Free trade rules
Listen up, antiglobalization activists: Not only does international economic integration boost the living standards and financial might of third-world countries, but their citizens actually depend on the fruits of free trade to survive.
An exaggeration? Not according to an eye-opening report released last week by the World Bank (WB). In the WB's preliminary assessment of the longer-term fallout from the Sept. 11 terrorist attacks in the United States, the WB asserts that as many as 10 million people living in third-world countries will be condemned to poverty next year, with the hardest-hit nations located in Africa. The reason, the report states, is simply a loss of income. African countries, which depend heavily on commodity exports, were already bracing for a projected 7.4% drop in export prices due to falling demand in the U.S., Europe and Japan before the attacks now that figure is expected to worsen. A grimmer outcome is the possibility that 20,000-40,000 children under the age of five could die from the economic consequences of Sept. 11.
If ever there was a compelling case for the importance of global integration, economic growth and foreign direct investment, the terrorist attacks are, albeit unwittingly, bearing this case out. While we have yet to learn the full economic ramifications of Sept. 11 let alone what will happen once the United States fully reponds to them its ripple effects are set to touch every market across the globe, slamming third-world countries the hardest.
Already global tourism is a shambles. Sixty-five percent of holidays booked to the Caribbean have been cancelled. The Middle East is expecting a steep decline in tourism revenue this winter, income it heavily depends on. Major shipping lines have increased their freight rates to India by 10-15%. Signs are also rife that increased insurance and security expenses are cranking up the costs of doing business everywhere, reducing the demand of wary consumers who are reluctant to part with their cash. And the cycle continues.
One of the more frightening prospects of the terrorist attacks for the world economy is the likelihood of a global retreat of foreign direct investment to safer havens. As the WB's Chief Economist Nicholas Stern says: "Maintaining world trade is more important than ever, especially in the face of an economic slowdown, which is often accompanied by pressures for increased protectionism."
So much for the arguments of antiglobalization protesters who claim that multinationals would do better to stay at home. Funny how their over-the-top antics, which at best seemed juvenile and misguided before, now seem downright embarrassing, and even dangerous.
