https://fee.org/articles/poor-countries-need-market-access-not-assistance/
Poor Countries Need Market Access, Not “Assistance”
Nate Mason
Thursday, August 11, 2016
In the current American political environment, free trade is widely
condemned by both Democrats and Republicans in favor of international
economic development work of one kind or another. Pretending free
trade and international economic development are separate issues
facilitates a self-serving narrative that allows Americans to feel
good about themselves while maintaining exploitative and
self-defeating policies toward poor countries. The first step toward
improving both trade and aid policy is to change the disingenuous and
condescending language we use to describe aid efforts.
A Question of Capacity
Policy makers overestimate their abilities to influence developing
countries’ governance.
Discussions about economic development invariably focus on the notion
of capacity building: the idea that poor countries’ governments lack
the capacity to govern effectively and, as a result, companies and
entrepreneurs in these countries cannot thrive. This leads foreign
policy experts and decision-makers to focus on what governments of
wealthy countries can do to help build the needed capacity.
Unfortunately, these efforts to aid the economic development of less
wealthy countries simply don’t work. Policy makers overestimate their
abilities to influence developing countries’ governance and, as such
people are wont to do, support misguided centrally planned initiatives
that put the cart before the horse with regard to market-based reform.
Most importantly, they distract from policies that could actually
work, like granting genuine market access for the exports of poorer
countries. Wealthy countries do not need to help poor countries
“develop capacity” as much as they need to stop actively harming them
with protectionist trade policies.
It is a remarkable conceit to think that the governments of wealthy
countries can better manage the affairs of foreign countries when
those same wealthy countries struggle greatly in managing their own
affairs. The United States’ efforts in Haiti should put to rest the
notion that foreigners can easily improve matters by interfering in
the affairs of other countries. “Experts” have increasingly focused on
targeted technical assistance. The World Bank, IMF, USAID, and other
organizations sponsor myriad reports advising governments in Liberia,
Ethiopia, Honduras, Bangladesh, and many others on how to choose
target sectors of the economy and providing value chain analysis of
key products in those sectors. They offer training to bureaucrats on
how to develop these sectors and perfect the value chains. This
doesn’t cease to be central planning simply because it is called
technical assistance or capacity building.
Abandoning these trade policies would provide a powerful incentive to
entrepreneurs and investors to create businesses, factories, and jobs
in poor countries.
In fairness, experts do increasingly focus on “ease of doing
business,” but in most circumstances this amounts to asking
governments to disrupt their existing patronage networks and fire
large numbers of public sector employees for the promise of future
gains. After all, many government workers justify their existence and
support themselves by creating bureaucratic obstacles that serve as
opportunities to extract bribes. These bureaucracies would benefit
from being more competent, but would benefit more from being much
smaller. Leaders are usually aware of the political challenges posed
by reducing government agencies; indeed they fear it more than most
challenges. There is very little that the governments of wealthy
countries can do to help with this. The need for this kind of
substantial disruption can be partially mitigated by free trade zones
and improving the quality of domestically produced goods. These,
however, are hardly state secrets requiring foreign experts. Strong
incentives for entrepreneurs and domestic and foreign investors to
create jobs despite domestic obstacles would be would be more
productive because they would reduce pressure on the public sector to
employ everyone.
A Dark Irony
The governments of wealthy countries routinely impose and maintain
prohibitive tariffs on products from poor countries and escalate those
tariffs the more value is added (a higher EU tariff on roasted coffee
than on raw beans, for example). This interferes with the ability of
businesses in poor countries to move up the value chain. Of course,
they do this to protect their own farmers, textile workers, and coffee
roasters from competition.
In lieu of market access, technical assistance is ironically provided
to help businesses move up the same value chains that protectionist
trade policies are expressly designed to make unattractive. In fact,
the United States protects and subsidizes corn and other produce to
the point of massive overproduction. It then dumps the surplus on poor
countries as “food aid,” undercutting their local economies. After
all, who can compete with free? No amount of USAID agricultural
capacity building is going to make up for that.
Dribbling out “development assistance” to poor countries while
actively blocking their citizens’ efforts at building businesses is
immoral.
Abandoning these trade policies would provide a powerful incentive to
entrepreneurs and investors to create businesses, factories, and jobs
in poor countries. With few prospects of exporting goods they can
competitively produce like agricultural products, textiles & apparel,
it is no wonder governments of poor countries see little incentive to
risk disruptive reforms. While greater access to markets is not a
silver bullet, it has the immense benefit of being easily
implementable and guaranteed to have a positive impact.
Changing the Focus
I am not suggesting that rich countries’ governments are likely to
stop their exploitative and self-defeating protectionist policies
toward poor countries anytime soon. I am suggesting that we abandon
the focus on poor countries’ governance in terms of capacity building.
Dribbling out “development assistance” to poor countries while
actively blocking their citizens’ efforts at building businesses is
immoral.
Characterizing this dynamic as “capacity building” adds insult to
injury. Shifting the discussion in the developed world from
self-righteous criticism of poor countries’ corruption and
mismanagement to wealthy countries’ own patronage networks is perhaps
a subtle change. Without it though, U.S. sugar barons, European coffee
roasters, and many others will continue to siphon wealth from their
countries’ citizens and impoverish poor countries while
well-intentioned activists are distracted by talk about capacity
building.
Moreover, the stubborn persistence of trade barriers demonstrates that
rich countries’ governments understand perfectly well that businesses
in poorer countries possess ample “capacity” to compete given the
opportunity.
Nate Mason
Nate Mason is President of Mason Trade Strategy LLC and served as a
U.S. government adviser to the Ministry of Commerce & Industry in
Liberia and Commercial Attache at the U.S. Embassy in Libya
Received on Thu Aug 11 2016 - 12:05:18 EDT