of consumer choice, if traded goods are differentiated, or if economies of scale stimulated by international trade generate comparative cost differences Free trade (with appropriate compensation) increases the welfare of all trading partners specialize in and export labor-intensive products, whereas those with abundant capital should specialize in capital-intensive products. Since any profit-maximizing capitalist would presumably seek to use more of what is cheaper, this also had the compelling implication that the rational choices of individual capitalists match the national interest; they conform to comparative advantage. Thus free domestic and free international trade complement one another. Fourth, the 1990s’ ‘new’ theory of international trade developed a further modification, seeking to account for what was dubbed ‘intra-industry’ trade. This referred to reciprocal trade in manufactures among the industrialized capitalist countries, which economists finally sought to address. Based on recently developed theories of monopolistic competition (Dixit and Stiglitz, 1977), this theory sought to account for where, across two countries, industrial clusters would emerge (Grossman and Helpman, 1991; Helpman, 1990; Krugman, 1990). Overall, each stage of theorization is presented as a revolutionary advance on the previous one. Yet they are sutured together by their capacity to reproduce and reconfirm a set of Lakatosian hard-core propositions that rationalize the free trade doctrine (Lakatos, 1970; McGovern, 1994) (Table 1). As is well known, these propositions rely on a series of heroic assumptions that inter alia disentangle trade from everything else. Quasi-perfect competition drives profits to zero (net of fixed costs): ‘assumptions of free entry and exit by firms that are ex ante identical, are infinitesimal in scale, and compete non-strategically’ (Neary, 2009: 2). Representative economic agents act rationally, on the basis of perfect information. The international economy is in equilibrium: trade balances, markets clear, and all production factors are fully employed. Geography is practically non-existent: typically, there are two countries of equal size and influence, with no internal spatial differentiation, and transportation costs associated with trade are ignored. Under such assumptions, it can be deduced that appropriate specialization and trade enhances international output, and that each country can be better off (obtaining more commodities for the same effort) with trade than in autarchy. The implausibility of these assumptions has provided much grist for criticism. Beyond this, empirical tests have not been kind to the theory. Leontief’s paradox (the USA, with the world’s highest capital-labor ratio, exports commodities whose capital-labor ratio is lower than that of its imports) remains a stubborn thorn in the eye of trade theorists, as it is the opposite of what the ‘modern’ theory predicts (Leontief, 1956). Confirmation of the Prebisch-Singer hypothesis, that primary commodity exporters face historically declining terms of south–north trade in exchange with manufacturing commodity exporters, undermines the ‘win-win’ predictions of the free trade doctrine. Finally, the failure of Sheppard global differences in the prices of labor and capital to dissipate over time undermines another central prediction of the ‘modern’ theory: factor price equalization (Samuelson, 1948). Such empirical negations, utilizing positivist standards for truthfulness adhered to by mainstream economics, have had to withstand repeated challenges within economics. They have not been refuted, but the theory stubbornly survives (Helpman, 1999; Ocampo and Parra, 2006; Subasat, 2003). Theoretical critiques of the mainstream theory also have been prominent at times. In Against the Tide, Douglas Irwin (1996) painstakingly recounts these debates: infant industry arguments, the terms of trade, increasing returns, high wages, welfare considerations, and strategic trade policy. Each of these counter-arguments can be shown to have logical validity, but nevertheless is dismissed (by free trade proponents at the time, and by Irwin) as not crucially undermining the free trade doctrine: they are constructed as exceptions that only prove the rule. IV Adding geography The ‘new’ trade theory has incorporated geography into the mainstream theory, adding nuance and improving empirical performance. Krugman linked imperfect competition with transportation costs and labor migration to explain intraindustry trade (Krugman, 1991). Typically, transportation costs are treated as an ‘iceberg’: a deduction that melts productivity away as goods are transported. With such transportation costs, and by integrating the Ricardian, ‘new’ and ‘modern’ theories into a single two-country model, the standard results of Ricardo and Heckscher-Ohlin are replicated (Brakman et al., 2009: Chapter 9). Yet the iceberg specification is profoundly empirically unrealistic: it implies that freight rates do not fall with distance (Fingleton and McCann, 2007). Geographical economists thus experiment with a variety of other transport 51 costs specifications, and different geographies. They have treated transport costs as a fixed charge rather than an iceberg (Cukrowski and Fischer, 2000; Ottaviano and Thisse, 2004; Tharakan and Thisse, 2002). They have explored ‘density dependent’ transport costs, where the freight rate falls as the amount shipped increases, also embedding two equally accessible regions within two countries trading with on another (Behrens et al., 2003). They have examined spatial differentiation within a country, dividing it into regions that trade with a spatially undifferentiated second country (Courant and Deardorff, 1992; Crozet and Koenig-Soubeyran, 2004; Hanink and Cromley, 2005; Krugman and Livas Elizondo, 1996; Mansuri, 2003; Paluzie, 2001). In ‘A spatial theory of trade’, Rossi-Hansberg (2005) reinvents a much earlier geographical research program on location, specialization and trade across continuous space (Beckmann and Puu, 1985; Curry, 1970, 1989). They have explored uneven international geographies, the clustering of countries into continental world regions and preferential trade areas, and differences in national endowments (Cukrowski and Fischer, 2000; Davis and Weinstein, 2003; Rauch, 1999; Venables and Limão, 2002; Villar, 1999). Occasionally, they integrate foreign direct investment with trade, dubbed ‘oligopolistic general equilibrium’ (Markusen, 