Fw: (ftaa-l) FTAA is Threat, Warns Nobel Laureate

["Nello Margiotta" <animarg at tin.it>]

 QUITO - Free trade in the Americas will not benefit
 the Latin American or Caribbean nations as long as the
 United States refuses to lift its import barriers,
 warns US economist Joseph Stiglitz, a winner of this
 year's Nobel Prize for economics 
 The United States is not willing to eliminate its
 generous farm subsidies or its restrictions on the
 entry into the US market of products like sugar and
 beef from Brazil, Stiglitz told IPS in an interview
 Friday in the Ecuadorian capital> 
 As such, he said, the Free Trade Area of the Americas
 (FTAA) being negotiated by 34 countries of the Western
 Hemisphere will not benefit the economies of Latin
 America and the Caribbean, but will instead prolong an
 unequal relationship 
 The United States maintains that it will begin
 dismantling tariffs under the FTAA in 2005, but it
 would be more just if it would resolve the existing
 disparities before moving forward with the trade
 negotiations, said the Nobel laureate 
 Stiglitz, former chief economist of the World Bank,
 was in Quito invited by the Central Bank of Ecuador to
 lead a series of conferences.=20
 
 The expert stated that the ''dollarization'' models,
 like Ecuador's, or the one-to-one parity of the local
 currency with the US dollar, as is the case of
 Argentina, increase vulnerability to the ups and downs
 of the global economy.=20
 
 ''What is happening in Argentina, with its fixed
exchange rate, has demonstrated some of the problems
that can arise from a scheme like that,'' in
 particular, an overvaluation of the dollar and an
 undervaluation of the Argentine peso, he said.=20
 
 The economic crisis has caused a dramatic depreciation
 of the Brazilian real, while Argentina has found it
 difficult to export its goods to Brazil or to Europe
 because of its fixed exchange rate.=20
 
 Furthermore, Stiglitz argues that the slowdown of the
 international economy could bring those countries that
 are tied to the dollar profound uncertainty with
 respect to their ability to compete on the global
 market.=20
 
 And the weakened economies of the United States and
 Japan are fueling a worldwide recession, which
 conspires against the economies of Latin America, he
 said.=20
 
 ''It used to be said that when the United States
 sneezed, Mexico caught a cold. With globalization, the
 United States sneezes and all Latin America, and much
 of the rest of the world end up with a bad case of the
 flu. Unfortunately, the United States now has
 pneumonia,'' he said.=20
 
 The economist, a professor at Columbia University in
 New York, says the crisis affecting Argentina and
 Brazil is likely to worsen because ''commodity sales
 will fall, and the countries that export to the United
 States will have to do so at lower prices.''=20
 
 Prior to the Sep 11 terrorist attacks, the US economy
 was seeing a slowdown in economic growth, though it
 had not yet given way to full recession. However,
 ''the attacks are now pushing the economy into a
 recession,'' stated the expert.=20
 
 Stiglitz took aim at the World Trade Organization
 (WTO) for defending the interests of industrialized
 countries to the detriment of the developing world.
 Though almost all countries are included in its
 membership, ''the WTO bases its resolutions on the
 interests of the inhabitants of the (industrialized)
 North,'' he said.=20
 
 One example of this is the push the wealthy nations
 gave the agreement on intellectual property rights in
 the Uruguay Round of multilateral trade negotiations,
 which culminated in the creation of the WTO, he
 pointed out.=20
 
 The Sep 11 attacks could also harm the globalization
 process itself because Washington is adopting extreme
 security measures that will inflate its budget.=20
 
 Furthermore, there are more and more layoffs each day
 in various sectors of the US workforce, which will
 hurt purchasing power, and therefore contribute to the
 recession.=20
 
 Stiglitz does not think Washington is applying the
 appropriate measures, but is instead staking its bets
 on ''the typical market policy, which is ineffective
 in staving off the wave of recession.''=20
 
 More than ever, given the current context, the United
 States should focus on fiscal policies and aim
 government spending at combating the effects of the
 terrorist attacks. The recovery of the economy, which
 could take a long time, depends on effective stimuli
 from the government, he said.=20
 
 In comments on the case of Ecuador, Stiglitz said that
 while the national economy recorded moderate growth
 last year, production is still not much better than
 what it was during the crisis two years ago, and that
 the stagnation of the standard of living here is cause
 for great concern.=20
 
 The economist also questioned the five-percent
 economic growth rate established among the conditions
 of an agreement between Ecuador and the International
 Monetary Fund (IMF).=20
 
 He said he would not give much credence to such
 projections because they are based on old models, and
 he insinuated that the IMF invents some of the figures
 involved in its calculations.=20
 
 Stiglitz is a co-recipient of this year's Nobel Prize
 for economics alongside George Akerlof and Michael
 Spence, also of the United States. Through their
 research conducted in the 1970s and 1980s, the three
 highlighted the distorting impacts on the market by
 what they called ''asymmetric information.''=20
 
 Their approach is based on the premise that one of the
 parties in a trade relationship is always at a
 disadvantage when it comes to information on the item
 being negotiated. Government must step in to correct
 the problem by playing a stronger role in the market,
 say the three laureates.=20
 
 Stiglitz explained in Quito that the market economy is
 characterized by imperfect information, which carries
 grave consequences for the development of economies at
 the global level. The models that have been applied
 are erroneous because they ignore important phenomena
 like unemployment.=20
 
 According to the economist, this is due to the fact
 that ''existing models are based on assumptions that
 information is perfect, when the free market is
 characterized by imperfection.''=20
 
 Stiglitz chaired the Council of Economic Advisers
 during the first years of the Bill Clinton presidency
 (1993-2001), and later served as chief economist at
 the World Bank.=20
 
 He stepped down from that post in late 1999 after
 issuing repeated criticisms of the IMF for its
 handling of Southeast Asia's financial crisis of
 1997-1998.=20
 
 His commentaries sparked the ire of top financial
 officials of the time, including World Bank president
 James Wolfensohn, IMF managing director Michel
 Camdessus, and US Treasury Secretary Lawrence Summers.
 
 Since then, Stiglitz has dedicated himself to the
 academic sphere, teaching economics, business and
 international affairs at Columbia University.=20
 
 Upon announcing the Nobel Prize winners on Oct 10, the
 award's committee in Norway underscored Stiglitz's
 numerous contributions towards ''transforming they way
 economists think about markets.''=20
 
 Copyright 2001 IPS -Inter Press Service