Free Trade or Development?

At the culminated Latin American Economic Forum held in Cartagena, the chief executive of the nation, in addition to declaring his sympathy for the United States and ensuring that we are part of what he understands to be the “back yard” of that power, showed frustration with the attitude of the U.S. government by postponing the signing of the Trade Promotion Agreement, alleging that it “is more favorable to the U.S. than to Panama.” This last sentence, if it contains a grain of truth, also contains a prominent error: If it is true that it favors U.S. interests, it damages the interests of national development.

Dani Rodrick, a Harvard University professor, has again made it clear in a recent article, entitled “The Return of Industrial Policy,” that state intervention that supports the development of certain sectors and industries has been key to the successful development of economies. In support of his view, Rodrick calls attention to several examples, ranging from the politics of China and the export of grapes and forest products from Chile, to the recent statements by the French president recognizing this liberal thinking, in the sense that this type of policy is essential to preserving manufacturing jobs in his own country. Additionally, in the case of the United States, it not only reminds us of the case of the development of the Internet, but also the decision of that country’s government to spend $40 trillion on the development of what it considers to be “green technologies.” Rodrick’s assertion is reinforced by the historical analysis conducted by Ha-Joon Chang in his book “Bad Samaritans,” which clearly demonstrates that, from the development of Great Britain to that of South Korea, progress has been promoted by government intervention through industrial policy.

One of the problems of the so-called Trade Promotion Agreement is precisely that it eliminates the possibility that Panama make effective industrial policy. This is evidenced, for example, in Article 10.9, which refers to the so-called performance requirements and prohibits the use of a set of levers for development. According to the article, in Panama for example, investors could require their counterparts to export a certain percentage of their production, that they ensure a certain level of domestic input content, or that they agree to transfer technology, production processes or other types of knowledge of their property. We are facing an arrangement that harms the interests of national development and therefore the vast majority of the country. It is an irrefutable reality, even though it may be difficult to understand for those who come from the ranks of the commercial capital.