2002; Neary, 2009). Such geographical complexities lead to a variety of conditions under which the derived general equilibrium deviates from the free trade doctrine, including scenarios where regions and countries lose as a result of trade. ‘[T]here is a sense in which the new developments in mainstream trade and growth theory have eliminated the centre of trade theory. There are no core propositions that can be embraced without strong qualifications’ (Darity and Davis, 2005: 164). One geographical issue receiving particular attention during the past decade has been the question of how mainstream trade theory can be reconciled with the empirically compelling 52 gravity model. In 1976, Ron Johnston showed that the gravity model, whereby trade correlates positively with the size of the national economy but negatively with distance, provides a good empirical fit to international trade statistics (Johnston, 1976). Without acknowledging Johnston, economists have come to the same realization. Indeed, transport costs have been elevated from a minor complication that can be readily ignored, to the cause of the ‘six major puzzles in international macroeconomics’ (Obstfeld and Rogoff, 2000). Formulations consistent with the gravity model provide a much better fit with empirical trade data than those that neglect distance. Thus a powerful expost strategy for reinforcing the empirical status of mainstream theories – and thereby the free trade doctrine – would be to show that they are consistent with the gravity model: the fewer the exceptions, the stronger the rule. Significant success has been achieved by duplicating strategies used to offer a rational choice theoretic theory of human spatial interaction in the early 1970s that is consistent with the gravity model (cf. Domencich and McFadden, 1975; Sheppard, 1978, 1980). Jacks et al. (2009: 2) are now able to conclude that ‘all micro-founded trade models produce a gravity equation of bilateral trade’. Ricardian, ‘modern’ and ‘new’ theories of trade, alike, have been reconfigured to make them consistent with the gravity formulation (Chaney, 2008; Deardorff, 1998; Eaton and Kortum, 2002; Melitz and Ottaviano, 2008). As with spatial interaction theory three decades earlier, heterogeneity becomes the key to forcing the square peg of a microfoundational equilibrium theory into the round hole of the gravity formulation. Heterogeneity of preferences and firms within a particular territory rationalizes why apparently identical agents would undertake spatially heterogeneous actions, in terms of where they buy from and/ or ship to, as predicted by the gravity model. Not only this; virtually all of the puzzles that spatial scientists sought to solve in the 1970s Progress in Human Geography 36(1) with respect to the gravity model – how to specify the distance friction effect, how to handle ‘zero’ distance (within territories), how to incorporate direct and indirect connectivities between locations, why the distance coefficient varies so much from study to study – vex trade economists today (Anderson, 1979; Anderson and van Wincoop, 2004; Bosker and Garretsen, 2007; Disdier and Head, 2008). These unacknowledged parallels send a shiver down this recovering spatial scientist’s spine. Yet two issues central to the earlier geographic literature have been ignored by trade economists: the difficulty of accurately estimating distance coefficients in the presence of spatial autocorrelation (i.e. when economies of similar size are proximate to one another; Curry, 1972; Griffith, 2007), and the use of entropy maximization to estimate trade models (presumably, because it does not force spatial interaction into a tightly specified theory). I have summarized these recent developments in order to indicate how and why mainstream trade economists have taken up the role of geography in trade theory, and to what effect. Without doubt, such elaborations have moved this body of scholarship some way from the two-country, two-characteristics, two-commodities disentanglement that Ricardo brilliantly pioneered, and challenge aspects of the free trade doctrine. Nevertheless, the sociospatial ontology underlying this framework drastically simplifies the spatial and other entanglements stressed by geographers, limiting the degree to which mainstream propositions are challenged. There is no space to rehearse all such simplifications here (Plummer and Sheppard, 2006; Sheppard, 2011a), but some salient aspects are worth noting. (1) The economy, only. Processes of commodity production, market exchange and accumulation are treated in isolation from the more-than capitalist and more-than economic processes with which they are co- Sheppard (2) (3) (4) (5) implicated. Economic interdependence (the first entanglement of section II) is generally neglected. Methodological territorialism. Two scales of actors are envisaged, each as contained spaces: autonomous, equally empowered individuals with given resources and preferences, and autonomous equally empowered (national) territories with given endowments. The body is the determinant scale: economics’ obsession with microfoundations implies that nationalscale phenomena are determined by bodily-scale rational actions. This eliminates relationality and unequal power relations, conceptualizing countries as subject to identical laws, conditional on contextual differences in place-based characteristics, aligning them onto a teleological capitalist development trajectory (catalyzed by trade). Exogenous geography. All geographical features, place-based characteristics and distance metrics, are exogenous: ‘Geography is as exogenous a determinant as an economist can ever hope to get’ (Rodrik et al., 2004: 134). A flat world. It is usually presumed that each country is equally positioned within the global system; that no cores and peripheries exist. (Recent research has introduced unequal, exogenous geographies, but as a variation on the flat world ontology, rather than as an alternative starting point for theorization.) Limited temporality. With the economy presumed to approximate general economic equilibrium, time is not only separated from space, but collapsed to a fixed point. It is assumed that the economy is self-regulating (close to a stable equilibrium), and that any losers from trade can be fully compensated by those who gain (Stolper and Samuelson, 1941). There is no space for history: how endowments 53 come into existence (e.g. as England deindustrialized Asia in the 18th century), or how