All, I heard this on NPR this morning and thought I would relay the article to everyone. This is a report issued by the World Bank and the International Monatery Fund. The world bank claims its goal is to end poverty across the world, and they supported cutting back trade restrictions in programs like NAFTA. The complaint is often made about NAFTA that it took jobs away from the US. And it indeed did, but it GAVE more jobs to people in poor countries. As a libertarian, I support free trade across national boarders, if this were to happen in the US the US markets will be openend up to inexpensive imported goods, bringing jobs and wealth into third world countries that manufacture these goods. The cost will be some american jobs, but as a libertarian, and a human being, I consider ALL people important, not just united states citizens. People in India and Bangledesh are still people. Eventually the economy of the world will globalize and balance out. The US is a post industrialized nation, as well as many European countries. These nations started as industrialized and were pre-industrial before that. With each incremental step the welfare of the occupants of that nation increases, they live longer, healthier, wealthier lives. On average, this is true of the entire world. You often hear the phrase 'The rich get richer and the poor get poorer' the true story is BOTH the rich and poor get richer, just the richer get rich faster BUT the number of people considered to be 'middle class' is increasing throughout the world, as is thier welfare and health. This fact is often negatively represented as the 'gap' between the rich and poor is increasing, but that gap is being filled by people, that is the middle class. Population growth in post industrialized nations is near zero and as pre industrialized nations move to industrialized, then post industrialized thier population growth diminishes. It is thought that the world population will level off somewhere around 12 Billion, depending on when this economic stasis is reached. You and I can help facilitate that by understanding and supporting organizations and programs that reduce trade restrictions. The fewer restrictions on trade, the quicker the world economoy will globalize, and the quicker the world will be dragged out of poverty. Keep this in mind next time you hear someone complaining about some company closing and re-opening in mexico. People in Mexico are people too. Or that some new technology will put people out of work, as the same was said about electric light bulbs putting candle makers out of work. ALL of our lives are better from these things, without sacrificing the rights or well being of an individual. - Michael

This is the main point of the article....

And, lastly, let me say something about trade. What the report shows, I think, very effectively, is that trade sanctions are not an effective means of improving labor and environmental standards in developing countries. Essentially, in large part, the emphasis on labor and environmental standards in the discussions of trade has in many cases cloaked essentially a creeping protectionism. What we want--protectionism of the advanced countries against the developing countries. What we need to see going forward is not an increase in protectionism through these various back-door methods, but what we need to see is a major reduction in protectionism by the advanced countries against the developing countries.

The total cost to developing countries of the protectionism in advanced countries is bigger, perhaps two times as big or more than the overall annual flows of aid. Annual flows of aid of the order of $50 billion and the cost to the developing countries of advanced country protection is probably substantially in excess of $100 billion.

It's not, of course, that easy to calculate these figures precisely because so much of the protectionism is in the form of non-tariff barriers, various forms of barriers which are creatively used in advanced countries against developing countries. But the cost to the developing countries is major, and what we should be seeing over the coming years is a reduction in this kind of protectionism and not an increase through these back-door kinds of approaches.

Let me just give you one other figure to illustrate the size of this problem. The payments by OECD countries to the subsidization of agriculture are around $300 billion a year. That's roughly the GNP of Africa. So the issue of protectionism is a major one. Some of it, of course, is through policies towards the agricultural sector, a sector in which developing countries have their comparative advantage.

And there's a certain hypocrisy about lectures from advanced countries to developing countries on the importance of liberalization, of getting into the world community, whilst at the same time erecting barriers against just the kinds of goods which comparative advantage would lead them to want to trade. It's not, of course, an argument against liberalization of trade policies. That is fundamental to growth in trade in developing countries, but it would be so much more effective if at the same time the protectionist barriers in advanced countries started to be dismantled.

Thank you.

The world banks site...

