The Protection Racket

In recent years, it has been encouraging to watch the developmental non-governmental organizations (NGOs) become more sophisticated in their thinking on the benefits of trade liberalization. NGOs such as Public Citizen that are against all forms of liberalization are now rare. Most NGOs including, for example, Oxfam, Christian Aid and Action Aid today agree that poor countries would benefit from reduced trade barriers in the rich countries. What is puzzling, however, is that these same NGOs remain skeptical of the benefits the poor countries can reap from their own liberalization and remain actively opposed to it. These groups are slow to appreciate that liberalization by poor countries—even if rich countries don't respond in kind—increases exports and thereby strengthen developing-country economies. For instance, when Bangladesh lowers its trade barriers, it makes selling in the domestic market less profitable relative to the world market and encourages resources to shift toward the production of exportable goods. Seen differently, such liberalization encourages imports, which require foreign currency and hence increased exports. Opening to the world markets also opens the door to the state of the art technology that is often embodied in the imported machines and brings the best out of the country's entrepreneurs by confronting them with the world's most efficient suppliers of the highest quality products in their fields.