The Foreign Service Journal, November 2006

Toward a World Trade Organization Fair Trade for All Joseph Stiglitz and Andrew Charlton, Oxford University Press, 2006, $30, hardcover, 315 pages. R EVIEWED BY J AMES P ATTERSON Concerned about a longstanding imbalance between developed and developing countries in trade negotia- tions, Nobel Prize-winning economist Joseph Stiglitz and Andrew Charlton, a research officer at the London School of Economics, have written Fair Trade for All to make the case that “trade policies can be designed in developed and developing countries with a view to integrating developing countries into the world trading sys- tem.” Both authors are critics of the Washington Consensus, a set of mar- ket liberalization methods some poli- cymakers see as vital to economic growth in developing countries. The authors do not reject the concept out of hand, but do argue that liberaliza- tion must be carefully managed. As evidence, they cite the Mexican expe- rience under the North American Free Trade Agreement. In what is perhaps the book’s most controversial line, Stiglitz and Charl- ton assert that “NAFTA is not really a free trade agreement.” As they docu- ment, since NAFTA was signed in 1993, U.S. farm subsidies have grown, not declined. As a result, Mexican imports of subsidized farm products have plunged their rural sector into extreme poverty. Clearly, trade liber- alization hasn’t worked to our south- ern neighbor’s benefit. Paradoxically, however, the NAFTA experience also provides the authors with support for their argument that trade liberalization can work if it is carefully managed. Toward that end, they support a “Development Round” of global negotiations under the aus- pices of the World Trade Organization that, in their view, would do a far bet- ter job of protecting the economic interests of developing countries than have previous multilateral trade agreements. Under previous accords, develop- ing countries have not realized the benefits that have accrued to devel- oped countries. Some analysts argue this inequity is calculated, even immoral, while others attribute it to other factors. Stiglitz and Charlton strongly advocate trade as a develop- ment tool. However it is judged, there has been an increased world- wide sense of responsibility for the economic plight of developing coun- tries, particularly since the riots at the 1999 WTO meetings in Seattle. Policymakers in the U.S. and Europe have gradually moved to seek trade agreements that provide more bene- fits to developing countries. The authors analyze the principles that would underlie a development round of trade negotiations. Their framework concentrates on produc- ing “development-friendly” agree- ments that incorporate such unquan- tifiable elements as equity and social justice. This approach would also afford developing countries special treatment in negotiations. As they point out, once developed countries are open to imports, the increased flow of trade from developing coun- tries, primarily in textiles and farm goods, brings them economic and social benefits. Economics is often called the “dis- mal science,” in part because individ- uals and countries with a lack of resources have such limited choices. Recognizing this power differential, developed countries have traditionally protected their industries with their own “special treatment” at the expense of developing countries. This approach may change over time; but once applied, protectionist measures become difficult to remove. The authors have selected a timely and important subject, recognizing that the general public needs to know more about government trade agree- ments. Unfortunately, their book is as dry and complex as an economics jour- nal. This is doubly disappointing because it is possible to write best-sell- ing books on trade; in fact, Stiglitz him- self did so with his 2002 work, Globali- B OOKS 78 F O R E I G N S E R V I C E J O U R N A L / N O V E M B E R 2 0 0 6 Stiglitz and Charlton assert that “NAFTA is not really a free trade agreement.”