Free trade among developing countries?

Last week, as the “Economist”: reports, the Brazil­ian Pres­i­dent signed a pref­er­en­tial trade agree­ment between the Mer­co­sur coun­tries (Brazil, Argenti­na, Uruguay, Paraguay) and India. da Sil­va described it as the first step toward a full free-trade agree­ment among the G‑20 devel­op­ing coun­tries led by the IBSA coali­tion[⇒ relat­ed sto­ry]. bq. “India and Brazil can togeth­er cre­ate a polit­i­cal force able to help change the glob­al trade geog­ra­phy to bet­ter meet the inter­ests of the plan­et’s poor­est peo­ple,” Mr Lula da Sil­va said. bq. “The devel­op­ing coun­tries need to join forces to defend our inter­ests on an equal foot­ing, whether in trade nego­ti­a­tions, inter­na­tion­al secu­ri­ty, or peace issues,” the for­mer union leader said. (“Finan­cial Times”: This is heady stuff and not par­tic­u­lar­ly new: it’s a fan­ci­ful idea belong­ing to the old UNCTAD agen­das of the 1970’s. Free-trade agree­ments that have any hope of meet­ing the WTO’s rea­son­able require­ments (no high­er bar­ri­ers to coun­tries out­side the region, cov­er­age of ‘sub­stan­tial­ly all’ trade, gen­er­al­ly com­plete with­in a decade) are very dif­fi­cult to nego­ti­ate even among economies that are geo­graph­i­cal­ly and eco­nom­i­cal­ly aligned, trade inten­sive­ly and already have low bar­ri­ers to exchange with each other.

Although the vol­ume and val­ue of ‘south-south’ trade has been grow­ing more rapid­ly in the past decade than world trade, more than two-thirds of this intra-devel­op­ing coun­try trade orig­i­nates in devel­op­ing Asia, accord­ing to the WTO’s 2003 “World Trade Report(summary page and down­load links)”: This is because: # The economies of Asia are grow­ing more strong­ly than oth­er devel­op­ing economies
# The economies of Asia are more open to trade than oth­er devel­op­ing economies While most of the devel­op­ing world accounts for only one third of south-south trade because of high pro­tec­tion against south-south trade the da Sil­va idea is sim­ply not a real­is­tic eco­nom­ic project. But, of course, it’s a polit­i­cal ges­ture aimed, with­out doubt, at dress­ing-up the glob­al stage for the Brazil­ian Pres­i­dent at the eleventh UNCTAD meet­ing in Sao Paulo in June this year. Such grandiose ges­tures are the weari­some fare of UNCTAD meet­ings and harm­less, one might say, because imprac­ti­cal and irrel­e­vant. This pro­pos­al is, how­ev­er, harm­ful in one impor­tant respect. It is a mis­di­rect­ed and inad­e­quate and response from one of the world’s strongest and most sophis­ti­cat­ed devel­op­ing coun­try gov­ern­ments to the real and rea­son­able demand of the oth­er mem­ber economies of the WTO for the giant devel­op­ing coun­tries of IBSA and Chi­na to shoul­der greater respon­si­bil­i­ty (and lead­er­ship) in the mul­ti­lat­er­al trad­ing sys­tem. The “force able to … bet­ter meet the inter­ests of the plan­et’s poor­est peo­ple” is, all the evi­dence sug­gests, freer trade on a glob­al non-dis­crim­i­na­to­ry basis. Not imprac­ti­cal ide­o­log­i­cal coalitions.

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