countries fared under the free trade doctrine (Sideri, 1970).3 V Alternative trade theories: stillborn heterodoxies A remarkable feature of international trade theory has been the paucity of alternative theorizations from radical political economists, notwithstanding their extreme skepticism about mainstream theory.4 These can be subdivided into Marxian theories, and post-Keynesian approaches haunted by Marx. 1 Marxist theories of unequal exchange Examining two countries and neglecting transport costs, Arghiri Emmanuel argued that when two countries exchange products at equivalent prices of production, this does not generally result in the exchange of equivalent labor values (Emmanuel, 1972).5 He termed this net transfer of labor value between countries unequal exchange. He argued that two general conditions cause a country to suffer a net loss of labor value through international trade. Unequal exchange in the ‘broad’ sense occurs if the country’s specialization entails a lower organic composition of capital, and in the ‘narrow’ sense if it pays lower wages. The latter case was of particular interest to Emmanuel. A net loss of labor value means that surplus value is transferred to the other country, favoring capital accumulation in the latter. Thus he concluded that lower wages in the periphery favors capital accumulation in the core, enhancing uneven geographical development. Anwar Shaikh sought to explicate what Marx’s theory of international trade would have been, by extending his law of value to the international scale (Shaikh, 1979, 1980).6 He finds that absolute advantage is more important than comparative advantage (cf. Milberg, 1994, 54 Progress in Human Geography 36(1) 2002). Shaikh also uses the two-country case with no transport costs (‘developed and underdeveloped regions of the capitalist world economy’; Shaikh, 1980: 57). He assumes that prices of production adjust internationally, so that rates of profit equalize across sectors and countries, and that labor values are set globally (in terms of globally socially necessary labor time). He argues that differences between Marx’s and Ricardo’s theories of money entail different conclusions about trade between an underdeveloped and a developed region.7 In Ricardo’s theory, if one country has absolute advantages in both commodities, then gold must flow from the more expensive to the cheaper region (from England to Portugal, in his example), to pay for the trade deficit with the cheaper country. An increasing quantity of gold in Portugal would drive up prices there relative to Britain, until Britain can export the commodity in which it has a comparative advantage at a lower cost than it could be produced in Portugal.8 At this point trade would equilibrate. Marx’s theory of money does not tie price levels to the quantity of money in an economy. Shaikh argues that this implies that international flows of specie do not allow England (underdeveloped, because less productive in both sectors) to become competitive in its comparative advantage. Instead: eventually the £ must collapse, and with it the level of trade between England and Portugal . . . England must eventually succumb to the consequences of its backwardness and restrict imports to the level consistent with its capacity to export . . . [I]n the case of Ricardo’s extreme example England has no capacity to export . . . [However,] even an underdeveloped capitalist region . . . may nonetheless produce certain commodities in which it has an absolute advantage. (Shaikh, 1980: 38–39) Thus trade between core and periphery systematically disadvantages the latter. When trade occurs between countries with similar technologies and levels of productivity, however (i.e. within the developed or the underdeveloped region), ‘factors such as climate, location, availability of resources, experience, innovations, and above all the competitive struggle between capitalists, became decisive in determining the pattern of absolute advantage’ (Shaikh, 1980: 41) – and thereby specialization and trade. Dependency and world-system scholars argue that global inequalities between core and peripheral world regions are due to unequal exchange. The Latin American Keynesian economist Raul Prebisch (1959) first attributed poverty and economic stagnation in Latin America to the unequal effects of international trade. His argument was based on: a higher rate of growth of productivity in manufactured than primary commodities; elevated wages in industrialized capitalist countries (reflecting struggles there between organized labor and capitalists, that could be passed on to primary commodity exporting former colonies as higher prices because of unequal global political and economic power); and stagnating prices for primary commodities in the absence of wage struggle in the periphery (benefitting industrialized countries). As a consequence, the bulk of the gains from trade accrue to industrialized core countries, exacerbating global uneven development (Sarkar and Singer, 1991; Sheppard et al., 2009; Spraos, 1983). The African Marxist Samir Amin offers a theoretical explanation. Constructing a two world region model – advanced capitalist core and third world periphery – he argues that the third world has a ‘natural advantage (abundant supply of ore and tropical products)’ (Amin, 1974a: 13). Capital flows to the third world to finance extraction of these, because lower wages in the periphery make production more profitable than in the core: ‘The products exported by the periphery are important to the extent that – ceteris paribus, meaning equal productivity – the return to labour will be less than it is at the centre’ (p. 13). Geopolitical processes emanating from colonialism, reinforcing the Sheppard periphery’s dependence on the core, are a precondition. Wage rates in the periphery will be ‘as low as the economic, social and political conditions allow’ (p. 13), resulting in small and distorted peripheral domestic markets. At the same time, the emergence of domestic, comprador peripheral elites creates a limited market for luxuries, served (when he was writing) by import substituting industrialization. Dependency and world-system scholars offer historical accounts to complement Marxian analytics (cf. Amin, 1974b; Amin et al., 1982; Frank, 1978; Wallerstein, 1979). Unequal exchange between a powerful core and a dependent periphery created a global division of labor between industrial and primary commodities, with organized labor in the core negotiating