Interview with Daniel Griswold, Director, Centre for Trade Policy Studies, Cato Institute, Washington DC, USA

He is the Director of the Cato Institute’s Center for Trade Policy Studies. Since joining the Cato Institute in 1997, he has authored or co-authored major studies on globalization, the US trade deficit, trade and democracy, immigration and other subjects. His articles have been published in major newspapers and he also has appeared on news programmes on C-SPAN, CNN, PBS, NPR, Fox News and other TV and radio news and talk shows. He has testified before congressional committees on immigration, the trade deficit and the costs of protectionism. We had the chance of meeting with Mr Griswold in New York where he spoke on the theme of peace and stability through trade at the annual conference of the World Trade Centers Association.
Q: Could you tell us briefly about the Cato Institute?
The Cato Institute is a think-tank, which means that we are a non-profit educational institution. We do not lobby the government saying that you have to vote for this bill; we do not support particular candidates or parties. We are a “lobby” for ideas. At the Cato Institute, we promote ideas that support a free society, individual liberty and free markets.
Q: How are you financed?
All our money comes from private donations. We do not receive any government money; we do not work on contracts. The overwhelming majority share of our money comes from individuals, some wealthy individuals but mostly regular people who send us $100, $200 or $500 a year; these are people who simply share our beliefs. Some 20% of our funding comes from foundations, and just a little bit comes from corporations. It’s a very diversified funding source.
None of our funders can direct what we do. We are completely independent. We have a great brand name in Washington for being non-partisan, for dealing with issues that accord with our principles and that give our research more weight in the intellectual market place.
Q: How did you start conducting research on peace and trade?
All my work at the Cato Institute is aimed at some aspect of trade and international integration. What inspired me to do more work on trade and peace was, in fact, 11 September 2001.
After the terrorist attacks of that day, one of my colleagues did a study looking at trade in the Middle East, which is one of the least globalized regions of the world. Outside of oil, the Middle East does very little trading with the rest of the world. A shockingly small amount! This contributes to frustration in that part of the world. It is not so much poverty that breeds terrorism and things like that but a lack of opportunity, a kind of stagnant economy, a stagnant political process where there is no competition.
Based on that research, I thought we really have to step back and do a systematic study of trade, democracy, human rights and peace. Thus, in 2004 Cato published a study of mine looking at the relationship between trade, democracy and human rights. We found a strong correlation. Countries that are open to trade are more likely to be democracies and to respect human rights –– for various reasons. And that leads one to talk about trade and peace. There is a history behind that.
At the end of the Second World War, when the General Agreement on Tariffs and Trade (GATT) was set up in 1947, the founders were partly motivated by economic development and rebuilding after the war, and the very strong consideration they had was towards peace. What we have tried to do at Cato and through other publications is to show that it was not an isolated notion that they had. It’s grounded in human history that people who trade with each other are more likely to live in peace.
Q: Has that always been the case?
I’m not a historian, but you can read history and you will see a link from trade/economic relations to more peaceful social relations or peace between countries.
You do not normally think about Emanuel Kant as an international economist, but in one of his essay’s –– The Perpetual Peace –– he drew attention to the fact that, as people drew closer in their economic dealings, nations tend not to fight each other. In the United Kingdom in the nineteenth century, Richard Cobden and others promoted the repeal of the corn laws, and when Britain opted for free trade, it not only obtained better conditions for workers but also more peaceful relations.
In 1860 France and Britain signed a peace treaty and, looking back, you have to say that this treaty helped to encourage better relations. I do not think they have fought a war against each other since then!
Q: Lately, we have seen that some countries do not want to export their excess food. Would you say that this is worrying?
Global food prices are a huge concern. The poorer you are, the bigger the share of your household budget spent on food. So this is something unjustly hitting poor people around the world.
Q: Would you go so far as to say that globalization is at stake?
Some people would be tempted to blame globalization, but, you know, agricultural policies are the most protective in the world. That’s what the Doha Round has been stuck on for quite a long time now, and that is because rich countries like Switzerland, the US, Norway and others do not want to give up their subsidies and trade barriers. One of the negative effects of governmental intervention in agricultural policy is that prices are more volatile.
Let’s take rice, for instance. It is the number one agricultural product in the world in terms of consumption. Yet, only about 7% of rice production is being traded internationally. There are a lot of trade barriers, lots of protection. This means that the traded volume is small compared with overall consumption. So if there is any disruption, prices swing up and down. If, for instance, there were more international trade, when there is a drought in one country, supply would come from other countries. What you see right now, among many other things, is the result of decades of governmental intervention. That’s why some countries are reviewing their barriers on the trading of rice so that rice can come in from elsewhere.
Q: What should governments do instead?
The 7% of rice that is being traded is among the lowest portion of trade for any major commodity. Rice is also one of the most subsidized grains around the world. Very high import/export barriers average over 40% worldwide. The answer I believe is to eliminate governmental barriers to agricultural products.
Let the agricultural products flow to where they are needed and wanted most. If the government wants to help its people, let them subsidize consumption so that people can buy the food. But do not let the government control the production through export controls, import controls and subsidized production –– that’s what causes the problems.
Q: Governments often say that subsidies are a way of maintaining their populations living in remote areas –– a kind of strategic importance. Do you agree with that?
I think food is too important to be left in the hands of governments. We rely on the market to provide us with clothing, automobiles, housing, etc. I do not see anything different about agriculture. The reason why governments intervene in agriculture is not to serve the general public; it’s to serve special interests. In the United States, over the years, consumers have paid higher prices and higher taxes to maintain subsidies and trade barriers, so it did not serve any national interest.
Q: Do you think there might a return of protectionism as a result of the current food crisis?
