Friday, August 05, 2005

Liberalisation: from below, not from above

Dr. Razeen Sally

Found on the website of the Globalisation Institute ( Critics on the world trade organisation start to emerge. In an earlier post, I already pointed at the nature of the WTO. From the beginning, the WTO was opposed by free marketeers as being an embryonal world government.

--> In a new report published by the Globalization Institute, Dr Razeen Sally - Europe's most senior trade economist - says the WTO is becoming ineffective. Hyperinflation of the membership has almost crippled decision-making. The WTO has become much too politicised, buffeted by external criticism and with deep internal fissures.

In the report, he suggests what needs to happen to the WTO to get it back on track, but also argues that instead of relying on the WTO to lower protectionism, countries should follow a Nike strategy - they should "Just Do It!" Because getting rid of tariffs is good regardless of whether other countries do the same, we should liberalize anyway. Moreover, Dr Sally points out that the big successes in free trade are already coming "from below", rather than thanks to international institutions and agreements:

"Freer trade in the early twenty-first century, and modern globalization more generally, are happening more "from below" than "from above". Their engine, now to be found in Asia, particularly in China, is bottom-up liberalisation and regulatory reform that spreads through competitive emulation, like ripples and waves across seas and oceans. This process is not driven by international institutions. The WTO and FTAs have considerable and perhaps increasing limitations. At best they can be helpful auxiliaries to national market-based reforms. But their importance should not be exaggerated."

Download the report (PDF) via title of post.


Ivan Janssens said...

I think Dr. Razeen Sally forgot the first law of motion in trade negotiations:

Trade distortions in place tend to remain in place, absent some external force. Changes to trade measures mean a re-distribution of income, making political enemies of those whose profits are taken away but without winning the recognition of those from whom the burden is lifted. This is the conservative bias in trade policy.(

In the United States some tariffs to bolster some infant industries in the 30's are still in place, while the industries concerned have disappeared.

And look at India. It just did it in ICT because it was convinced that it could compete internationally and because it had open access to the U.S. market. But absent some external pressure i'm afraid it will never open up the agricultural sector, which still is highly protected.

Pieter said...

The external force shouldn't be coercion from WTO-like organisations. I think the opportunity cost of not having certain wealth should be a great engine.

At the other hand, trade restrictions are violence, and there is a moral justification for third parties to use violence to defend people from these restrictions.

But in general, I think we should rely on decentralisation and not on centralisation. So if there is this "defence through violence", then let it not be by a permanent organisation that is maybe an embryonal world government.

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