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09/04/2003
Trade and the Middle East
No issue is hotter with the American electorate today than trade
and the loss of jobs overseas, primarily to China. And there is
growing evidence the losses are increasingly of the white-collar
variety, as opposed to just the manufacturing sector.
But trade is also a paramount issue in the war on terror and
recently the Cato Institute published a report on the topic,
authored by Brink Lindsey. Following are some of the key
points and findings, including solutions which many Americans
will find unpalatable.
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The primary danger in today’s world emanates from the
economic and political failures of the Muslim world, and
promoting reform in both areas is an urgent priority for U.S.
foreign policy. Trade liberalization is an important part of the
equation.
“From an economic perspective, failure to pursue trade
liberalization with willing partners amounts to cutting off our
nose to spite our face. From the standpoint of national security,
the heavy-handed use of America’s economic leverage will only
perpetuate foreign resentment of U.S. power.”
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“The Muslim world’s woeful deficits in economic and political
freedom surely deserve much of the blame (for its problems).
Widespread poverty, high unemployment, the absence of
opportunities for upward mobility, brutal and corrupt ruling
elites, the stifling of dissent, the exasperation caused by seeing
spectacular successes elsewhere in the world – all stoke the rage
and despair that win new converts to Islamist extremism. And
all are traceable to the failure of liberal institutions – market
competition, the rule of law, popular self-government – to take
root in the region.”
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Collectivism, in one form or another, has been guiding ideology
throughout the Middle East, whether it was the Arab “socialism”
of Nasser, Baathism in Syria and Iraq, or the Islamic Revolution
in Iran.
By failing to foster market competition, the governments also
“fail to support markets from below with the necessary
institutions – namely, the political and legal infrastructure needed
to define and reliably enforce property and contract rights.”
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“The Muslim world is the land that globalization forgot.”
Exports from the western Muslim states, including the Middle
East and Central Asia, currently account for only 4 percent of the
world total – down from 13.5 percent in 1980. And when it
comes to direct investment, the entire Muslim world, 1.3 billion
strong, receives about the same amount of foreign direct
investment as does Sweden.
In the latest “Economic Freedom of the World” report, based on
tariffs, restrictions on capital movements, etc., not a single Arab
country made the top half of the 109-contry list. Which begs the
comment from Cato: “No country ever got rich by suppressing
competition, squelching market signals, and cutting itself off
from the outside world.”
I recently used the following in one of my “Week in Review”
columns. The GDP of all Arab countries, with a combined
population in excess of 280 million, is less than that of Spain.
Further, between 1985 and 1998, the per capita GDP declined in
real terms in Iran, Iraq, Jordan, Saudi Arabia and Syria, among
others in the region. By way of comparison, the same
measurement rose 30% in Israel and 90% in Chile over the same
period.
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“The Muslim world’s economic backwardness props up
autocracy and repression. Elsewhere around the world, in places
as diverse as Chile, Mexico, South Korea, Taiwan and Thailand,
the economic dynamism unleashed by market-based
development has led to democratization and the expansion of
political rights.”
While U.S. capacity to promote change is limited, “trade policy
is an option for combating terrorism that we ignore or slight at
our peril.”
In pursuing his policies, “President Bush would do well to
remember the example of other presidents who understood that
free trade is about more than dollars and cents. During the Cold
War, President Eisenhower insisted that anti-import special
interests must take a back seat to the larger national interest in an
open and prosperous international economy. ‘(All) problems of
local industry pale into insignificance in relation to the world
crisis,’ he declared. Protectionism, in the context of the twilight
struggle against communism, amounted to ‘shortsightedness
bordering upon tragic stupidity.’”
The CATO study concludes, “The liberal trading system
constructed after World War II was crucial to two great Cold
War victories: the reconstruction of Western Europe and the rise
of East Asia. Today, a determined policy of market opening can
help to reduce the appeal of Islamist extremism – and fear of the
American colossus.”
Hott Spotts returns September 11.
Brian Trumbore
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