- The Washington Times - Monday, August 6, 2001

Last month, just before 100,000 or more anti-globalization protesters demonstrated at the Group of Eight summit of world leaders in Genoa, Italy, President Bush made a startling proposition to reduce the level of debt in the developing world one of the chief aims of many of the protesters. But the G-8 rejected the proposal out of hand, even as they released vague statements about doing more to alleviate world poverty. The Bush proposal that up to 50 percent of World Bank aid to poorer countries be given in the form of direct grants rather than loans is a bold start and should be considered, but not without opening our markets to their exports, too.
From 1980 to 1998, the developing world saw its external debt as a share of gross domestic product (GDP) leap from an average of around 6 percent to more than 18 percent of economic output. Latin America has the highest percentage of debt to output more than 32 percent. Russia and Eastern Europe experienced an astonishing increase in debt during these years, from 3 percent to more than 28 percent of GDP.
There is no ignoring the fact that the developing world is awash in debt, and globalization also means that we will feel the sting of our neighbors' debts with them, even as we enjoy the benefits from opening their markets. Witness our current economic slump, made worse by, if not a result of, the financial meltdown in East Asia in 1997 to 1998. The decline in Asia that spread to Latin America, Russia and Europe was precipitated by tough World Bank and International Monetary Fund lending requirements to developing nations, including floating exchange rates, which let currencies collapse, and spending cuts and tax hikes, which pummeled domestic demand and made economic downturns in Asia even worse. If the rest of the world's consumers are hurting, it eventually cuts into our own export growth and economy.
In addition, U.S. trade barriers to exports from developing countries are especially punitive to the poor both theirs and ours. The U.S. textile industry continues to enjoy protective tariffs of 25 percent to 34 percent especially harmful to developing nations, which depend heavily on apparel exports. These same trade barriers also result in higher prices to American consumers another form of regressive taxation of the poor in our own country. Economic sanctions on foreign nations further restrict the ability of developing nations to escape from debt and poverty, yet cost the U.S. economy an estimated $19 billion each year in lost exports of goods alone while failing to achieve their political or policy aims.
Meanwhile, over the past few years, developing nations have been reducing their trade barriers. India has reduced its average industrial tariffs from 71 percent to 32 percent; Brazil from 41 to 27; Venezuela from 50 to 31. They know that developing countries with open economies grow faster, lifting millions from poverty. Developing countries with open economies grew by an average of 5 percent a year in the 1970s and 1980s, while those with closed economies grew just 0.7 percent a year.
Debt relief and a relaxation of lending requirements from the World Bank and other institutions are critical now to helping developing nations build the infrastructure needed to compete in the global economy. Further, the United States can do more to open its own markets, just as we ask of them.
There are going to continue to be winners and losers in the process of globalization, though on net there are more winners than losers when there are free and open markets. But we can help ease the pain of our global neighbors and also help ourselves. The anti-globalists are right about the need for debt relief to the developing world. It's the right thing to do for the developing nations, the poor and for the U.S. economy.

Robert Batterson is public affairs director at the John M. Olin School of Business at Washington University and co-author of "The Pros and Cons of Globalization."

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