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12/12/2005:

"Two countries, one booming, one struggling: which one followed the free-trade route?"

...The Harvard economist Dani Rodrik is one trade sceptic. Take Mexico and Vietnam, he says. One has a long border with the richest country in the world and has had a free-trade agreement with its neighbour across the Rio Grande. It receives oodles of inward investment and sends its workers across the border in droves. It is fully plugged in to the global economy. The other was the subject of a US trade embargo until 1994 and suffered from trade restrictions for years after that. Unlike Mexico, Vietnam is not even a member of the WTO.

So which of the two has the better recent economic record? The question should be a no-brainer if all the free-trade theories are right - Mexico should be streets ahead of Vietnam. In fact, the opposite is true. Since Mexico signed the Nafta (North American Free Trade Agreement) deal with the US and Canada in 1992, its annual per capita growth rate has barely been above 1%. Vietnam has grown by around 5% a year for the past two decades. Poverty in Vietnam has come down dramatically: real wages in Mexico have fallen.

Rodrik doesn't buy the argument that the key to rapid development for poor countries is their willingness to liberalise trade. Nor, for that matter, does he think boosting aid makes much difference either. Looking around the world, he looks in vain for the success stories of three decades of neo-liberal orthodoxy: nations that have really made it after taking the advice - willingly or not - of the IMF and the World Bank.
guardian.co.uk