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Saturday, July 15, 2006

Stiglitz and Rashid: Free Trade Hypocrisy

Joseph Stiglitz and Haidir Rashid see hypocrisy in the policies of the U.S. and other developed countries toward trade liberalization:

America's new trade hypocrisy, by Joseph Stiglitz and Hamidur Rashid, Project Syndicate: As the current "development round" of trade talks moves into its final stages, it is becoming increasingly clear that the goal of promoting development will not be served, and that the multilateral trade system will be undermined. Nowhere is this clearer than in a provision that is supposed to give the least developed countries almost duty-free access to developed countries' markets.

A year ago, the leaders of the world's richest countries committed themselves to alleviating the plight of the poorest. At Doha in November 2001, they pledged to give something more valuable than money: the opportunity for poor countries to sell their goods and earn their way out of poverty. With great fanfare, developed countries seemed for a while to be making good on their promise, as Europe extended the "Everything but Arms" initiative, under which it was unilaterally to open its markets to the poorest countries of the world.

The opening was less than it seemed. The devil is in the details, as many less developed countries discovered that EBA's complicated rules of origin, together with supply-side constraints, meant that there was little chance for poor countries to export their newly liberalized products.

But the coup de grace was delivered by the world's richest country, the United States, which once again decided to demonstrate its hypocrisy. The United States ostensibly agreed to a 97 percent opening of its markets to the poorest countries. ...

America's intention was ... to seem to be opening up its markets, while doing nothing of the sort, for it appears to allow the United States to select a different 3 percent for each country. The result is what is mockingly coming to be called the EBP initiative: developing countries will be allowed freely to export everything but what they produce. They can export jet engines, supercomputers, airplanes, computer chips of all kinds - just not textiles, agricultural products, or processed foods, the goods they can and do produce. ...

The official argument for the 3 percent exclusion is that it affects "sensitive products." In other words, while the United States lectures developing countries on the need to face the pain of rapid adjustment to liberalization, it refuses to do the same. (Indeed, it has already had more than 11 years to adjust to liberalization of textiles.)

But the real problem is far worse because the 3 percent exclusion raises the specter of an odious policy of divide and conquer, as developing countries are invited to vie with each other to make sure that America does not exclude their vital products under the 3 percent. The whole exclusion simply undermines the multilateral trading system.

Indeed, there may be a further hidden agenda behind the 97 percent proposal. At the World Trade Organization's meeting in Cancun in 2003, the developing countries stood together and blocked efforts to forge a trade agreement that was almost as unfair as the previous Uruguay round, under which the poorest countries actually became worse off. It was imperative that such unity be destroyed. America's strategy of bilateral trade agreements was aimed at precisely that, but it enlisted only a few countries, representing a fraction of global trade. The 97 percent formula holds open the possibility of extending that fragmentation into the WTO itself.

The United States has already had some success in pitting the poor against each other. ... Even if America succeeds in dividing the developing countries, however, it may inspire a degree of unity elsewhere. Both those committed to trade liberalization within a multilateral system and those committed to helping developing countries will look at America's new strategy with abhorrence.

    Posted by on Saturday, July 15, 2006 at 03:33 AM in Economics, International Trade, Policy | Permalink  TrackBack (1)  Comments (5)


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    [Source: Economist's View] quoted: America's new trade hypocrisy, by Joseph Stiglitz and Hamidur Rashid, Project Syndicate: As the current development round of trade talks moves into its final stages, it is becoming increasingly clear that ... [Read More]

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