A new report says trade liberalization has not brought the economic gains to poor countries that many expected. In fact, it says the concessions developing countries must make to rich nations often wipe out many of the benefits.
The Center for Economic and Policy Research says trade liberalization does lift people above the poverty level. But not much above the two dollar a day threshold – and a lot fewer people than estimated.
Instead of the estimated 540 million people that would be lifted above the poverty line over the next 10 to 15 years, it says the true number is fewer than 100 million.
Mark Weisbrot is an economist, co-director of the center and co-author of the report entitled: Poor Numbers: The Impact of Trade Liberalization on World Poverty.
He says, "First of all, most of them are not really coming out of poverty. They’re going from something just below the two dollar a day poverty line – so, something like $1.95 – to something just over, like $2.03 or $2.05 - somewhere in that range. So, they’re still pretty poor. Now, that’s still significant. Obviously, even an extra 10 cents a day is significant for a lot of really poor people. But it’s not like what most people think."
He blames the claims of big gains on miscalculations in economic growth and poverty projections.
Mr. Weisbrot is wary of those who eagerly promote free trade.
"The people promoting these agreements are trying to convince the world it’s really about free trade, which is a smart marketing move on their part, right? I mean who can be against free trade? It’s like being against clean water. But the problem is there is a lot more going on and that’s what I think people don’t know. And if they did know that there’d be a lot more scrutiny," he says.
The co-director of the Center for Economic and Policy Research says trade liberalization often requires poor countries to make concessions. He says these include accepting the patent and copyrights of rich countries, which can substantially raise the cost of such things as medicine. This includes AIDS drugs.
He also says as developing countries compete for a share of the US market, they don’t realize that market may shrink dramatically.
"The market for imports here is going to shrink over the next decade. And it has to simply because our trade deficit is now so big that it can’t be sustained. It’s explosive if you project it out over the next decade. So an adjustment is going to occur. And when that occurs, any country on average that is trying to get into the US market is going to have to displace somebody like China or Mexico that’s already here," he says.
He says, “It is entirely possible that the cost to developing countries from paying copyright and patent-protected prices to rich nations will equal or exceed the gains from trade liberalization.”