The de-flattening of the world

…Of all the new barriers to free trade, the most damaging are probably export restrictions, as on rice in Egypt, India and Vietnam, or export tariffs, as in Argentina. Rice export restrictions have had the effect of doubling the world market price of rice in three months, to the immense suffering of the Third World’s urban masses. They are the product of an ideology of scarcity, in which resources are thought to be severely limited and trade is viewed as a negative factor in the welfare of a country’s inhabitants.

Not only do they damage the economy of commodity buyers, they are even more damaging to the country that imposes them. Nevertheless, in a world in which corn becomes scarce because of massive US ethanol subsidies, they have made their malign appearance, and they will not be eliminated until food and other commodity prices decline.



Agriculture subsidies were a creation of the last major recession 70 years ago, and they seem fated to remain with us whatever the economic weather. They made a certain amount of sense as an income protection program for small farmers during the Great Depression; they make far less sense now. Nevertheless it was for the sake of agriculture subsidies that the US and the European Union killed the Doha Round of trade talks, which had offered the best hope of putting world trade on a basis of openness and equality between rich and poor countries.

The Doha Round has now apparently been replaced with a network of bilateral arrangements. These make sense politically but not particularly economically; they are also by definition de-flattening since in a bilateral trade agreement both parties give each other benefits and tariff reductions that they do not extend to other countries.

Asia Times