End of the ‘Washington Consensus’? By Kevin Gallagher - Wednesday, March 09, 2011

Source : http://www.dawn.com/2011/03/09/end-of-the-washington-consensus.html

COLOMBIAN President Juan Manuel Santos sent shockwaves through Washington when he told the Financial Times that his nation is holding negotiations with China to build a multibillion dollar “dry canal” that would compete with the Panama Canal. After all, Santos said, China is “the new motor of the world economy”.
This deal is charged with politics. Colombia is trying to get the US to pass a long-stalled trade deal. And let us not forget that the original canal was to be the result of an agreement between the US and Colombia.
When the Colombians didn’t like the deal the US had on offer and threatened to squelch it, Washington supported Panamanian separatist movements and got itself a new country to build a canal with.
But that’s all water under the isthmus. Or so we thought.
Whether or not this deal goes through, it highlights the stark contrast between China’s foreign economic ventures and those of the United States.
For 30 years, Washington has been shopping a trade-not-aid based economic diplomacy across Latin America and beyond. According to what is generally known as the ‘Washington Consensus’, the US has provided Latin America loans conditional on privatisation, deregulation and other forms of structural adjustment. More recently, what has been on offer are trade deals such as the US-Colombia Free Trade Agreement: access to the US market in exchange for similar conditions.
The 30-year record of the Washington consensus was abysmal for Latin America, which grew less than one per cent per year in per capita terms during the period, in contrast with 2.6 per cent during the period 1960-81. East Asia, on the other hand, which is known for its state-managed globalisation (most recently epitomised by China), has grown 6.7 per cent per annum in per capita terms since 1981, actually up from 3.5 per cent in that same period.
The signature trade treaty, of course, was the North American Free Trade Agreement (Nafta). Despite the fact that exports to the US increased seven-fold, per capita growth and employment have been lacklustre at best. Mexico probably gained about 600,000 jobs in the manufacturing sector since Nafta took effect, but the country lost at least two million in agriculture, as cheap imports of corn and other commodities flooded the newly liberalised market.
This dismal economic record prompted citizens across the Americas to vote out supporters of this model in the 2000s. Growth has since picked up, largely from domestic demand, and exports to China and elsewhere in Asia.
Interestingly, the only significant card-carrying members of the Washington consensus left in Latin America are Mexico and Colombia. That explains why Washington was so shocked at Santos’s remarks.
Before China ‘gets’ Colombia, there is now a rallying cry that says the US must pass the US-Colombia Free Trade deal.
— The Guardian, London

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