<http://www.worldbank.org/>

Here is the article... The important part is preceeded by a "********************************"

WASHINGTON, December 5, 2000 - Technological innovations that have reduced the costs of transport and communications, together with the dismantling of trade barriers over the past decade, have led to accelerated growth in global trade, according to a new World Bank report released today. In fact, world trade volumes are likely to increase by 12.5 percent this year, the highest rate of growth since before the first oil shock of the 1970s. Many developing countries boosted export and GDP growth over the 1990s. However, the report warns that many of the world's poorest countries, especially those torn by conflict in Africa, have not kept pace.

Global Economic Prospects and the Developing Countries 2001, the World Bank's yearly update on prospects for developing countries, says their economic growth is expected to register 5.3 percent this year, 5 percent next year, and ease to 4.8 percent by 2002. But developments in oil markets remain a major uncertainty in the outlook, as does the durability of the remarkable non-inflationary United States expansion.

"Many developing countries have adopted reform programs needed for sustained growth, by cutting inflation, increasing their integration with the global economy, and improving the education and health of their workers," says Nick Stern, the World Bank's Chief Economist and its Senior Vice President. "This progress has greatly improved the prospects for growth and for a substantial reduction in poverty over the next decade. However, developing economies will continue to face significant risks over the next few years, including the potential for further volatility in financial markets, an abrupt slowdown in U.S. growth, sharp changes in oil prices, and a failure to deepen domestic reform."

Prospects for developing countries and world trade

The global economy is likely approaching a cyclical high in 2000, boosted by a further acceleration of growth in the U.S., the recovery in Europe and Japan, and the sharp rebound in countries affected by the financial crisis. The apparent boost in trend productivity growth in the U.S., increased labor market flexibility and product market competition in Europe, and steps towards financial and corporate restructuring in Japan have improved the prospects for long-term growth.

The same applies in developing countries, where liberalization of markets, more stable macroeconomic policies and technological change have promoted integration. Developing countries have also improved the health and education of their workers, which should boost growth over the long term. Indicators of "human capital", including school enrollment and illiteracy rates, have shown broad improvement across most developing regions. For example, illiteracy rates fell from 31 percent in 1990 to 26 percent in 1998, and life expectancy has increased from 63 to 65 years.

If developing countries can achieve their long-term growth prospects, they should also be able to reduce substantially the share of the world's population living in dire poverty - on less than US$1 a day. This will only occur, however, if their GDP performance is broadly-based and if poor people are fully involved in the process of growth and development.

Regional forecasts

While growth over the next two years should slow somewhat from the cyclical peak hit in early 2000, all developing regions are expected to enjoy near-term increases in per capita incomes, ranging from near 6 percent in East Asia to about 1.5 percent in the Middle East and North Africa and Sub-Saharan Africa regions.

In East Asia, the five countries hardest hit by the financial crisis (Indonesia, Korea, Malaysia, Philippines, and Thailand) have experienced a sharp rebound after the 1997/98 recession. On average, growth in these five recovered smartly in 1999 at a rate of 6.7 percent in contrast with their 1998 crisis decline of 8.2 percent, and consolidated further with growth near 7 percent in 2000. Growth in China during the post-crisis period has ranged between 7 to 8 percent.

In 2001-02, growth in East Asia region is likely to start moderating and converging towards longer term growth paths. The two most vulnerable countries are Indonesia and the Philippines. These countries also suffer from political weaknesses, civil disturbances, and a perception (from the point of view of investors), that business operating practices have not become substantially more transparent.

In South Asia, GDP growth rose to 5.7 percent in 1999 and is likely to register 6 percent in 2000, owing to better than expected agricultural performance in India, Pakistan and Bangladesh, as well as an acceleration of India's industrial production to double digit rates and strong advances in services output. Average growth for the region is anticipated to slow to 5.5 percent in 2001-02. Financial difficulties are likely to restrain growth in Pakistan. In addition, the region is heavily dependent on energy imports and (especially the smaller countries) on agricultural exports such as cotton, tea and rubber. The need to adjust to terms of trade losses from the recent, adverse movements in primary commodity prices, may dampen growth in the near term.

