World trade: far from fair

Joseph E. Stiglitz and Andrew Charlton:
Fair trade for all. How trade can help development.
Oxford University Press, 2006, 344 p.,
$ 30, ISBN13: 9780199290901

The current round of WTO negotiations is ostensibly about making world trade more development-friendly. Stiglitz and Charlton investigate exactly what this means from an economics point of view. They first discuss the link between trade and development, explaining why they believe that, for countries with high levels of unemployment (as is typical of poor countries), moving too fast towards free trade does more bad than good. It makes more sense for poor countries to deregulate markets slowly and selectively, and for their governments to promote commerce and industry, as the East Asian countries have shown.

The authors next turn their attention to the history of the world-trade regime, leaving the reader in no doubt that it has blatantly disadvantaged developing countries. In their opinion, it would be fairer for the richer nations to dismantle their trade barriers, without prohibiting poorer countries from applying protections like customs duties or investment rules. The authors propose to open trade in an asymmetrical way. All nations should allow free-market access to all countries with a lower GDP, both in absolute and per-capita terms. Doing so would also lower the trade barriers so far blocking South-South trade. Furthermore, rich countries should abolish agricultural subsidies and dumping practices, and severely curtail interim protectionist measures.

Stiglitz and Charlton are not in favour of WTO talks dealing with further liberalisation of service sectors – such as banking –, rules for foreign investors or government procurement. Rather, they argue that quite differentiated steps are required to promote development in these areas. In their view, the migration of unskilled labour should be made easier, tax rebates for investors should be curtailed, and anonymous bank accounts which encourage corruption should be prohibited.

The book estimates the impact of individual deregulation measures on different countries and various social segments. It soon becomes clear just how speculative many predictions are, and that the political economy of global interactions is normally disregarded to a large extent . The balanced and well-founded arguments in this book, however, make it abundantly clear that both the liberalisation demands from rich nations and their own trading practices flagrantly contradict their pledge to promote development.

Bernd Ludermann