higher wages, subsidized by low wages in a disempowered periphery. Low wages result in a domestic market that is too small to support domestic peripheral capitalism, perpetuating what Frank dubbed the development of underdevelopment. Peripheral elites support this pattern of global dependency because they benefit from it (Galtung, 1971).9 A variety of criticisms can be offered of these theories from within the Marxian tradition. Emmanuel’s empirical argument is based on wages, but his theoretical basis for unequal exchange in the narrow sense depends on differences in the rate of exploitation, not wages (Sheppard and Barnes, 1990: 170). Further, Emmanuel’s formulation erroneously assumes that Marx’s original solution to the transformation problem between value and exchange value is strictly correct. If prices and labor values are correctly calculated, then, while unequal exchange is possible, no predictions can be made about the direction of inequality (Gibson, 1980; Mainwearing, 1974). Shaikh (1980: 52) agrees: wage differentials ‘in and of themselves . . . do not necessarily give rise to a transfer of surplus value’. Thus a higher rate of exploitation and lower organic composition in a country need not imply that it loses labor value through 55 trade. Yet Emmanuel’s and Shaikh’s theories share difficulties rooted in their dependence on Marx’s value theory (less clearly for Amin, who draws more loosely on the labor theory of value).10 Within geographical political economy, labor values are geographically variegated in ways that are elided in Marxian value theory. Further, labor value can no longer be regarded as independent of (i.e. the basis for) prices of production when rates of profit equalize, raising significant questions about the applicability of Marx’s essentially non-spatial value theory to a capitalist spaceeconomy (Sheppard, 2004). Dependency theory can be criticized for its inability to account for the rapid industrialization and economic growth in selected third world countries that have transformed global trade and production during the past two decades: uneven development within the postcolonial world. 2 Post-Keynesian theories Post-Keynesian theorists are skeptical of Marx’s value theory, but nevertheless theorize capitalism in ways that are consistent with the economic interdependencies, uncertainties and contradictions of capitalism emphasized by Marx (e.g. Holt and Pressman, 2001). Inter alia, post-Keynesian theory has demonstrated that neoclassical macro-economic theory, fundamental to the modern trade theory that mainstream economists still utilize to explain north–south trade, is logically inconsistent. This generated a post-Keynesian theory of international trade. Piero Sraffa, iconoclastic economist, confidante of Ludwig Wittgenstein and supporter of Antonio Gramsci (Roncaglia, 2000), pioneered this fundamental critique of neoclassical aggregate production theory (Sraffa, 1960). In a neoclassical world, a country with abundant labor relative to capital will specialize in and export commodities requiring labor-intensive technologies, whereas a country with abundant capital 56 will specialize in and export commodities requiring capital intensive technologies. Sraffa showed that there is no necessary equivalence between factor abundance and factor intensity; ‘capital reswitching’ is possible. A national, economy-wide ‘capital intensive’ production technology can replace a ‘labor intensive’ technology as wages increase, as in neoclassical theory. However, as wages increase further it is possible that the labor-intensive technology will become more profitable again – the opposite of neoclassical theory.11 If wages are high (and capital cheap) in one country, with the converse holding in another, then the former may export labor-intensive commodities in exchange for more capital-intensive exports from the latter (Steedman and Metcalfe, 1979).12 This poses two deep problems for how the modern theory of trade explains comparative advantage (Jones, 1956–1957). The possibility of what Kar-yiu Wong (1995) calls ‘factor intensity reversal’ (i.e. capital reswitching) means that (1) the Heckscher-Ohlin theory is not universally valid, (2) the factor price equalization theorem is undermined (although weaker conclusions are possible, that average factor prices converge across countries), and (3) the Rybczynski theorem, providing the micro-economic foundation for comparative advantage, does not hold (Wong suggests it is not even meaningful). Utilizing the example of a single ‘small open’ economy, Ian Steedman (1979) explored the implications of Sraffa’s critique for the Heckscher-Ohlin-Samuelson theory. He concluded that comparative advantage could be resurrected, by the direct method of simply comparing the prices of production for different commodities. A country should specialize in the commodity whose relative price of production is lowest under prevailing technologies, irrespective of how it is produced or whether this is consistent with micro-foundations. Wong similarly concludes that comparative advantages can still be determined, although it Progress in Human Geography 36(1) depends also on the trade equilibrium (Wong, 1995: 94). Yoshinori Shiozawa (2007) recently generalized this to the case of M countries and N (>M) commodities, neglecting transport costs, to show that an international pattern of specialization exists that minimizes production prices and thus maximizes global production. Theodore Mariolis (2004) shows that the widely neglected phenomenon of joint production (when a single production process creates two commodities, e.g. wheat and straw) further undermines comparative advantage. There is a second critique at the heart of Sraffa’s analysis, which undermines any attempt to conceptualize production factors as exogenous inputs. Recognizing the importance of exogeneity, Ohlin devoted a chapter to trying to conceptualize factors of production in this exogenous sense, in terms of kinds of labor (skilled, unskilled, technical), natural resources, and capital (long and short, safe and risky) (Ohlin, 1933: Chapter V). Sraffa showed that capital goods are produced using other produced commodities, not from some exogenous homogeneous ‘putty-clay’ stuff called capital.13 Indeed, all ‘production factors’ – money capital, labor, land, bio-physical resources – are increasingly commodified (Harvey, 2003; Polanyi, 2001 [1944]). Yet some post-Keynesian trade theory still treats production factors and