Sunday, August 01, 2004

Let Freedom (of trade) Reign

What a good news day for the entire developing world:

Rich and poor nations struck a historic deal today to slash billions of dollars in farm subsidies, create more open industrial markets and revive stalled world trade talks that could boost global growth.


Note the correlation - the freer the trade, the better off are developing coutries. Much as the discourse of the past 10 years suggests that globalisation is the cause of global poverty, the reality is that it is the lack of globalisation, and indeed the emphasis on individual nations, that has entrenched poverty. It smacks of hypocracy that Australia, Europe and US heavily subsidise and protect their farms from developing-world competition and send billions abroad in foreign aid to the same countries that are being excluded from the marketplace. It seems like we in the developed world would rather treat other countries as a charities than trading partners.

The great competitive advantage held by developing countries is a large pool of cheap labour and vast agricultural land. These are things that are going to help developing countries develop, but only when they can trade with wealthy countries who hold other competitive advantages (technology, infrastructure, good governance). By maintaining tariff walls, wealthy countries are trying to compete on their own turf, and on that of the developing world. It's bad economics, and ultimately it's bad for the state of humanity.

How about this as a solution to developing world poverty - Europe, the US and Australia all pledge their commitment to free markets and remove subsidies, tariffs, quotas and whatever on manufacting and agriculture. Yep. It'll cost jobs. In the First World. But create jobs. In the Third World. And it'll bring down prices and improve resource allocation for all of us.

1 comment:

Anonymous said...

Hurrah! Excellent commentary.

From Daniel.