“Trade liberalization has a critical role to play in economic growth by directly stimulating domestic firms to become more productive,” so says the U.S. Federal Reserve. As a result, the incomes of ordinary people typically rise.

This generally leads to an improved quality of life and a better-educated and politically-involved population. In turn, despair and hopelessness, characteristics commonly found among terrorists or their supporters, slowly turn to hope. And since economic growth empowers people to improve their standard of living, they are more likely to strap on money belts than bombs.

Establishing democracy in the Middle East and Northern Africa will be very difficult. But open economies help. Once markets are liberalized, their political systems follow. The adage “open markets open minds” is true.

Look at Mexico. Prior to the implementation of the North American Free Trade Agreement, Mexico’s ruling party, the Institutional Revolutionary Party, had an indisputable grip on the country since 1929. Post-NAFTA Mexico elected its presidents from opposition parties. For years, U.S. trade policy has promoted economic freedom, access to information, higher living standards and the rule of law in China. And as the country’s economy has become increasingly market based, its political system has begun to adapt to the point where the Chinese government recently approved a law that gives individuals more legal property protection.

A primary economic problem in the Middle East and Northern Africa has been the inability to participate in globalization.

Barriers to Trade Are Barriers to Liberty

A primary economic problem in the Middle East and Northern Africa has been the inability to participate in globalization. The region is replete with totalitarian regimes that use trade barriers to isolate themselves from the world, as well as each other. Excluding Israel, this has resulted in virtually no economic growth in the Middle East and Northern Africa since 1965.

Participation in global markets increases incentives to implement difficult measures that pave the way for countries to grow rich, the Federal Reserve says. For example, East Asia and the Pacific—a region that has welcomed global integration—has generated growth rates that are the envy of the world. Plus, in the short span of 1990 through 1998, the number of people living in extreme poverty there decreased 41 percent—one of the largest and most rapid reductions in history.

Globalization, Poverty and Inequality, published by the Progressive Policy Institute, a Washington, D.C. think tank associated with the New Democrats, contends that ”no country has managed to lift itself out of poverty without integrating into the global economy.” Former Mexican President Ernesto Zedillo agrees: “In every case where a poor nation has significantly overcome its poverty, this has been achieved while engaging in production for export markets and opening itself to the influx of foreign goods, investment and technology.”

Isolation Breeds Hopelessness

Thomas Barnett, a former senior strategic researcher at the U.S. Naval War College and author of The Pentagon’s New Map: War and Peace in the Twenty First Century, says that if we map out U.S. military responses since the end of the Cold War, we find an overwhelming concentration of activity in the regions of the world that are excluded from globalization’s core.

Barnett argues that regions or countries isolated from globalization or lacking economic and cultural connectivity with the rest of the world are where you will find instability, threats to the international system and terrorist networks. Consequently, Barnett notes that there is a far greater chance that the United States will be sending forces to these non-integrating regions at some point as opposed to those that are largely participating within the global community.

These areas, including the Caribbean Rim, virtually all of Africa, the Caucasus, Central Asia and the Middle East, have large numbers of poor young populations that lack hope as well as economic, intellectual and political connections with the rest of the globe.

With regard to the Middle East, Barnett comments that it's not the oil trade that accounts for the enmity the region has for the United Sates, "it's the fact that we don't have anything but the oil trade."

This article appeared in World Trade Magazine, June 2007, and in Impact Analysis, May-June 2007.
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John Manzella
About The Author John Manzella [Full Bio]
John Manzella is a world-recognized author and speaker on global business, competitive strategies and the latest economic trends. He also is chair of the Upstate New York District Export Council and founder of the ManzellaReport.com and Manzella Trade Communications Inc. His latest book is Global America: Understanding Global and Economic Trends and How To Ensure Competitiveness.




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