technologies as fixed, place-based characteristics.14 3 Assessment Attempts to construct Marxisant alternatives to mainstream trade theory – alternatives with the potential to deconstruct the free trade doctrine – have had remarkably little purchase, even within radical political economy.15 They emerged as a cluster of intellectual innovations in the 1970s, but only world-systems analysis received sustained attention and now also is out of fashion. There is also little consensus – heterodoxy is the rule within these marginalized heterodox alternatives: Marxian value Sheppard theorists disagree on the nature, degree, and causes of unequal exchange, whereas postKeynesians are critical of value theory tout court. This has left the field open for mainstream theory, still framed such that the free trade doctrine remains the rule. Beyond this, these alternatives tend to reiterate aspects of mainstream economics’ problematic, disentangled sociospatial ontology: the economy, only; methodological nationalism; no, or exogenous geography (reduced to fixed, placebased characteristics); and limited temporality. Geographical political economy has the potential to do better. VI Toward a geographical theory of global trade Geographical political economy resists the disentanglements characterizing mainstream economics (Sheppard, 2011a). Attending to entanglement implies distinct theorizations of trade, challenging the free trade doctrine. Such theories are at best nascent. Thus, to explore this claim I examine two of the five entanglements of trade: spatial (temporal) and more-thaneconomic.16 1 Entanglements of space I begin within the confinements of the capitalist economy, disentangled from the more-thaneconomic and more-than-capitalist. This has opportunity costs, but enables me to interrogate how attending to the co-constitution of economy and spatiality departs from the disentangled mainstream and heterodox economic theories of international trade. Consider the case of defined spatial territories (e.g. nation states), within which a variety of interdependent economic sectors, with technologies that vary by sector, firm and location, evolve. When such interdependencies transcend national borders, they are recorded as international trade. Three entanglements of space are of particular import: 57 connectivity, methodological nationalism and spatiotemporality. Consider, first, connectivity. A critical but neglected economic sector in trade theory is that of transportation and communications – sectors that commodify accessibility. Inclusion of these means that transport costs are no longer a fixed cost undermining productivity (cf. the iceberg model), but co-evolve with the capitalist space economy. This has two crucial implications (Sheppard and Barnes, 1990). First, capitalists (and workers) face genuine uncertainty about the consequences of their actions: they cannot know whether these will realize their intentions. Indeed, the economy’s endogenous spatiality reduces the likelihood that intentions will be realized.17 Second, intersectoral interdependencies are fungible. Every shift in prices and location patterns, even when technological interdependencies remain unaltered, can alter spatial interdependencies (i.e. trade flows). Uneven geographical development can evolve, then, in a variety of ways (Bergmann, 2011). Elsewhere, we have explored the implications, for mainstream and radical economic trade theories, of this entanglement (Sheppard and Barnes, 1990). Marxisant theories demonstrated how the entanglements of economy undermine modern trade theory’s factor-abundance based principle of comparative advantage. Yet this critique remains incomplete, because it presumes that geographies are fixed (and that labor and capital are exogenous to the economy). If no unambiguous basis for comparative advantage can be established except in equilibrium (of which, more below), then the possibility that trading territories each benefit from specialization and trade is further compromised.18 Such complications would need to be teased out in Marxist theories of international trade before making definitive judgments, but they do imply: Proposition 1: incorporating transportation as an endogenous sector of commodity production can 58 Progress in Human Geography 36(1) undermine central claims of existing mainstream and Marxisant trade theories. A second entanglement of space is territoriality. The world is not flat. Nation states are neither equally empowered, nor are they homogeneous, sovereign territorial units with well-defined interests and goals. Yet the inclination in international economics, like realist international relations, is to reduce territoriality to just such units, a territorial trap that Brenner dubs methodological nationalism (Agnew, 1994; Brenner, 2004). By treating nation states as separate units of analysis, methodological nationalism also has the effect of aligning them onto a single teleological development trajectory along which free trade lifts all boats (Sheppard, 2011b). Nation states differ vastly, of course in size and internal coherence, itself a difficult problem for methodological nationalism. Beyond this, they are differentially empowered with respect to one another. One way of conceptualizing this unequal relational power is through sociospatial positionality (Sheppard, 2006). Sociospatial positionality is relational, reminding us that locational (dis)advantage cannot be reduced to an exogenous geography – e.g. tropicality or landlockedness – redolent of environmental determinism (Sheppard, 2011b). Differences in positionality form the basis for distinct interests, perspectives, identities and strategies. Positionality is continually socially (re)constituted, in ways that often reproduce, but on occasion reconfigure, these differences and inequalities (Leitner et al., 2008).19 Nation states are differently positioned within the global economy, in ways that reflect, reproduce, but also contest existing power relations. Trade theories that do not take this into account make the same mistake as microeconomic theories in which all economic agents are presumed equal – price takers but not market makers. It creates a convenient fiction – a flat ontology that allows questions about inequality to be set aside. Such positional differences are assumed away in the bulk of mainstream and post-Keynesian trade theory (except for north–south models, and recent mainstream work incorporating geography as fixed relative location). Two