Can Trade Drive Development?
On March 15th Wilson Center on the Hill and the Program on America and the Global Economy (PAGE) hosted a discussion on the impact of trade and international markets on developing countries. With almost a third of the world's population living on less than $2 per day, the need to reduce poverty is critical. The panel focused on the prospects for economic growth through the expansion of trade, and the related policy challenges facing United States lawmakers. Kent Hughes, PAGE director, moderated the discussion.
Ambassador Peter Allgeier, President of C&M International and a veteran of the Office of the U.S. Trade Representative, opened the event by stressing the unique aspects of modern trade and placing the current policy challenges within that updated framework. Unlike in the 20th century, most products today are involved in a complex supply chain where goods travel to several different countries before they come to market. The modern diversified modes of production make it easier for emerging nations to "plug in to small parts of a bigger supply chain," and increase manufacturing capability more efficiently.
Developing countries must "play by the rules," Allgeier pointed out, by maintaining low tariffs and working to create a favorable investment climate. Many expanding markets lack the physical and institutional capacity to support large-scale trade, which can preclude international investment; proper sanitation, rule-of-law, and a stable trade policy are all important factors in economic development, and are lacking in many small markets.
Allgeier optimistically referenced the potential success at the Doha Development Round in focusing on trade facilitation such as upgrading customs procedures. He specifically pointed to a proposal jointly supported by the United States and Uganda. He again argued that weak infrastructure and protective trade barriers hurt emerging nations trying to diversify their economies. Allgeier closed on a positive note, arguing that improvement is possible, as seen in the opening and diversification of the Costa Rican market.
Bill Krist, a Senior Policy Scholar at the Woodrow Wilson Center, followed Allgeier by echoing the importance of "involvement in world trade as an engine for growth in addition to an appropriate import strategy." A former consultant for trade issues at USAID, and senior official at the Office of the U.S. Trade Representative, Krist brought the challenges of agricultural subsidies, intellectual property rights and free trade into a uniquely American focus. Protection of intellectual property is an important aspect of international cooperation, especially for a country with an innovative manufacturing economy like the United States. Krist argued that the 2010 WTO agreement over Trade-Related Aspects of Intellectual Property Rights (TRIPS) bolsters U.S. interests, but had reservations about some Free Trade Agreements with small economies that sought to make the intellectual property protection even more restrictive. He argued that the additional restrictions generally did not serve small economy interests and would reduce the foreign policy gains that often drive such agreements. He noted further positive achievements for international trade at the Doha Development Round in the area of "aid for trade" agreements between industrialized and emerging economies—initiatives that assist in developing trade-related skills and infrastructure for countries looking to expand their presence in global markets.
Beyond Doha, Krist hoped that further discussions could encourage fewer agricultural subsidies and reduce costly tariffs that pose problems for robust international trade. Krist suggested that farm subsidies, especially the 2002 Farm Bill, "go in the wrong direction," though he recognized that poor, food importing countries did benefit from the subsidies
Krist also argued that the failure to approve free trade agreements with Colombia, Panama, and South Korea weakens America's trade negotiating posture around the world. Krist recognized organized Labor's concern about a past pattern of assassinating labor leaders, but pointed to recent progress and felt tighter trade relations would strengthen Columbia's ability to make further progress. The failure to act on the deal with Bogota actually works against its purpose of "avoiding the potency of cocaine exports," Krist said, and "does not allow Colombia to develop a more diverse economy." With the South Korean free trade agreement also stalled, the United States is missing an estimated $10-12 billion increase in GDP. Krist noted that Europe has agreed to its own FTA with South Korea, and argued that the United States would lose its competitiveness by delaying any further.
Both panelists probed the possibility of future free trade agreements with Pacific Rim countries through the Trans-Pacific Partnership. Both also raised the question of trade and investment potential in Africa, where China has already emerged as a major economic force. Both also suggested that Africa could increase its share of world trade by expanding regional ties and promoting "regional trade and development blocks." In closing, Krist argued that economic cooperation and free trade can foster international relationships and encourage economic growth.
By: John Coit
Kent Hughes, Director, Program on America and the Global Economy