Free Trade Hypocrisy

By P.R. Ganapathy 

I've been reading the recent spat about the US Air Force's award of a Tanker Contract to a consortium of Northrop Grumman and EADS, the European Conglomerate and parent of Airbus, with great interest.

I have a strong sense of deja vu when I hear many of the arguments cited by opponents of the deal. Deja vu, because I remember the very same arguments being made by members of the Bombay Club, a collection of protectionist Indian businessmen, in the early 1990s, when India was contemplating opening up its economy to overseas competition.

I don't know if you remember that time, but India was forced to open up its economy under pressure from the Multinational lending institutions – the IMF and World Bank – during the balance of payments crisis of 1991-92. These institutions, and the Western Governments that controlled them, insisted on a lowering of import tariffs, freeing of capital and foreign exchange market controls and other liberalizing measures. Coke and Pepsi, GM and Ford entered India in the years that followed, and many businesses in the sub-continent either sold out to the multinationals (remember Thumbs Up?), or went under.

We shrugged our shoulders then, and treated this as a natural consequence of the changes that were taking place, because other industries showed their ability to be globally competitive. "This is the new world order promoted by the West" we said, and after the fall of the Soviet Union, we thought that it was perhaps a winning formula for "developing" our economies. We embraced it with all fervor, and another Asian Tiger was unleashed.

It therefore pains me now to see the West talking about the same trade protections that they forced us to dismantle, when the changes they thrust on us developing nations for so many years have come back to impact them. When US multinationals grew at breathtaking rates during the 90s, fueled by new-found revenues overseas, did anyone question it? Did they wonder about the lack of a safety-net for workers in third world countries who were out of work because their industries had vanished in the face of international competition? I seriously doubt it.

Fareed Zakaria correctly points this out in "What the World is Hearing" in the recent edition of Newsweek.

The US's hypocrisy in matters of democracy (supporting despots in the Middle East) created the disenchantment that fueled terrorism. However, given that this hypocrisy involves jobs (which affect people more directly) rather than politics (which doesn't), and also impacts much larger populations (Central and South America, all of Asia) I fear that the resentment that this will create will have much deeper and larger consequences. A sobering thought, indeed.

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