examples suffice to show how sociospatial positionality matters. England’s hegemonic position within global capitalism in the 18th century enabled it to destroy India’s welldeveloped cotton textile industry, relocating textile production to the Manchester region and turning India into a provider of raw cotton. Its Methuen Treaty with Portugal similarly undermined Portuguese manufacturing. Turning these countries into primary commodity exporters, as if this were their ‘natural’ comparative advantage, generated asymmetric trade relations that systematically advantaged industrializing England relative to increasingly dependent trade partners. After adopting free trade in 1846, England tried to convince other European countries, and the USA, to accept their position within this international division of labor that concentrated manufacturing in England. Yet Germany and the USA developed industrialization and tariff policies that eventually enabled them to surpass England (which then abandoned free trade). After 1944, a newly hegemonic USA has promoted the free trade doctrine – now facing similar problems to those plaguing Britain a century ago. Marxist trade theorists presuppose a binary positionality, separating core from peripheral world regions. This fixed sociospatial positional differentiation provides a fixed datum for their quasi-equilibrium analyses of unequal exchange. Consider, however, the emergence of selected manufacturing powers within the third world. Thus South Korea and Taiwan came to occupy favorable positionalities by comparison to other formerly colonized countries, due to their geostrategic position in Cold War struggles in Asia and the pursuit of statecentric policies of ‘getting the prices wrong’ Sheppard (Amsden, 1987; Wade, 1990; Webber and Rigby, 1996), shifting from primary commodity to manufacturing commodity exporters. China currently is transforming itself (and global trade flows) through a similar strategy, taking advantage of its size, and the power and determination of its central state, to not only attract low-wage export assembly but also now undertake technology-intensive production, both for global markets and the domestic market (if wages are indeed permitted to rise). Marxist trade theorists tendentially stress one aspect of unequal sociospatial positionality: how powerful nations historically have used that power to turn international trade to their advantage, creating asymmetries and dependencies that fly in the face of the free trade doctrine. Yet, as this last example demonstrates, sociospatial positionality can reconfigure as well as reproduce positionalities: on occasion, the multiple gaps and contingencies underlying all power relationships enable a broader power shift. Given their complex dynamical nature, such possibilities and contingencies remain unpredictable, but their conditions of possibility can be theorized: Proposition 2: By attending to the sociospatial positionality of territorial units geographical political economy can contribute to theorizations of periodic restructurings of trade relations and uneven geographical development. The entanglements of connectivity and territoriality entail a third aspect: space/time. Marxian theories of the capitalist space-economy fundamentally question the utility of examining potential equilibrium outcomes – the dominant predilection in mainstream economics (where even the possibility of multiple equilibria has been controversial). Agents cannot be presumed to know equilibrium outcomes and act on the basis of such knowledge, particularly given the additional complexities and possibilities of unintended consequences in a spatially differentiated economy (Sheppard, 2011a). Even in 59 geographical economics, seemingly rational actions taken far from equilibrium need not drive the space economy toward equilibrium (Fowler, 2007, 2011), and individuals frequently do not act on the basis of perfectly rational calculation of their self-interest anyway (cf. Thaler and Sunstein, 2003). Beyond this, conflicts of interest about the distribution of the economic surplus among different classes of economic agents (workers’ wages, capitalists’ profits, resource owners’ rents) have the potential to destabilize any equilibrium outcome that is serendipitously reached (Sheppard and Barnes, 1990). In the real world, trade is not in balance, markets do not clear, labor and capital are often underemployed, and profits are positive (e.g. Fletcher, 2009; Subasat, 2003; Unger, 2007). It is thus strange that even Marxisant trade theories have focused on equilibrium outcomes. Attempts to theorize trade as an evolutionary process, often far from any potential equilibrium, remain rare. Marxisant approaches occasionally narrate accumulation dynamics mathematically, to determine the conditions under which equilibrium is an emergent feature or what kinds of out-of-equilibrium dynamics result (e.g. Bergmann et al., 2009; Duménil and Lévy, 1993; Foley, 2003; Webber and Rigby, 1999). Yet none of these have incorporated spatiality, addressed commodity trade, or attended to destabilizing struggles over the economic surplus.20 Proposition 3: Entanglements of economy and space require an out-of-equilibrium theorization of trade and uneven development, incorporating evolutionary and historical perspectives (e.g. Smith and White, 1992). 2 Entanglements with the more-than economic Consider, first, governance. It is necessary to conceptualize the multiscalar context shaping the national territories whose boundaries define 60 what is counted as international trade. Nation states’ actions are embedded within shifting supranational frameworks (the United Nations, the World Trade Organization, international financial institutions, the Group of 77, transnational corporations, global finance markets, ATTAC, the World Social Forum). This constitutes a geopolitics of trade, which nations are unequally empowered to influence and which unevenly shapes actions at the national scale (cf. Gibb and Michalak, 1996; Grant, 1993, 1994; Hughes, 2006; Poon et al., 2000). Nation states also are territorially and socially differentiated into subnational, and transcended by transnational, regions, which also shape, and are shaped by, national-scale trade and industrial policy. Geographical political economists have contributed to a powerful theorization of the production and politics of scale (cf. Brenner, 2001; Collinge, 1999; Delaney and Leitner, 1997; Leitner and Miller, 2007; Swyngedouw, 