OCTOBER/NOVEMBER 1999 · VOLUME 20 · NUMBER 10 & 11
T H E L A W R E N C E S U M M E R S M E M O R I A L
A W A R D
OCTOBER/NOVEMBER 1999 · VOLUME 20 · NUMBER 10 & 11
T H E L A W R E N C E S U M M E R S M E M O R I A L
A W A R D
The September 1999 Lawrence Summers Memorial Award goes to the World Trade Organization (WTO), for its “10 Benefits of the WTO Trading System” paper.
Here is how the “10 Benefits” paper begins:
“From the money in our pockets and the goods and services that we use, to a more peaceful world — the WTO and the trading system offer a range of benefits, some well-known, others not so obvious.”
“The world is complex. This text highlights some of the benefits of the WTO’s "multilateral" trading system, but it doesn’t claim that everything is perfect — otherwise there would be no need for further negotiations and for the rules to be revised. ...”
“There are many over-riding reasons why we’re better off with the system than we would be without it. Here are 10 of them.”
Award-winning excerpts:
On peace:
“Crudely put, sales people are usually reluctant to fight their customers — usually. In other words, if trade flows smoothly and both sides enjoy a healthy commercial relationship, political conflict is less likely.”
“What’s more, smoothly-flowing trade also helps people all over the world become better off. People who are more prosperous and contented are also less likely to fight. ...”
“The GATT-WTO system which evolved in the second half of the 20th Century helps governments take a more balanced view of trade policy. Governments are better-placed to defend themselves against lobbying from narrow interest groups by focusing on trade-offs that are made in the interests of everyone in the economy.”
Quite often, governments use the WTO as a welcome external constraint on their policies: "we can’t do this because it would violate the WTO agreements."
In a 1991 internal memorandum, then-World Bank economist and current Deputy
Secretary of Treasury Lawrence Summers argued for the transfer of waste and
dirty industries from industrialized to developing countries. "Just between
you and me, shouldn't the World Bank be encouraging more migration of the
dirty industries to the LDCs (lesser developed countries)?" Summers wrote.
"I think the economic logic behind dumping a load of toxic waste in the
lowest wage country is impeccable and we should face up to that. ... I've
always thought that underpopulated countries in Africa are vastly under
polluted; their air quality is vastly inefficiently low [sic] compared to Los
Angeles or Mexico City." Summers later said the memo was meant to be
ironic.
The ten benefits:
1. The system helps promote peace
2. Disputes are handled constructively
3. Rules make life easier for all
4. Freer trade cuts the costs of living
5. It provides more choice of products and qualities
6. Trade raises incomes
7. Trade stimulates economic growth
8. The basic principles make life more efficient
9. Governments are shielded from lobbying
10. The system encourages good government
“The system helps to keep the peace. ... This sounds like an exaggerated claim, and it would be wrong to make too much of it. Nevertheless, the system does contribute to international peace. ...”
On jobs and protectionism:
“Even when a country has difficulty making adjustments, the alternative of protectionism would simply make matters worse.”
On lobbying:
“The system shields governments from narrow interests.”
And our favorite, on good government:
“Under WTO rules, once a commitment has been made to liberalize a sector of trade, it is difficult to reverse. The rules also discourage a range of unwise policies. For businesses, that means greater certainty and clarity about trading conditions. For governments it can often mean good discipline. ...”
Source: WTO web page, http://www.wto.org/wto/10ben/10ben00.htm. Thanks to Bob Olsen for circulating the URL.