Commentary

Developing Countries Betrayed by EU and USA

The good news is that the United States and the European Union recently agreed on agricultural trade in advance of the Sept. 10-14 World Trade Organization meeting in Mexico. The bad news is that the agreement is more of the same old stuff. And, as a result, it is viewed by developing countries as a betrayal and perhaps as reason to give up on globalization and the West’s promises about free trade and prosperity.

The Western countries say they have agreed to reduce tariffs against foreign farmers and subsidies to their own. But they don’t say by how much, on which goods, or when. And the deal contains this convenient phrase: “Without prejudging the outcome of the negotiations.” In other words, anything goes.

That’s an approach that could doom globalization, which has already brought a better life to much of the world. In the last two decades, more than 200 million people have been lifted out of absolute poverty thanks to liberal reforms and increased barrier-free trade. A recent World Bank report concluded that 24 developing countries with a total population of 3 billion are integrating into the global economy more than ever. Their per capita growth has increased from 1 percent in the 1960s to 5 percent in the 1990s. At the present rate, the average citizen in these developing countries will see his income doubled in about 15 years. Imagine how that will strengthen the demand for rich world exports.

But many countries have been left behind because the liberalization of trade during the last 50 years has not included two sectors: textiles/garments and agriculture. Those are the labor-intensive goods poorer countries can produce and sell at competitive prices. In manufacturing, the volume of trade has risen 45-fold since the end of World War II. But in agriculture it has risen only six-fold.

In 1995, the EU and the U.S. promised to abolish all quotas that restricted exports of textiles and clothing from poor countries could sell. But to date, the EU and U.S. have killed quotas only on goods that developing countries do not export, such as parachutes — yes, parachutes. Many doubt that rich countries, after 10 years of stalling, have the courage to abolish these quotas come January 2005. When developing countries talk about the need to discuss “implementation issues” in the WTO negotiations, it’s their polite way of saying: “Will you please stick to your promises?”

Contrary to popular perception, the 1999 trade meeting in Seattle didn’t fall apart because of protests. It collapsed because developing countries faced demands for environmental and labor standards without getting, in return, increased market access. If that happens in Cancun, developing countries may drop out of the trade talks. This would be a shock to the multilateral trade system. And it could end the wave of economic and political liberalization that has made life better in many parts of the world.

During the last century, many developing countries followed inward-looking, anti-liberal policies because they couldn’t tap into the world market. In the early 20th century, Latin American countries such as Argentina and Uruguay were among the richest in the world because of their agricultural exports. But in the 1930s, the U.S. and Europe reintroduced protectionism. In turn, Latin American countries turned to import substitution and state-led industrialisation, and to a succession of military dictatorships. Those policies gave Latin America a temporary economic boost after the Second World War — but the region ran on outdated technology and insufficient market access. In the end, these nations wound up poorer. They accumulated huge debts, which still affect the world economy. And, in Africa and Asia, many states that weren’t welcome in the Western markets fell into communism and all its errors.

Some of the same is happening today and many poor countries feel betrayed. They were promised progress if they liberalized. But when they did, they weren’t allowed access to the world economy. We dumped our subsidized goods in their countries. But they weren’t allowed to export their goods to us. Brazilian President Lula da Silva has said that all his country’s efforts and exports are useless “if the rich countries continue to preach free trade on one side and practise protectionism on the other side.” South African President Thabo Mbeki has said that there is a real threat of famine in Africa, because of Western protectionism: “It remains an inexcusable shame.”

We do not make friends with these double standards. Instead, anti-American and anti-Western movements surface. According to polls, globalization and trade are popular with the world’s poor, but the rich countries and their policies are unpopular. So, in the end, many will dismiss the free market because they never see it in practice.

Johan Norberg is a young Swedish writer and leading activist in the debate on free trade and globalization. His latest book, forthcoming in September, is “In Defense of Global Capitalism” (Cato Institute, 2003).