1997) that has yet to be applied to global trade. As for sociospatial positionality, interscalar relations are shaped by unequally empowered agents, with contestation making possible reconstitutions of scales and hierarchies. Power need not emanate from the top (contra Marston et al., 2005), or the bottom (as micro-economic theory asserts), and occasionally is up for grabs. I turn now to the ways in which the economic is entangled with culture, emotion, identity, discourse and materialities. Notwithstanding the centrality of such entanglements to contemporary scholarship, geographical political economists have had very little to say about how these are co-implicated in the production processes associated with the transfer of commodities from place to place (i.e. commodity trade). This has left aside important theoretical and empirical issues. Theoretically, as discussed above, trade is bound up with the production of a quintessentially geographical commodity: accessibility. Even the most diehard value theorist must accept that transportation produces value (Marx, 1885 [1972]: Progress in Human Geography 36(1) Chapter 6; Sheppard, 1990, 2004). Empirically, logistics remains a sector of major economic import, particularly in our heavily globalized world. One of the most immediate dramatic impacts of the 2008–2009 global crisis was on freight transportation: around the world, containers piled up in ports, ships were idled outside harbors, logistics companies faced crises of profit realization, and economies based heavily on logistics (e.g. Singapore) were thrown into a particular kind of crisis. Yet this peculiar, mobile, arena of commodity production and profit realization remains largely neglected – a most unfortunate lacuna that has left transportation geography somewhat adrift from geographical political economy. Here, I can only gesture toward how such entanglements with the morethan-economic can be incorporated into a geographical theory of global trade. Commodity trade has always been entangled with culture. From the earliest days, traders have acted as cultural brokers – embodying the mobility of cultural difference between places, and posing problems for societies that seek to take advantage of their space-transcending proclivities while retaining already-existing cultural norms. A persistent strategy was to confine ‘foreign’ traders to peripheral spaces in receiving societies (cf. Curtin, 1984; Sjoberg, 1960). The process of trade itself is encultured. Forms and norms of exchange resonate with cultural difference (cf. Gudeman, 2001, 2008). Participants in those places through which trade is realized – ships, trucks, airplanes, and markets – find their economic activities bound up with their (often) itinerant identity as traders (cf. Berndt and Boeckler, 2009; Casale, 2007; Hughes, 2007; Robins, 1995). Traded commodities also are entangled with culture – many of the cultural debates about contemporary globalization have revolved around the question of the degree to which global vectors of trade constitute a stalking horse for western cultural hegemony, or are productive of cultural hybridity and difference. With respect to gender and Sheppard sexuality, as particular aspects of identity, there has been considerable research into the gendering of places of both trade and transportation/ communication. Marketplaces, real and virtual, are highly gendered, in ways that vary geographically and often are contested (cf. McDowell, 1997; Mandel, 2004; Mintz, 1971; Seligmann, 2001; Wright, 2004). The same is true within vehicles producing the accessibility that makes trade happen (cf. Bunnell, 2007; Fajardo, 2008; Norling, 1996).21 Entanglements of trade with the more-thanhuman world fall into two overlapping but somewhat separable themes.22 First, there is the question of how trade is entangled with ‘nature’. A number of geographers have examined this with respect to particular commodities: the ways in which the materialities of, particularly, primary commodities co-mingle with the trade and commodity chains that bring them to first world consumers (e.g. Cook et al., 2004, 2006; Whatmore, 2001; Whatmore and Thorne, 1997). There are, of course, much larger questions about how global trade vectors, and the processes driving these, are entangled with nature at broader scales. What is the carbon footprint of global trade; how is this distributed geographically; whose responsibility is it? How does free trade compound the ecological unsustainability accompanying capitalism’s accumulation imperative (Harvey, 1996; O’Connor, 1998)? Is local trade more sustainable, and if so how can it be encouraged and what are its implications? There has been considerable theoretical and empirical research into these questions outside geography (Hertwich and Peters, 2009), but their complex spatialities remain under-researched (Bergmann, 2010). Second, the entanglements of trade with materialities connect with questions of science and technology (cf. Latour, 1987; Pickering, 1995; Stengers, 1997). Contesting attempts in mainstream trade theory to treat technology as a malleable capital input whose evolution is either treated as exogenous to the economy 61 (a time trend), or endogenously as ‘human capital’ (e.g. the new growth theory: Romer, 1990), geographical political economists have taken up the insight from science and technology studies that technology is neither exogenous to nor reducible to political economic processes. The pressure for new trading, transportation and communications technologies is central to capitalism; they accelerate the production and circulation of commodities (shortening turnover times and thus increasing profit rates) and extend the geographical reach of trade and production networks (enhancing capitalists’ and states’ capacities to eke out the economic opportunities associated with geographical inequality and difference). Technologies co-evolve with, helping constitute, trading practices and possibilities in marketplaces – enhancing and disrupting market functionality (Callon, 1998; Mackenzie, 2009; Mackenzie et al., 2008). This is also the case for the vehicles transporting commodities, whose functionality and capacity depend on geographical knowledge, and emergent geographical technologies of navigation, transportation and communication (particularly, today, electronic trade and commerce) (Dodge and Kitchin, 2004; Latour, 1993; Law, 1996; Zook, 2005). Proposition 4: Entanglements with the noneconomic profoundly