Sweden, which holds the rotating presidency of the European Union, has launched a drive to speed up liberalization of the EU's textiles and clothing trade with the Third World. And there are increasing indications that the new administration in Washington is likely to soon join with Europe and Japan and indicate its willingness to enter a major new trade round, meant to lower tariffs across the board. The trade ship, which seemed to have hit the rocks just over a year ago at its calamitous meeting in Seattle, has been prized free and is once again sailing with the wind behind it.
And so it should. A year on it appears even more nonsensical than it did at the time that the seasoned diplomats and politicians gathered together for earnest negotiations on freer trade should have allowed their plans to be scuttled by the combination of exuberant street protest and heavy handed policing. Moreover, the journalistic reporting made it appear as if Third World delegates were of the same wrecking spirit, when it has been obvious for years now that the pacesetters in the Third World are the ones who favor freer trade the most.
Thus it has taken the best part of a year for the smoke to clear and now at last some sense is starting to be spoken. As Mexico's new finance minister argued at Davos last month, rapid wage growth among workers in Mexico's export industries had proved that developing countries have the most to gain from globalisation. "It is the privileged who have lost because of globalization, and it is the poor who have better opportunities," he said.
Third World countries have come to realize the last thing they need to do is to emulate the cripplingly expensive system of protectionism and subsidies that the industrialized countries hand out. On agriculture alone the West is spending US$350 billion a year. As one observed, "That is enough to pay to fly every cow in the Western countries around the world once each."
Nicholas Stern, the chief economist of the World Bank, has said that as a start rich countries should unilaterally open their markets to duty-free imports from the 48 poorest countries. In too many cases the industrialized countries discourage imports of precisely those products that developing nations can produce most competitively, costing these impoverished countries far more in lost export opportunities than they receive in aid. Why should the US have a tariff of 121 percent on groundnuts, Europe a 130 percent tariff on above-quota bananas and Japan a 171 percent tariff on raw sugar cane?
Cynics will say the World Bank and other liberal observers have been making such points for decades. What is new is that no one in power in the industrialized countries is today seriously querying the argument. As the Financial Times recently reported, "Representatives of rich countries make no effort to defend themselves against bitter complaints from developing countries that trade barriers were an obstacle to lifting their economies off the floor." The right is squared and ready to go. It is the left of the industrialized world's political spectrum that is holding things up. After decades of making arguments like those above it has switched (and this was the significance of Seattle) to arguing that the impact of tariff removal will be to encourage western multinationals to invest in Third World countries and then will engage in savage cost-cutting in their drive for profits.
Yet the evidence available suggests that the "race to the bottom" in labor standards is something of a myth. If there were less trade barriers and therefore fiercer international competition then, as a new study of the Organization for European Cooperation and Development argues, "pressure from other employers will ultimately force a firm that has cut its wages to return the total compensation package to the original level." This is not to say that serious problems such as child labor will disappear overnight but subsidies to keep children in school are more effective than trade sanctions.
A further opening of the world economy will lift all boats both in the industrialized and the developing world. It is time overdue for making this point the centerpiece of anti-poverty campaigns everywhere. If the lobby groups of the Western countries devoted the emotional energy they pour into disaster, famine and war relief into this cause it would within a decade change the whole nature of poverty. Free trade must be their clarion call too.
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