Kicking the periphery ladder again – 06/08/2023 – André Roncaglia

There is a new wave in the air: rehabilitating free trade as a ladder for the shared development of nations. Last week, the executive director of the IMF (International Monetary Fund), Kristalina Georgieva, criticized the formation of regional trade groups, based on geographic proximity (near-shoring), on common values ​​(friend-shoring) or on policies that internalize sectors that previously depended on imports (reshoring).

Georgieva was careful to spell out the benefits of trade, but chose to be telegraphic in pointing out its limits. She championed “agreements on reducing harmful fisheries subsidies, removing barriers to food donation and accessing the intellectual property behind Covid vaccines.” According to her, the opportunity will come at the next WTO ministerial meeting in February 2024.

The careful tone has at least three reasons for being. First, the current geopolitical and commercial fragmentation, as well as the blocking of access to vaccines, were promoted by the largest IMF quota holders: the USA and Europe. The global north has also played a role in trade and technology sanctions against China, NATO’s advance in Russia’s vicinity and tensions in the Taiwan Strait. Second, as the Nobelist Joseph Stiglitz recalled, the Biden government’s commitment to the values ​​of the WTO (World Trade Organization) namely: fair competition, openness, transparency and the rule of law is a big deal. After all, since the dystopian years of Trump, the US has still not allowed the appointment of new judges to the WTO arbitration chamber. According to a report by Reuters, the body will not be able to take action against violations of international trade rules before the end of 2024.

The third reason is that the violation of liberal values ​​is coming precisely from the US, the country that wrote the international trade rules that defined the neoliberal order for 40 years. As Stiglitz points out, by adopting industrial policies, the US and Europe are openly acknowledging that these rules have gotten old. Cui bono? Developing countries could have just as blatantly ignored intellectual property rules, saving tens of thousands of lives during the pandemic. They didn’t because they know how the band plays in the international context. But if you, reader, do not know, I will give you an illustration.

Douglas Irwin’s article, also published by the IMF, reveals the “two weights, two measures” that mark the center-periphery dynamics in capitalism. Irwin says that the future of globalization is at stake. Rich countries are turning inward to protect key sectors with industrial subsidies, trade controls focused on punishing geopolitical rivals, environmental concerns and ensuring domestic supply and national security.

But when reflecting on how emerging countries can benefit from this change, Irwin is adamant: “large-scale industrial subsidies seem to be a luxury that rich countries can afford. Just because the US, China and the EU can afford subsidies does not mean that others should copy them”. Only free trade can save them. It will be?

This strategy is old. In the middle of the 19th century, Friedrich List, a German economist, revealed the “very common and clever expedient of those who reached the top of magnitude kicking the ladder they climbed up in order to prevent others from doing the same. of the cosmopolitan doctrine of Adam Smith…”.

In this process of redefining the rules of global trade, it is essential that countries on the periphery have a greater voice. It is time for the rich West to spread the democracy they defend in their countries internationally.

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