Saturday, October 15, 2005

Give a man a fish

No loans, no calls upon "rich nations" to give a certain percentage of GDP in foreign aid. Paul Wolfowitz, who Kash of Angry Bear didn't think was qualified to head the World Bank, is using his position to emphasize that trade liberalization is the way to help the world's poor feed themselves. Rich nations can give them only so much money and not forever.
World Bank: Farm Trade Concessions Needed

Both developing and wealthy countries must make "serious concessions" on farm subsidies to salvage world trade talks, the World Bank president said Saturday in an appeal for compromise to help the 1.2 billion people living in dire poverty.

Paul Wolfowitz, speaking on the sidelines of a financial summit of the Group of Twenty industrial and developing nations, urged Japan, the EU, the U.S. and other rich countries to wean themselves off agricultural subsidies to prevent a failure of the Doha round of world trade talks, which has stalled mainly over thorny farm trade issues.

"Unless serious concessions are made by everyone, the Doha round of talks will fail and the people who will suffer the most are the poor people of the world," Wolfowitz said.

The World Bank chief said he recently visited impoverished regions in western China, South Asia and in Africa, witnessing the conditions faced by the 1.2 billion people worldwide living on less than $1 a day, the bank's standard for absolute poverty.

"The solution has to come from opening markets," he said. "These people need aid, but more than aid they need a place to sell the products of their work. Otherwise they'll be aid-dependent forever and that's not a solution."

The World Trade Organization's 148 members are scheduled to meet in Hong Kong in mid-December to discuss an outline for a global trade deal as part of the Doha round of negotiations, named for the Qatari capital where it was launched in 2001.

Fears of failure sharpened after Japan rejected a new U.S. proposal this week calling for the EU and Japan to reduce farm tariffs by 80 percent while offering to cut U.S. tariffs by 60 percent. The United States says the EU and Japan have to make higher cuts because their subsidies are higher.

Wolfowitz acknowledged that such concessions might be "uncomfortable."

"But that temporary discomfort is as nothing compared to the daily discomfort and deprivation of the poorest people of the world," he said....
Protectionist economics keeps the world's poor in poverty. It depresses the buying power of rich nations by creating higher prices for their residents, and wasting resources by pouring money into inefficient domestic industries. Domestric industries that cannot compete on an international level should not be propped up by taxpayer dollars. A distinguishing feature of Austrian economics is its belief that it's ok for inefficient, uncompetitive firms to fail, and that it's wrong to maintain their operations via public money. Private investors will pump in money only if they believe the operations can be made efficient and competitive.

There is always concern about lost jobs on the domestic end, but such a shock is short-lived as economies adjust, especially when we have, as Ben Bernanke put it, "the resilience and structural stability of the U.S. economy itself." I was one of those who believed, as Ross Perot did, that NAFTA meant losing jobs to Mexico, which today we know was far from the truth. Free trade with Mexico and Canada has, in fact, created more jobs for all involved. And if we're so concerned about what forces destroy jobs, technology has done far more than international trade, as Ed Leamer of UCLA is renowned for pointing out. Yet no one in his right mind will advocate cutting back on our use of technology to give people work.

Instead of trying to bargain, the U.S. should set the example and start cutting its own tariffs, regardless of who follows.

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