There are declared crises such as in Syria, Lebanon, and Libya…. However, there are many other latent crises: underdevelopment is in itself a crisis. Why is it that the countries of the South that have signed the Association Agreement with Europe, that are part of GAFTA and/or Agadir, are not taking off after two decades of intense aid from the European Union and opening up to the Arab world? They have not even made any progress in development. On the contrary, the gap with the countries of Europe has widened.
Yet the Barcelona process wanted to make the South a zone of shared prosperity. The countries of the South are going to benefit from the “neighborhood” policy; they are going to sign the Association Agreement and benefit from the aid consigned in three consecutive programs totaling more than 20 billion euros over 20 years. Above all, customs duties will be abolished gradually, depending on the needs of the Southern countries.
At the end of the last century, the GATT (General Agreement on Tariffs and Trade) ended its career under the leadership of the United States and the assistance of the OECD (Organisation for Economic Co-operation and Development) countries, which was created between the most advanced countries in the middle of the thirty glorious years to discipline and boost trade and with the laudable aim of reducing the gap with the developing countries. The United States had become the world’s leading supplier after the Second World War. They suffered from the protection applied by European countries and the relative autarky practised by the developing countries. The GATT had to convince them of the benefits of openness. By the time the WTO came along, tariffs were being lowered everywhere and the exchange offices had disappeared completely. It took half a century later for the US to realise that openness was not an absolute good and that there were times when it was harmful.
Such a situation arose during Donald Trump’s term in office. The US was only able to restore its unemployment target by imposing a 10% import tax on steel and a 25% tax on cars.
The benefits of openness can be traced back to Adam Smith, in the mid-18th century, who explained the advantage of buying abroad what is cheaper to import than to produce and devoting one’s activity to products in which one has a comparative advantage. Michael Porter, a specialist in development programmes, changed the term to “competitive advantage” to emphasise the activity we should focus on to get the best out of the factors at our disposal. His work has certainly supported GATT policy in developing countries.
Southern countries have jumped into the Association Agreement (AA). They benefited from European aid programmes, from the opening of Europe to their products, from cheaper products to import, from a large programme of subcontracting and co-contracting with European industry; and yet the result 20 years later seems disappointing. It was known that the productivity of the countries of the South at the time of the signing and even the implementation of the AA, but it was not known that all the advantages of openness would not be sufficient to bring productivity up to standard, as was the case in all the countries of the South.
Yet history reveals a famous case. Portugal, where the sun never set, decided in the 19th century to adopt Smith’s ideas and open up its economy. As a result, it was demoted to the rank of a secondary local power. Meanwhile England, contrary to the aspirations of its famous philosopher-economist, closed its borders, protected its draperies and dominated the world.
Productivity, employment and market opening
It is undeniable that openness contributes to improving the nation’s productivity, due to the improvement of the terms of supply; as well as the reciprocal reception of its products and services.
However, this should not be at the expense of employment in the country. It is important to understand that a deficit in the balance of trade (goods and services) reduces employment opportunities in the country, just as an excess in this balance creates inflationary pressures.
Therefore, openness is beneficial insofar as it preserves the balance of foreign trade. One might think that the balance of payments is a safeguard for the trade balance. This is not the case because developing countries attract a profusion of FDI (foreign direct investment) which benefits from certain conditions, cheap labour, low taxes and a panoply of incentives that the developing country establishes to attract them. The temptation is very strong to use these funds to fill the gaps. Until one day, the crisis hits.
In the meantime, unemployment soars, the working population shrinks, and wages stagnate. The country adopts a cash economy to satisfy capital and provide for public expenditure. Emigration is in full swing. The socio-economic crisis is coupled with a political and sometimes security crisis.
ASCAME’s contribution to a better future
The difference between the development of the North and the underdevelopment of the South can be eliminated within a generation. This is certainly the will of both parties and the dearest wish of the chambers of commerce, the home of the economy, united in ASCAME.
Indeed, the wealth of the nation is the result of a good combination of capital and labour. Natural resources are superfluous; most advanced countries lack them. Capital is no longer a barrier either; the mobility of capital is so high that it is enough to have a good investment to attract as much capital as one wants. Human resources make the difference. In addition, at the level of human resources it is education.
Paradoxically, the level of education in the countries of the South does not justify the gap with the advanced countries. The only explanation lies in the organisation of factors, i.e. in public management.
Since its creation, ASCAME has been a vector of coherence between the public and private sectors; one only has to observe its unconditional support for the UPM and its close collaboration with the European Union. This should enable it to act as a laboratory for progress by drawing attention to the importance of the public service and the harm that chronicle can cause.
In the meantime, the economies of both North and South are free economies. It is difficult for states to intervene to re-establish the foreign trade balance necessary for progress. ASCAME can create a “think tank” in charge of restoring the balance without losing the benefits of economic openness. The index of progress is the fall in unemployment and the normalisation of the active population ratio (65% of the working age population).11/02/2021