Why would developing countries gain power by unilaterally liberalizing trade?


I don’t follow the logic of Andreas Freytag and Sebastian Voll’s proposal that developing countries capitalize on the current crisis by unilaterally liberalizing their trade policies so as to pressure developed countries.

To get back on track after resolving the financial crisis, we will need new growth and investment opportunities. Economic development driven mainly by exports to the “Western World” will thus no longer be successful. Therefore, maintaining the old export-oriented industry structures and protecting home markets at all costs is not expedient. For future economic growth, another strong and global strategy is needed – impulses like those proposed in the Doha-round negotiations will be necessary.

The crisis offers an ideal window of opportunity. The emerging countries could now, for the first time, take the position in international trade policy to which they are entitled, given their increased economic weight, by putting the industrialised countries’ own reforms and global initiatives under pressure (Dhar et al. 2009). Unilateral reforms could be an alternative to revitalising the Doha round, which admittedly has a highly uncertain outcome. For example, emerging markets could open national services, public procurements, and contracts in infrastructure sectors, as has been frequently advised for South Africa for instance (OECD 2008; Draper and Freytag 2008)…

[W]e see a great opportunity for emerging economies to stand up against protectionism and use their new economic power to increase their political weight in international economic policymaking. By bringing global trade back on the agenda and taking steps to conclude successfully the Doha round, these countries can put pressure on the OECD. The economic and political impetus generated by such efforts to overcome the economic crisis and restore confidence in future growth should not be disregarded.

Perhaps unilateral reforms would spur economic growth, but that would make them a good idea any time, crisis or not. What about the current international policymaking environment means that unilateral reforms will “increase their political weight in international economic policymaking”? And how does unilateral liberalization put pressure on developed countries? Moreover, what does additional pressure produce? There are theories of trade policymaking in which unilateral reform alters foreign political economy considerations so as to spur sequential reciprocity, but they are neither familiar to the casual reader nor necessarily applicable to the current circumstances. Freytag and Voll fail to explain the causal mechanism that is the crux of their argument – how does unilateral reform generate political pressure?

We all want to avoid protectionism during the crisis and would be delighted to see growth-promoting reforms, but that doesn’t mean such liberalization is politically logical.