In Latin America, the strength of recovery has been impressive, but momentum appeared to wane in the second half of the year. GDP is expected to rise by 4 percent in 2000 although growth rates will vary widely across the region. Latin America is poised to enter a phase of sustained moderate growth over the next decade, due to the past trend towards market-friendly policies in the larger countries, relatively strong banking and financial sectors, potential for technology spillovers from the U.S., and the largest rise in FDI among developing regions.

In Europe and Central Asia, average GDP growth is expected to rise to 5.2 percent in 2000, significantly above the 1 percent advance of 1999. In Russia, the rebound has also been unexpectedly strong, though largely dependent on high oil revenues and more fragile than in East Asia. With oil prices expected to ease in the medium term, and the effect of the 1998 ruble devaluation wearing off, Russia's current GDP growth of 7.2 percent is expected to slow significantly in the medium term.

The region's longer-term prospects have improved considerably after the problems experienced during the transition to market economies in the 1990s. Countries anchored by the EU accession process have strong incentives to implement reforms, and are positioned for stronger growth than other countries in the region.

In Sub-Saharan Africa, fallout from the 1997-99 crisis continued to depress economic activity in the region in 2000, as non-oil commodity prices remained near cyclical lows. But higher oil revenues boosted growth for the region's oil exporters, and output in South Africa increased to 2.2 percent growth following several years of subdued performance. On average the region experienced an acceleration of growth to 2.7 percent from 2.1 percent in 1999, and per capita incomes stabilized following two years of decline.

Countries with better policy environments-for example Botswana, Uganda and several of the CFA-zone countries-tended to perform better than average, with GDP gains of 4.4 percent. Countries experiencing civil strife or major political disruption-for example Angola, the Democratic Republic of Congo, Sierra Leone, Ethiopia, Zimbabwe-registered the weakest performances, with GDP falling by 1.5 percent during the year.

Progress in reform programs and in debt relief have improved the prospects for growth. Per capita income is projected to rise by 1.3 percent per year over the next decade, far better than the continued decline over the 1990s but only one-third the average rate of Asian economies. However, economies in Sub-Saharan Africa will continue to suffer from poor transport and communications infrastructure, a lack of investor confidence which encourages capital flight and constrains private investment rates, and continued low levels of official assistance.

Importantly, HIV/AIDS will have a substantial negative impact on a number of countries. According to latest estimates, Sub-Saharan Africa has 24.5 million of the 34.3 million existing cases (or 70 percent) world wide, and 12.1 million of a total of 13.2 million AIDS orphans. In the longer term, labor force growth in the worst-affected countries could slow by 1-2 percentage points. The fact that victims tend to be working adults in their prime amplifies the tragic human impact of the disease, and is likely to depress growth.

In the Middle East and North Africa, developments for both oil- non-oil exporters in the region have been quite favorable, with GDP growth of 2.2 percent reported in 1999 and growth of 3.1 percent anticipated for 2000. Over and above high oil export earnings, the region has also benefited from strong growth in western Europe that has fuelled a boom in tourism, with record numbers of tourist arrivals in many North African and Mediterranean countries.

Activity is anticipated to pick up moderately to 3.8 percent in 2001 and 3.6 percent in 2002. With an average oil price of $25/bbl for 2001 and $21 in 2002, export revenues should continue to support income growth in the oil exporters. For the diversified exporters, the positive effect of higher external demand are being overshadowed by relatively high exchange rates, high fiscal deficits in some countries, and declines in stock markets. Moreover, the recent conflict in the Levant may also dampen confidence in the region.

Oil prices should fall

The current oil price shock is expected to be temporary, since it was generated by a combination of unexpected short- term factors. A combination of supply increases and some decline in demand (from higher prices) should reduce oil prices from an average of $28/bbl in 2000 to $25/bbl in 2001 and $21/bbl in 2002.

Plausible worst case scenarios (for example an unusually cold winter or unanticipated supply disruptions) could see prices averaging $30 in 2000 and 2001, with temporary spikes running to $50 or more.

