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The WTO vs. History

Guest Column
John Reed

Two months ago, the convergence of 40,000 street protesters sparked the collapse of the World Trade Organization talks in Seattle. The mainstream media reaction to this setback for free trade has taken on the tone of a frustrated parent dealing with unruly children.

Two common refrains have recurred in this drumbeat of criticism. The WTO opponents are either deluded idealists who will actually harm the people and environment they desire to help -- or spoiled and selfish people who would deny the developing world the wealth and opportunities enjoyed in rich countries. After all, the only proven route from poverty and tyranny to prosperity, freedom, and blue skies is the free flow of capital and trade unhindered by barriers and government meddling. Or is it?

History suggests otherwise. Furthermore, with little evidence to bolster their claims, and plenty to counter them, it’s more likely the WTO advocates are either deluded, selfish or both. The whole atmosphere of debate surrounding the issue is very reminiscent of the “emperor has no clothes” story. There’s scant evidence to support the claim that free trade is the best way for developing countries to prosper, and yet, if you don’t believe it, you’re an idiot.

You’re supposed to ignore the fact that not one major economic power in the world developed its economy by practicing free trade. It’s well known that the major Asian economies -- Japan, South Korea, Taiwan, and China -- did not practice free trade during their rapid economic developments. Less well known is that those two stalwarts of laissez-faire capitalism, the United Kingdom and the United States, had trade practices that were even less free, especially in the full sense of the word, during their ascents to economic prosperity.

Protectionism was the rule for the U.S. in its first century of existence. American military spending to this day stimulates economic growth and the development of new technologies (like the Internet, as pointed out in Phillipe Larochelle’s column last week [“Deconstructing Laissez-faire,” Feb. 1]). In addition, the first major U.S. industry, textiles, used cheap agricultural inputs provided by slave labor and the cultivation of land conquered from Native Americans. It is revealing that free trade has traditionally been championed by countries that have already achieved economic primacy (the U.K. in the 19th century, the U.S. in the 20th) -- could it be because it’s a good way to increase economic dominance if poorer countries can be convinced or coerced to go along with it? ‘Do as we say, not as we did’ is the message from wealthy, pro-WTO countries to poor ones.

While it’s immoral to suggest that poor nations should emulate the development path taken by the U.K. and U.S., since that path involved slavery and military conquest, does history recommend any ethical plan? Not the snake oil called multilateral free trade being peddled by the US and the WTO. To compete in an open world market created by the WTO, the developing countries are supposed to take advantage of their peoples’ desperation. This desperation will allow corporations to pay low wages there and to disregard safety. Most wealthy nations also abused labor and the environment early in their economic development, so this model would seem consistent with what has worked in the past.

However, there’s an important difference -- these nations retained their wealth through restrictions on trade and capital, whereas the WTO forbids such measures. The model being promoted by the WTO more closely resembles another system that has already been tried; it’s called colonialism. Just in case you haven’t heard, it featured the following: people were harshly exploited, the environment was trashed, and almost all the wealth flowed away to foreign investors. Some argue that since a crummy job at a plantation or sweatshop is better than starving, free trade is good. Well, if that’s the case, then is it “good” when westerners go on “sex tours” to poor nations, giving hungry children money in exchange for sex, since otherwise they might starve?

If you agree that that’s not good, rather that it’s deplorable exploitation, then consider that there are other ways for an individual to get screwed than just in the literal sense. If the WTO advocates are really sincere about helping poor nations, it seems they should be promoting a policy of unilateral free trade by the wealthy nations -- i.e., the wealthy countries open markets while poor countries are allowed to maintain protective barriers -- instead of multilateral free trade for all nations. Historically, when unilateral free trade is tolerated by the economic powers that be, it frequently is the springboard to economic development for poorer trading partners. This was seen in the 19th century with the U.K. practicing free trade while the weaker U.S. and German economies grew behind trade barriers, and during the cold war, when the U.S. provided Japan, West Germany, South Korea, and Taiwan with similar opportunities.

Quite simply, where the WTO and current U.S. trade policy punishes poor nations that attempt to improve their lot in the time honored fashion (nurturing industries with protectionism), and rewards nations that subject their people to abuse, a humane trade policy would do the opposite. The moral of this story: beware of rich nations and corporate interests bearing free trade agreements.

John Reed is a graduate student in the Department of Materials Science and Engineering.