There is a risk that we can turn away from the global economy, that governments will impose trade barriers in response to short-term problems in the economy. The food crisis has nothing to do with trade liberalization; it has to do with other things, such as global supply shocks with food and energy. Raising trade barriers would be a huge mistake. It would put into jeopardy all the tremendous gains that the global economy has made over the last thirty years in terms of reducing global poverty and create more strife among nations. We have cut global poverty in half since 1981. We have raised living standards for hundreds of millions of people.
One of the lessons from the 1930s was that rising protectionism not only reduces trade but feeds international resentment. Thus, it can actually make countries more likely to go to war with each other. That would be a very real threat resulting from the rise in protectionism.
Q: We are just ordinary people and not decision-makers. How do you think we can contribute to or hamper this evolution?
People of influence –– in the media, in the universities and think tanks –– have to continue to make the case to the public that our long-term interests are in a more open global economy. This makes good sense economically, and it’s good for the poor. It is good for promoting world peace. I think for political leaders the challenge is not to succumb to short-term temptations fed by public anxiety about trade and by favoured special interests. It calls for leadership. Being integrated into the global economy and having competitive industries is in our national interest–– consumers and producers being able to buy products at global prices and to strengthen and deepen our ties with one another. We had that statesmanship at the end of the Second World War.
Q: We do not have it any more?
Our leaders have forgotten the lessons of that period. We had this surge of global protectionism in the 1930s, we had a horrible world war in the 1940s and out of these ashes we decided to go in another direction, encouraging global trade through the European Union, through GATT. This not only raised prosperity in the West but it also resulted in more peaceful relations.
The idea of a war between France and Germany today is pretty much unimaginable, and I think part of the credit has to go to their increased economic integration. Europe is really one integrated economy rather than a fragmented collection of economies. Our politicians today are losing sight of those important lessons.
Q: Do you think that everybody is more concerned about the short-term perspectives than the long term?
One of the reasons why protectionism is always a threat is that politicians have a very short perspective. Yes, you can help industry A by raising tariffs, but what people do not understand is that, at the same time, you hurt the rest of the country. You aggravate your relations with your trading partners and you actually encourage lower overall standards of living, which increases frustration. So protectionism is never the answer to any problem.
Q: Some people say that globalization is good for some but not for all. For instance, a colleague said that before Margaret Thatcher started out with liberalization there were only five really poor countries in the world, but today there are so many more. Do you share this point of view?
No! I think it is not only wrong but totally ridiculous when you think about it. Go back to 1979 when Margaret Thatcher came into office. A far higher percentage of the world’s population was living in poverty then. In 1981, according to the World Bank, 41% of the world’s population lived on one dollar a day –– or less! That’s real poverty! Today, it’s 18% and it’s dropping. So under this era of globalization that Thatcher and Reagan encoruaged, we have cut global poverty in half. Around the world, some countries are still very poor. It is not because of globalization; it’s because these nations, for whatever reasons, haven’t participated in globalization. Those nations that have lowered their trade barriers and welcomed foreign investment –– that’s where you see the most progress against poverty.
If you look at mankind as a whole, and forget about individual nations, we are more equal than we were thirty or forty years ago. The reason is that we have seen the tremendous rise of the middle class –– in India, in China, to some extent in Latin America and other places. Some people have been left behind, but that is not the fault of globalization. That would be like blaming education for the fact that many people still do not have a quality education.
Q: You say that people are getting more and more equal. Don’t you think that this is how cultures disappear?
I have occasionally heard the argument that we are moving towards some homogeneous culture, with a 7-11 and a McDonald’s on every block. I simply do not see it. On the one hand, there are more similarities across cultures. If an American travels round the world, he may see a McDonald’s or a Wal-Mart abroad. Here in the United States you see more foreign brands –– foreign retailers, or businesses that are foreign-owned. For instance, Japanese culture has a lot of influence on young people, which is an interesting phenomenon.
So there is definitely more sharing of cultures, but can anybody say that they fly from Geneva to New York and feel that they are in the same culture? I do not think so. In fact, you cannot even go from Brussels to Amsterdam and say that you are in the same culture. As a country globalizes, I think it holds even more tightly to its own culture.
What globalization does is that it allows individuals to choose their culture to a greater extent. Rather than being trapped in one culture, they can pick and choose the best of several cultures. To me that makes life even more worth living and richer, and I think it liberates us more as individuals.
Q: What should we do –– should we all fight for peace?
The desire for peace is universal; we differ on how we achieve it. For some it’s nuclear disarmament, for others transcendental meditation, others favour arms control, others UN blue helmets. All I’m saying is that, if you really want peace, consider the historical and empirical link between trade, globalization and peace. If you really want peace, promoting trade, globalization and economic integration is one of the most effective ways that we have to achieve it.
Q: On our small level, what can we do?
A country like Switzerland can show the world that being a free society means being engaged in the global economy, trading with your neighbours, being globally competitive in important industries. The US government is lecturing other governments about their agricultural policies, but we at the Cato Institute criticize all governments –– Norway, Switzerland, US –– that are among the heaviest subsidizers and protectors of their agricultural production. This hurts poor farmers around the world –– and sets a bad example.
I think Switzerland is a country that –– as we might say in the sports world –– “boxes above it weight”. It is a small country but has a disproportionate influence on the world because of its banking and financing interests and the historical role of Geneva. It is a global meeting place, and it a good place for the World Trade Organization headquarters as it is seen as a neutral participant in the global economy.
One of the most important ideas flowing out of this World Trade Centers Association conference in New York is for a more open, integrated, free, global economy because of all the benefits that flow from it –– including a more peaceful and stable world.