Depending on policy and private sector reactions, such higher prices could pose a substantial risk to the global expansion, particularly if the shock contributes to steep declines in industrial country equity markets. However, it is difficult to see significantly higher prices being sustained for more than a year or two, given that non-OPEC production and the supply of alternative energy sources would increase in response. Prices are expected to average about $18-19 per barrel for the rest of the decade, as technological improvements (e.g. better methods of locating and recovering crude) boost energy production and conservation efforts continue.

Nevertheless, the oil price rise has increased inflationary pressures and trade deficits in some of the developed countries, as well as exacerbating tensions over the level of gasoline taxes. Oil-importing developing countries have been more severely affected than industrial countries, because they consume more energy per unit of output and have less access to the external financing required to sustain expenditure levels until oil prices decline. Moreover, prices for their primary commodity exports (especially tropical beverages and other agricultural goods) have continued to drop over the course of 1999 and 2000, so their terms of trade have fallen precipitously.

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Trade policies in the 1990s and the poorest countries

Over the past two decades, most developing countries carried out significant liberalization of their trade regimes. Their export growth accelerated during the 1990's, and kept pace with the 6 percent per year expansion of world trade in volume terms. However, average per capita growth rates in developing countries as a group remained well below those of the rich countries in the 1990s. Though China and India embarked on market reforms and grew rapidly, growth in a large number of small, poor countries was disappointing.

The liberalization of trade regimes was associated with a substantial boost in incomes and exports in many developing countries in the 1990's, but this outcome is partly masked by severe political shocks and various foreign and civil conflicts that especially affected the poorest countries. However, even if the countries in conflict are excluded, the poorer countries had lower growth rates than the middle income ones for reasons of both domestic policy shortcomings and external trade barriers.

Despite the spread of reforms and improved global economic conditions, developing countries' average real per capita incomes advanced at rates less than 1 percent per year during the 1990s, compared with over 2 percent in industrial countries. Regions that saw the largest declines in trade barriers, including East Asia, South Asia, and Latin America also saw the largest acceleration in exports. By contrast, growth in export volumes in Sub-Saharan Africa averaged only 2 percent per year, in part because world trade of the products they export grew at half the rate of growth of world trade. Countries in Sub-Saharan African and in the Middle East and North Africa also saw market share decline in their traditional exports.

Weaknesses in trade-related policies continued to restrict growth in many of the poorest countries. Appreciated real exchange rates and high real exchange rate volatility have often been associated with a muted export response to trade liberalization; per capita income growth was significantly faster in poor countries with relatively stable real exchange rates. The absence of effective duty exemption/drawback programs, coupled with fiscal reliance on tariffs on intermediate and capital goods, have increased costs facing exporters.

Thus, despite significant progress, including accelerated trade liberalization, policy regimes in many of the poorest countries appear still inadequate to rapidly raise living standards, improve or even maintain export shares in traditional markets, or encourage rapid diversification.

External factors also played a role.

Trade barriers by industrial countries hurt poor countries

High trade barriers imposed by industrial countries on agriculture and processed food imports, along with agricultural subsidies, have contributed to the relatively poor performance of developing countries' exports of these commodities. These trade barriers have particularly hurt the poorest countries, which because they also struggle with weak trade-related infrastructure such as transport and communications, and a lack of skilled manpower, find their options to diversify into other exports with greater potential for growth severely limited.

Although average tariffs in the United States, Canada, European Union, and Japan - the so-called Quad countries - range from only 4.3 percent in Japan to 8.3 percent in Canada, their tariffs and trade barriers remain much higher on many products exported by developing countries. Products with high tariffs in Quad countries include:

major agricultural staple food products, such as meat, sugar, milk, dairy products, and chocolate, where tariff rates frequently exceed 100 percent; tobacco and some alcoholic beverages; fruits and vegetables-including 180 percent for above-quota bananas in the European Union and 550 percent and 132 percent for shelled groundnuts in Japan and the U.S., respectively; food industry products, including fruit juices, canned meat, peanut butter, and sugar confectionery, with rates exceeding 30 percent in several markets; and textiles, clothing, and footwear, where tariff rates are in the 15 to 30 percent range for a large number of products. All these are sectors in which developing countries have a comparative advantage.

