Do as We Say, Not as We Do

Globalization might actually be good for poor countries, if only rich countries played by the rules

America's leaders have to think beyond guns if the war on terror is to succeed in freeing us from the fear of terrorism. That Osama bin Laden was born into his millions and that the mass murderers of September 11 appear to have come from comfortable circumstances should not blind us to the danger posed by Third World poverty. Writing in these pages some years ago, Robert D. Kaplan said that we in the West were like the occupants of a limousine being driven through a slum, with the desperate masses, their patience thinned by global communications, peering through the windows. In order to strip the aura of Armageddon from what Paul Kennedy and Matthew Connelly, also in these pages, described as a contest of "the West against the Rest," the Rest must share in the prosperity of the West. As long as the only way to help them was by sending tax dollars abroad in the form of development aid, the Rest had little hope. Taxpayers would never support the amount necessary to make a difference. They barely support the current level of U.S. aid, which amounts to one tenth of one percent of GNP. Now there is another way: trade plus aid. But globalization is no painless elixir. Unlike the cost of development aid, which is borne by all taxpayers, the costs of trade will be paid by a relative few Americans. Textile workers, sugar-production workers, and others employed in labor-intensive industries will lose their jobs so that the Rest can narrow the life-chances gap with the West.

That, at any rate, is the unacknowledged message of two new studies of the effects of globalization on poor countries. "Eight Broken Promises: Why the WTO Isn't Working for the World's Poor," produced by the British development charity Oxfam, and "Global Economic Prospects and the Developing Countries 2002," produced by the World Bank, detail the "blatant hypocrisy and double standards that govern the behaviour of rich countries toward poor countries" (to quote from the Oxfam study). Basically, the West has required the Rest to open their markets without reciprocating commensurately. Developing countries lose about $100 billion a year owing to Western export subsidies and trade barriers. For agriculture alone these amounted to $245 billion in 2000—about five times what the West spent on development assistance that year. Tariff barriers against manufactured goods from the developing world are, on average, four times as high as those against products from the industrialized world. What the World Bank calls "deeply poor" nations, where people live on less than a dollar a day, face tariffs more than twice as high as do "non-poor" nations, where people live on more than two dollars a day. Leather, footwear, textiles, and other products coming into the United States from the forty-nine least-developed countries—where some 300 million people live below a UN-defined poverty line—face tariffs so high that they cost those countries more than the countries get from the United States in aid. Trade is far more important than aid for such countries. Every 0.7 percent increase in their exports generates as much income as they now receive in aid. "International trade has the potential to act as a powerful source of economic growth and poverty reduction," the Oxfam report states. "Yet that potential is being lost." Overall, in recent years there has been a 10 percent drop in demand for imports from the developing world.

From the archives:

"Another Great Victory of Ideology Over Prosperity" (October 1991)
What the Bush Administration should learn from the instructive failure of the "Uruguay round" of trade talks. By Robert Kuttner

In the Uruguay Round of tariff reductions, concluded in 1994, the West pledged to reduce agricultural subsidies by 36 percent; in return, the developing countries would lower their tariffs on agricultural imports. The developing countries met their part of the bargain by halving their average tariffs. The developed countries reneged: subsidies have in recent years made up almost 40 percent of the value of Western farm output—about the same as when Uruguay started. Of the $90 billion spent on crop supports over the past five years, some $60 billion went to the top 10 percent of recipients—Fortune 500 companies, city-dwelling farm owners, and big agribusiness. The average subsidy to the bottom 80 percent, meanwhile, was $5,830. These subsidies price the developing countries' foodstuffs not only out of possible export markets but also out of their home markets. On the import side, Western governments levy tariffs on developing countries' agricultural products that are five times as high as those on all other goods. In the European Union, for example, meat and dairy imports face a tariff of more than 100 percent.

If farm exports are about the only escape from rural poverty in the Third World, textile and other labor-intensive exports are the only escape from urban poverty. Yet here, too, the West has failed to live up to its promises. At Uruguay the industrialized countries agreed to phase out the protectionist Multi-Fibre Agreement by 2005, yet 80 percent of textile and clothing exports from the developing countries will still face restrictions in 2004. The average tariff on these goods is 11 percent—three times as high as the average industrial tariff. South Asia loses approximately $2 billion a year to these tariffs. The United States promised General Pervez Musharaff, the President of Pakistan, that it would accept more textile imports as one of the conditions for Pakistan's support in the war on terror, but Senator Ernest Hollings, of South Carolina, was not consulted, and the textile lobby must have whole congressional delegations in its pocket.

If the United States lives up to the promises it made to the developing world, U.S. textile workers will eventually have to find new jobs. Their sacrifice may be a matter of national security, to preserve the safety of the rest of us in Robert Kaplan's limo. Although Dick Armey, the House majority leader, says that helping workers displaced by terrorism is not "commensurate with the American spirit," the nation should prove him wrong in the treatment it accords to workers displaced by the economic war on terrorism—that is, by the urgent necessity to import more goods from the Third World.