complicate theorizations of trade, in important, ill-understood ways. VII Conclusion Trade theory, as developed within mainstream international and geographical economics, has been constructed in a way that supports the free trade doctrine. Recent work, sometimes invoking geography, has posed important questions about the doctrine, albeit framed as exceptions to it. I have argued that this has been possible through a conceptual framework that disentangles trade theory from multiple processes that are, in fact, entangled with trade in practice: spatiotemporality, politics, culture, identity, nature, technology. This disentanglement 62 makes it possible to present free trade as superior to its alternatives (free trade good; protectionism bad). By refusing such disentanglements, Anglophone geographical political economy can decenter the free trade doctrine. Careful attention to entanglements of space, particularly connectivity, suffices to call into question mainstream trade theory’s hard-core propositions (Table 1). Taking into account the (often difficult to realize) attempts of differently positioned agents within a capitalist space economy to realize individual gain confirms what has become a consensus position within geographical political economy: capitalism is generative of the very sociospatial inequalities that mainstream theorists expect it to overcome. The entanglements of geopolitical positionality and temporality clarify that the postcolonial global south was not simply a victim of historical circumstance. Rather, these regions have been compelled into disadvantaged specialization, historically in primary commodities and now in low wage export-oriented assembly production, as a result of the actions taken by the firms and governments, and at times organized labor, of wealthy powerful capitalist countries – often in the name (if not the practice) of free trade. Certain postcolonial countries have fought their way out of this trap, through state-led actions to alter the terms of their ‘comparative advantage’. A consequence of this has not only been deindustrialization and lowered working conditions in parts of the global north, but a polarization between emergent manufacturing economies, particularly in east, southeast and south Asia, and the remainder of the global south. Re-entangling trade with the more-thaneconomic further complicates these processes. Other than confirming that unequal sociospatial positionality affects the ability of people and places to shape and gain from global trade vectors, and that these vectors will inevitably be shaped by more than economic processes in complex ways, few broad conclusions have been drawn. Perhaps this reflects the shortage Progress in Human Geography 36(1) of global-scale geographical scholarship examining the broad contours of these entanglements of trade, notwithstanding many illuminating local case studies. There are profound consequences associated with replacing the sociospatial ontology of mainstream international economics (i.e. microfoundations, methodological territorialism, and flat or exogenous geographical backcloths) with the relational and dialectical sociospatial ontology of geographical political economy. First, as others have argued, this shift fundamentally calls into question modernist teleological accounts, in the spirit of Walter Rostow (1960; Sachs, 2005), of development as a universal sequence of stages that all countries can and must pass through to attain prosperity – emulating the USA and other ‘advanced’ capitalist countries (Blaut, 1993; Massey, 1999; Sheppard, 2011b). Rather, the produced geopolitical and socionatural geographies of uneven development that inevitably have accompanied globalizing capitalism require that peoples and territories of the global south break the chains of the free trade doctrine, if they are to escape impoverishment. The free trade doctrine, mobilized by narratives of capitalism’s capacity to conquer poverty, concludes that free trade is always better than its alternatives. Geographical political economy’s narrative of capitalism as continually (re)creating sociospatial inequality undermines this claim, implying that the variety of alternatives is worthy of exploration and examination. Some are narrow forms of protectionism: state-led interventions into territorial trade policy that seek to tweak capitalism when it undermines the constituted interests of a territory. Protectionism can be venal, seeking to enhance the interests of territorial elites or powerful states at the expense of others.23 Yet it also may be used to protect disadvantaged groups and territories from the ravages of uneven development (Fletcher, 2009; Stiglitz and Charlton, 2005). Sheppard Turning to entanglements with more-thancapitalist logics, a variety of other alternatives lie beyond such state-led interventions. Geographical political economists have examined such alternatives as fair trade initiatives, alternative food networks, and LETS (Hughes, 2005). There was also the Soviet Union’s Council for Mutual Economic Assistance (COMECON), and now Chavez’s Bolivarian Alternative for the Americas (ALBA; Harris and Azzi, 2006). These resonate with more-than-capitalist exchange and production (Gibson-Graham, 2006): barter, Ithaca hours, exchange values incorporating living wages and environmental protection, and the politics of trading Cuban doctors for Venezuelan oil. There are no panaceas, of course: ‘The best-laid schemes . . . Gang aft agley’ (Burns, 1786). Others have documented how alternative logics can become absorbed into capitalism (e.g. Walmart marketing fair trade coffee; Nestlé selling organic baby food), or compromised by the conflicting interests and unequal power relations of participants in trade (cf. Fridell, 2006; Raynolds and Long, 2007). Yet the answer to the deep problems of the free trade doctrine cannot be a ban on trade. Instead, geographical political economy can and should contribute to creating an intellectual space that acknowledges and critically assesses alternative trading movements and initiatives, rethinking and decentering this foundational doctrine of free market capitalism. Acknowledgements I am grateful to Progress in Human Geography for the opportunity to present the 2010 Progress Lecture at the Association of American Geographers meeting in Washington, DC, to the Center for Advanced Studies in the Behavioral Sciences (Stanford, CA) where I began this ...
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