The New Republic Online


Domestic Disturbance

by Daniel W. Drezner

Only at TNR Online
Post date: 10.29.03

These are not the best of times to be an advocate of economic globalization. The Doha trade round seems dead in the water. None of the Democratic candidates for president sound comfortable with the notion of free trade. Worst of all, free market advocates are being forced to concede that the anti-globalization movement is making a salient point--hypocrisies riddle current U.S. international economic policy. When the Bush administration advocates a new global trade deal while simultaneously fretting about outsourcing, raising steel tariffs, and demanding that the Chinese revalue their currency, you know that the Washington Consensus is in trouble.

A free trader's mood turns even more sour when considering developments in Latin America over the past two months. Venezuela's Hugo Chavez has decided to impose an economic embargo against the Dominican Republic for reasons that defy all understanding. Brazil's government, led by president Luiz Inácio Lula da Silva, played a key role in blocking consensus at September's global trade talks in Cancun, Mexico, and then played the lead role in thwarting progress towards a Free Trade Area of the Americas (FTAA) at trade talks a week later in Port-of-Spain, Trinidad. Chavez and Lula have found company in Peru's Alejandro Toledo and Argentina's Nestor Kirchner, forming what's become a vanguard of new leaders distrustful of free flowing goods and capital.

But the piece de resistance is Bolivia. Earlier this month, a wave of protests against the government of President Gonzalo Sánchez de Lozada succeeded in forcing the president to resign. At the heart of the protests was the belief that Bolivia needs to turn inward. The New York Times quoted one protestor as saying, "Globalization is just another name for submission and domination." Evo Morales, the leader of the opposition, wondered aloud at a recent anti-globalization forum, "How much longer will the natural resources of Latin America remain in the hands of transnational companies?"


So is Latin America, the region that spawned the Washington Consensus and eagerly embraced the theoretical benefits of globalization in the '90s, about to become the first region to reject that consensus wholesale? Not exactly.

First, not all countries in the region share Brazil's reluctance to move forward on the FTAA. Most Latin American countries heavily criticized Brazil's tactics at Port-of-Spain. Even Brazil's MERCOSUR partners expressed ambivalence. And the domestic criticism of Lula's negotiating tactics grew so strong that the Brazilian president was forced to revamp his negotiating team. This does not mean that getting the FTAA off the ground will be easy. But there is clearly room for an agreement.

As for Bolivia, there is no question that resentment of trade--in this case, of the export of natural gas--was one of the reasons for the domestic unrest. Even so, the precise cause of the protest was not the transnational solidarity of indigenous third world peoples--a staple of the anti-globalization movement--but good old-fashioned nationalism. Many Bolivians were incensed at the idea that Chile would be a primary beneficiary of the proposed export scheme. This is, after all, the country that annexed Bolivia's coastal provinces following the 1879-1884 War of the Pacific.

Beyond the energy issue, most analysts agree that the far larger source of tension among the Bolivian population was the U.S.-led war on drugs. As the Bush administration has scored successes in fighting Colombia's troubling mix of anti-government rebels and drug traffickers, coca cultivation spread southward into Bolivia and Peru. It's not hard to see why the local populations balked when the American anti-drug offensive followed. Telling coca farmers to surrender their most profitable and portable crop flies in the face of market incentives, especially given their export potential. (This is doubly true when the resources for viable alternatives are wanting. When President Sánchez de Lozada asked the Bush administration for an additional $150 million to spend on social programs, he received a mere $10 million for his troubles.) Ironically, then, it was the least market-friendly component of U.S. foreign policy--the war on drugs--that triggered the unscheduled change in Bolivia's government.

Furthermore, despite the conventional view to the contrary, neoliberal policies have not failed Latin America. Consider Mexico. Before the country started to liberalize its economy in the mid-1980's, oil represented 90 percent of the country's exports. Now the numbers have been reversed--90 percent of Mexico's exports are non-petroleum products. Even in Bolivia there was evidence that Sánchez de Lozada's market-friendly policies were working. According to The Washington Post, when Bolivia went the populist and protectionist route in the mid-1980s, per capita income dropped by an average of 4 percent per year while inflation rose to 15,000 percent. In the decade after market-friendly reforms were implemented, the country's economy grew 4 percent per year on average; in the latter half of the 1990s, per capita income rose by 20 percent.

None of this means that the United States should breathe easy about Latin American stability. If the United States wants Latin America to put up with its drug policies, it needs to sweeten the deal by reaffirming its commitment to a strong FTAA. But if it does, the benefits will be considerable. It's worth remembering that the reason Mexico pushed so hard for NAFTA was that the government wanted to use the treaty to lock in its neoliberal reforms domestically--a strategy that clearly worked. A decade after NAFTA was ratified, Mexico is a stable democracy and a member of the OECD. Its major parties are committed to free markets and the rule of law.

The same is true for the FTAA and the rest of Latin America. The FTAA does not just serve the economic interests of Latin American governments. It serves the national interest of the United States.

Links to relevant documentation and further information can be found here.


Daniel W. Drezner is Assistant Professor of Political Science at the University of Chicago. He is the author of The Sanctions Paradox (Cambridge 1999). He writes regularly at


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