WTO Report Card III:
Globalization and Developing Countries

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The "anti-globalization coalition" that paraded through thestreets of Seattle in November and stormed police barricades inWashington, D.C., in April contends that international trade andinvestment are "lose-lose" propositions. On the one hand, organizedlabor argues that low-wage workers in developing countries willgain employment at the expense of American workers. On the otherhand, self-appointed advocates of the developing world claim thattrade with and investment from Western countries lead only toexploitation and continued poverty abroad. Given that negative viewof globalization, it is not surprising that anti-trade activistsare calling to "shrink or sink" the World Trade Organization.

The two previous Cato "WTO Report Cards" demonstrated that openmarkets have been a boon for the thriving U.S. economy and that therules governing world trade do not infringe on U.S. sovereignty.This third paper examines the other side of the equation: theeffect of trade and investment liberalization on the world's poorernations. According to the prevailing anti-trade line, developingcountries suffer from a "race to the bottom" in abusive laborpractices, environmental quality, and wages. Sweatshops and childlabor, not economic opportunity, are the supposed consequences offree trade. In reality, however, the empirical experience withforeign trade and investment in the developing world has beenoverwhelmingly positive. From rising wages to improved workingconditions, the competition and cooperation that accompanyliberalization are proving to be powerful forces for good.Moreover, the claim that developing countries were somehow bulliedor tricked into opening their markets is simply false; the pace ofeconomic liberalization has accelerated because poor countries haverealized that liberalization is in their best interest.

In the past half century since the founding of the GeneralAgreement on Tariffs and Trade, the world economy has grown 6-fold,in part because trade has expanded 16-fold. That growth has not ledto the wholesale exploitation of workers in poor countries. To thecontrary, globalization has made it possible for more people tolift themselves out of grinding poverty more quickly than was everpossible before. Globalization has improved and will continue tomeasurably improve the lives of millions of people around theworld.

Aaron Lukas

Aaron Lukas is a trade policy analyst at the Center for Trade Policy Studies at the Cato Institute.