Peace through Trade

This week marks the continuing "Doha Round" of trade liberalization negotiations between the 149 member nations of the World Trade Organization (WTO) which is being held in Hong Kong from December 13 to 18th.

Personally I believe I have consistently called for complete free trade in the world since I am confident that one country (everyone fear China today but it is not justified by historical experience) will not produce EVERY PRODUCT AND SERVICE in the world since it is simply impossible one one nation-state to be the best producer at everything in a world with complete free trade. If you doubt this possibility please note my posting entitled -- "David Ricardo is Smiling" to learn about the concept of "specialization of labor."

But let's return to the Hong Kong discussions this week. At present most key negotiators (that is the USA and European Union leaders since these entities represent the vast majority of economic activity in the world) have great doubts regarding the possibility of progress being made in this round of trade negotiations -- by "progress" I am referring to the ending of subsidies, tariffs, non-tariff barriers, etc. to help generate better products and services for us consumers to purchase at lower prices.

In an effort to provide an overview of the impact of these negotiations the December 12th Wall Street Journal-Europe had an article entitled, "EU, US try to salvage some gain in WTO talks", with a chart of bullet point summaries called , "Who stands to gain what?", as determined by the World Bank:

• $287 billion a year would be added to national incomes by 2015 if all tariffs, subsidies, etc. involved in trade ended
• The biggest winners -- Vietnam, Thailand, South Korea, and Taiwan
• 32 million fewer people wold be living on less than $1.00 a day, a decline of 5%

For me, bullet points #1 and #3 above are important and worthy but are easily affected by what parameters, economic assumptions are used to "crunch the numbers". for instance, I would argue many people in Europe would be living better if the current Value Added Taxes (VAT) ranging from 19% to 26% in some cases were completely eliminated since these VAT taxes are a huge burden on the poor.

It is bullet point #2 above which most interests me because the four (4) countries listed above are very interesting from these standpoints:

• All four of these nations which stand to gain the most from trade liberalization via success in Hong Kong all were governed by some form of military dictatorship/totalitarian government within the last 50 years so this is quite a transformation and positive development for the spread of democracy.
• Taiwan of course is considered to be a "breakaway province" of Mainland ("Red China" when I was a Cold War Warrior!!) China so should reunification of Taiwan/China occur one day the impact of today's free trade agreements will be even more important.
• South Korea could apply its national income gains to military spending and foreign aid to North Korea perhaps to replace the current deployment of American troops in South Korea so we can re-deploy our nation's resources.
• Greater free trade with Vietnam would enhance relations with the USA including the resolution of the POW/MIA issue so we "bring the boys home". If you have not had the opportunity to visit the Vietnam Veterans Art Museum in Chicago I encourage you to do so one day since it is a fitting tribute to experience of war as seen through military veterans' artistic inspiration -- http://www.nvvam.org
• Since many of these four nations were part of French Indochina which was a federation of French colonies and protectorates in Southeast Asia, part of the French colonial empire. It consisted of Cochin China, Tonkin, Annam (all of which now form Vietnam), Laos and Cambodia (http://en.wikipedia.org/wiki/French_Indochina) this is another example of the bad results caused by imperialism (see my posting -- "Half Pregnant").

Trading nations are not warring nations,

Todd