"Many of the world's poorest countries have failed to win the benefits of increased openness to the global economy, due to their own policy and institutional shortcomings, but also importantly, the severe impact of protectionist barriers against their goods in industrial countries," says Uri Dadush, Director of the World Bank's Economic Policy and Prospects Group, which produces Global Economic Prospects each year. "These trade barriers act as a major roadblock for developing countries wanting to get greater quantities of their textiles and agricultural goods into the lucrative import markets of industrial countries."

Higher protection allows only the most efficient agricultural producers in developing countries to enter industrial country markets and relatively more inefficient producers in industrial countries to maintain their market share. The success of many developing countries in products that face lower protection and subsidies, such as cut flowers from Africa, and greater trade shares in fruits and vegetables also suggest that if protection in agriculture is lowered, many of the poorest countries could expand their exports.

Standards, developing countries and the global trading system

Product standards (rules governing the characteristics of goods that are generally imposed to protect health and safety) are critical to the effective functioning of markets and provide important support to the trade system. However, many developing countries (particularly the poorest ones) lack the technological and financial resources to develop product standards effectively, meet industrial countries' import requirements, and bring disputes when standards are used to discriminate against their exports.

Enforcement of core labor standards (such as the right to form unions and the abolition of exploitative child labor and slavery) and of environmental standards (such as limits on pollution and deforestation) are critical for both growth and equity. However, the use of trade sanctions to support labor and environmental standards are likely to be counterproductive, as they would restrict developing countries' access to international markets while doing little to improve welfare. Labor and environmental standards generally improve as countries develop, but low labor and environmental standards are not usually a significant source of competitive advantage. The imposition of trade sanctions is vulnerable to manipulation by protectionist interests and hurts workers by reducing demand for the goods they produce. Even if the threat of sanctions improve conditions for some workers, average working conditions in the economy are unlikely to improve. Similarly, empirical studies show that imposing trade sanctions on exporters can cause considerable output losses while doing little to reduce pollution.

Electronic commerce and the developing countries

According to the new report, the Internet is globalization on steroids. It will boost efficiency and enhance market integration domestically and internationally, particularly in developing countries that are most disadvantaged by poor access to information. While the Internet should enhance global growth, it also brings increased danger of economic marginalization to countries that cannot access it effectively.

Taking advantage of electronic commerce requires policies similar to those needed to capitalize on the opportunities for trade: improved international coordination, for example in ensuring interoperability of communications technology and confronting challenges to domestic tax and financial systems; an open economy promoting competition and diffusion of Internet technologies; and efficient social and infrastructure services, in particular a competitive telecommunications sector and a well-educated labor force.

The report says the cost of reaching industrial country markets will fall, generating large gains from trade. Developing country firms that sell labor-intensive, differentiated products (e.g., crafts, software, business services-particularly services involving the remote processing of routine information) will experience increased demand. Developing country firms also will benefit from the opportunity to leapfrog to the most advanced technologies.

However, Internet access varies dramatically across countries, a factor that brings an increased danger of economic isolation for countries that cannot access it effectively. In the U.S., 30 percent of its population has on-line access compared with just 0.6 percent in developing countries. Internet access in developing countries is expected to rise at a faster rate than in industrial countries during the next 10 years, supported by the growing use of cell phones as a major link to the Internet.

Internet access is likely to remain limited in per capita terms, especially in the poorest countries, and remain well below levels now achieved in industrial countries. Access by developing country firms may increase significantly, but the poorest developing countries may still see their competitiveness impaired because of a lack of human capital and complementary services required for effective participation in electronic commerce.

"Developing countries must remain open to trade and to foreign direct investment to absorb recent technological innovations. Countries that fail to keep pace with technological progress risk being marginalized as the Internet plays a more important role in global commerce," says Bill Shaw, the lead author of Global Economic Prospects 2001 and a Lead Economist at the World Bank. "The challenge for developing countries is to realize the remarkable promise of the Internet in driving economic growth, and to prevent the digital divide from widening."