What should we think of a developing country that protected its young industries with high tariffs, stole technologies from established nations, used government aid to develop manufacturing and farming, limited foreign ownership of land, devalued its money in defiance of international wishes, imposed currency controls, and even allowed secessionist provinces to default on foreign debt? The country would probably be read out of the World Trade Organization and blacklisted by the International Monetary Fund. Well, the country in question is the United States of America at earlier stages of our development. Other advanced economies, including France, Germany, Korea and Japan, did much the same things. Mercifully, there was no IMF or WTO to retaliate. And it worked out pretty well.
Now, however, we deny these tools to today's poor nations. We want them to fling open their borders to foreign private capital, renounce state development aids, balance budgets and conform to our other current conceptions of good behavior. (Actually, if the Bush budget deficit belonged to a developing nation, it would be scorned by the IMF.)
The hypocrisy of the rich countries finally came home to roost over the weekend when the world trade talks collapsed at Cancun. The Third World at last said: Enough!
The American press has been filled with pious commentaries about what a tragedy this failure is for poor countries themselves. In theory, a grand bargain could have benefited everyone, especially the poor countries with potential to increase farm exports. In this bargain, the rich countries would cut farm subsidies, and in exchange poor countries would embrace more of the rich north's agenda of rules for investment.
So why did the poor countries apparently shoot themselves in the foot? Don't they know what's good for them?
The answer is that the system is rigged against poor and vulnerable countries, and these nations have had a bellyful. For decades, the United States and Europe have set agendas for these "rounds" of trade negotiation, and the outcome invariably does more to advance the interests of the sponsors. This time, the Third World finally cohered as a strategic bloc.
Why does Argentina or Thailand get put through the IMF wringer when faced with a financial crisis -- while the United States gets to set its own rules? Why do the rich countries get to define what counts as humanitarian exceptions to drug patents that keep getting extended to make pharmaceutical companies even richer? Why is development aid a tiny pittance of what is spent domestically to subsidize agribusiness?
The countries that revolted at Cancun are all too aware that with an election coming up, George Bush is not likely to cut subsidies on farmers in midwestern swing states; that Bush is also on the spot for lost U.S. manufacturing jobs. Any grand bargain that appealed to the Third World would only increase U.S. imports of farm products and manufactured goods. The developing nations preferred to scrap these negotiations and start over, rather than lend legitimacy to a mostly one-sided deal and the illusion of progress.
What would it take to accomplish real progress? The administration and its allies in the IMF and WTO need to abandon their conceit that one recipe fits all. They'd need to allow poor countries some of the same public-private development strategies that the United States and Europe have used to good effect and cut them more slack during financial crises.
Agriculture is the toughest issue of all. The United States and other nations began stabilizing farm prices because otherwise farmers would get into ruinous cycles of boom and bust. Europe takes the process a step further, because many European nations want to preserve the rural way of life and local food products. With a globalized economy, the effect is to deny poor agricultural countries export opportunities and to compel consumers in the United States and Europe to overpay for food.
Over time, these subsidies should indeed be reduced. But that would have to be done gradually, with due regard for the interests of both domestic farmers and Third World producers and no illusions about the ability of free markets to solve all ills overnight. It would be easier to strike such a bargain if we didn't try to impose the rest of the laissez-faire model on countries that have already been victimized by it.
Cancun was billed as the WTO's first "development round" -- something especially to benefit poor countries. But nations such as Brazil and India that led the revolt understood Cancun as a trap. Now, perhaps, real progress might begin.
Robert Kuttner is co-editor of the Prospect.
This column originally appeared in yesterday's Boston Globe.
