and Open Markets
Previous chapters have described the benefits of free trade and the costs of import protection, but many observers are skeptical that open trade policies can improve conditions in poor countries where a majority of the world's population live. This chapter examines whether the case for free trade is qualified by the special circumstances of developing countries. Recent experience suggests that developing countries can reap substantial benefits from adopting more open trade policies, but that such policies alone do not guarantee development, particularly when corruption, civil conflict, excessive regulation, and other institutional failings prevent local entrepreneurs from taking advantage of world markets. This chapter also discusses developed country policies that are harmful to developing countries, such as agricultural protectionism, import barriers on labor-intensive manufactured goods, and requirements that labor standards be a condition for trade.
In past decades, developing countries were reluctant to participate in the world economy. Many people in poorer countries feared that rich countries would dominate and exploit them.1 Powerful foreign multinationals, it was believed, would gain control of small economies unless governments restricted their activities. Furthermore, the prevailing view among
1 “It is sometimes difficult for sophisticated economists and politicians to under-
stand the deep historic and cultural problems some [developing] countries have with the
idea of free trade. Some still equate it with oppression from colonial days.” This comment
comes from Mike Moore, the former director-general of the WTO. Moore 2003, 133.