The Cato Institute here in Washington, D.C. recently sponsored a discussion of trade and economic development, emphasizing the role that robust trade has in raising living standards in developing nations.
Free trade provides enormous benefits to developing countries. Arvind Panagariya will describe its impressive record in promoting growth and reducing poverty at a time when some policymakers in rich and poor countries are turning toward protectionism. He will explain how openness was key to the economic success of countries like South Korea and Taiwan and will refute claims that industrial policy, infant industry protection, or measures that erected barriers to trade have worked better than free trade itself. Anne Krueger will comment on Panagariya’s full-scale defense of free trade and warn about threats to the liberal, global trade regime.
Some of the themes mentioned by the Cato speakers are similar to points made in “Economic Freedom Is Key to African Development,” a 2017 study by the Competitive Enterprise Institute’s Iain Murray and Daniel Press. First, economic growth (including trade) should be preferred to international donor aid as an anti-poverty strategy, and second, it is often domestic politics and corruption that erode the gains from economic growth and trade:
While profit, trade, and entrepreneurship can be found to varying degrees in all African economies, anti-business policies stifle the ability of many to participate in the formal economy. High taxes and burdensome regulation discourage potential entrepreneurs from starting businesses and expanding them.
Secure, strong property rights are a cornerstone of economic freedom. They enable individuals to trade, gain access to finance, and claim damages through the justice system. They are also a historically proven key to development.
Read more in Prof. Panagariya’s newset book, “Free Trade and Prosperity: How Openness Helps the Developing Countries Grow Richer and Combat Poverty.”