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To What Extent Does Free Trade Benefit a Nation? - 2002-04-23


Does opening national markets to international trade yield political as well as economic gains? Free trade proponents contend that in case after case, economic growth prompted by market liberalization has led to greater democratization.

Once a national economy is exposed to the sunlight of global competition, Cato Institute political scientist Brink Lindsay said, political liberalization usually follows.

Trade reform, he has said, is often a catalyst for systemic reform. "In Asia, we've seen many examples. Taiwan, South Korea - military dictatorships that nonetheless got economics right enough to bring profound increases in growth to those lands - ultimately saw those dictatorships fall away and democratization come. A similar dynamic was played out in Thailand and, although messy and still unresolved, is playing out these days in Indonesia," Mr. Lindsay said.

In the same way, George Washington University international law professor Raj Bhala has said, it is no coincidence that trade liberalization in Mexico led, after decades of one party rule, to the creation of a two-party political system.

In addition to bolstering democracy, Mr. Bhala said, trade improves international relations. "Economically healthy countries that trade and invest a lot with one another are less likely to go to war. And conversely, when countries have very little intercourse and the people have nothing to lose from destroying the status quo because there is no wealth they fight," Mr. Bhala said.

Brink Lindsay has said the Middle East exemplifies the negative aspects of isolationist policies. Other than selling oil, he said, the Arab world participates little in the global economy, choosing instead to erect high barriers to both trade and foreign investment.

"Political reform follows on the heels of economic reform. The Middle East has experienced neither, and as a result it stews in its own juices of discontent and resentment and hopelessness and we see large numbers of angry young men who are looking to vent their anger in a nihilistic and destructive way," he said.

In contrast, Raj Bhala said, developing nations that have lowered barriers have found that the rules of the world trading system can work to their advantage. "Brazil has defeated Canada on a subsidies case. Costa Rica has defeated the United States on a textiles case. Ecuador has defeated the European Union in the bananas case. These are all instances of newly industrialized countries taking on major trade powers successfully," Mr. Bhala said.

Trade rules are equalizers, Raj Bhali said, and increasing numbers of developing countries are discovering that.

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