Commentary

Free Trade Tills the Soil of Democracy

By Daniel Griswold
This article originally appeared in The Detroit News on July 30, 2003.

In the aftermath of World War II, Democratic and Republican administrations alike pursued trade expansion as an important pillar of America’s postwar policy. Trade promoted development in Western Europe and Japan, and cemented relations among our Cold War allies. The Sept. 11 attacks and their aftermath have reminded us again that trade and foreign policy are intertwined — nowhere more so than in the Middle East.

Free trade is not a panacea, but it is a necessary building block for a more peaceful and prosperous Middle East. That is why trade, development and security dominated the agenda at a recent historic meeting of the World Economic Forum in Amman, Jordan. And it is why trade and development will be the main topic at the U.S.-Arab Economic Forum in Detroit Sept. 28-30.

Free trade has helped to reduce poverty in those countries and regions of the world that have progressively opened themselves to the global economy. Free trade can till the soil for democracy and respect for human rights by creating an economically independent and growing middle class. Countries that are open to trade and global commerce are more likely to be working democracies that respect human rights.

In his May 9 address in South Carolina outlining his plan for a Middle East Free Trade Area, President George W. Bush said, “The Arab world has a great cultural tradition, but is largely missing out on the economic progress of our time. Across the globe, free markets and trade have helped defeat poverty, and taught men and women the habits of liberty.”

We have seen this dynamic in action in South Korea, Taiwan, Chile, Mexico and other countries where economic reforms and openness have laid a foundation for civil liberties and democracy. Within the Arab world, those nations that have traveled the farthest on the road of economic reform, such as Morocco, Jordan and Bahrain, are among the leaders of political reform as well.

Sadly, the Arab world is a land that globalization has largely passed by — and their isolation is largely self-imposed. Average tariff barriers in the Arab Middle East are among the highest in the world. As a consequence, the region suffers from chronically declining shares of global trade and investment. Average annual inflows of foreign direct investment to Arab countries are only slightly larger than the inflows to Sweden; non-oil exports from Arab countries to the rest of the world are smaller than those of Denmark. Internally, price controls and government domination in many Arab states stifle local enterprise.

Those policies have wrought dismal economic performance. According to a recent report by the United Nations Development Program written by 22 Arab scholars, between 1985 and 1998, inflation-adjusted or real per capita gross domestic product (GDP) declined in a broad swath of the Arab world. In contrast, real GDP during that same period rose by 30 percent in Israel, 90 percent in Chile and more than doubled in Thailand, China and South Korea. Today the GDP of the Arab world is smaller than that of Spain.

The record on civil and political freedom in the Arab world is no better. Freedom House, the human rights group in New York, reported in its latest study that only 25 percent of Muslim-majority countries in the world are democracies compared with 75 percent of non-Muslim countries. Freedom House noted “the democracy gap between the Islamic world and rest of the world is dramatic,” and there is no sign that the gap is closing.

That depressing reality feeds terrorism, not because of poverty but because of a lack of opportunity and hope for a better future, especially among the young.

It’s a myth that poverty breeds terrorism. In fact, poverty is more widespread in sub-Saharan Africa and South Asia than in the Arab world, in part because of the network of private Islamic charities that help the poorest in society. And many terrorists are well educated and come from relatively privileged families. Young people who cannot find meaningful work and who cannot participate in the political process are ripe pickings for religious fanatics and terrorist recruiters.

All of this gives urgency to the Bush administration’s proposal for a free trade area in the Middle East. A complementary proposal in Congress, sponsored by Sens. Max Baucus, D-Mont., and John McCain, R-Ariz., would grant immediate, unilateral duty-free access to imports from qualifying Middle Eastern countries. Our nation has extended such access to the Caribbean Basin countries, Andean Trade Preference Act countries and sub-Saharan Africa. Is the Middle East any less important to U.S. foreign policy?

Free trade is not a magic tonic that by itself will bring peace and hope to the Middle East. But trade can, as it has in other times and places, bring people together in peaceful cooperation to build a better future. Now is the time to put aside petty, parochial and partisan concerns to do whatever we can as soon as we can to extend the blessing of freedom to a part of our world that desperately needs it.

Daniel T. Griswold is associate director of the Center for Trade Policy Studies at the Cato Institute.