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Small is beautiful. Recently, it has become almost a clich� to attack globalization. An increasing array of commentators and institutions has questioned its benefits, especially those to the world’s poor. These critics argue that globalization has only served the interests of the rich and the powerful. Since international trade is deemed an icon of globalization, it shares the same criticism. Scholars even disagree among themselves on whether trade is an engine for growth at all. However, such criticism and accusations, even if they ring true, all miss one critical fact: Globalization, as well as international trade, has not had fair opportunities to contribute to economic development because its rules are distorted in a way that serves only “big” economic players. Here are some reasons for this regrettable state of affairs. Big players call shots First, big players, be they countries or industries, control the trade negotiations, such as the currently comatose Doha round talks under the auspices of the World Trade Organization (WTO). Even the Doha round, whose sobriquet is the “development” round, has been steered by the interests of big trading nations, such as the United States and the European Union, not by those of small African countries. Benin’s cotton and Cambodia’s textiles are not a main subject under the Doha round, even though they are the lifeline of these poor nations. Domestically, trade negotiators heed big local industries’ protectionist demands because negotiators’ bosses, namely politicians, are captured by these big players via their money (campaign contributions) or power (swing states). Voices of, and for, small players, such as consumers, although representing the genuine “public” interest, are easily silenced by often nonsensical noises that lobbies from these big industries produce. Second, these small players, both countries and industries, cannot capitalize on the countless niches that globalization (and free trade) could have generated but for distorted trade rules. Driven by revolutionary changes in telecommunication and transportation, most manufactured goods are nowadays produced in a dense network of global production chains. The production process is divided into multiple stages, and the global producers locate a geographical region for each production stage in the most economical way. For example, a U.S. shirt retailer could purchase yarn from India, have it woven and needled in Bangladesh, have it dyed and printed in Mexico and, finally, have it shipped to New York. Here, if this shirt were deemed made in Mexico and thus duty-free under the North American Free Trade Agreement (NAFTA), everyone involved in this global production chain would have won. In particular, those small players, such as Indian yarn producers, Bangladeshi weavers and Mexican printers, would have gotten their own shares in this glorious income-generating process of globalization. Of course, the U.S. retailer and U.S. consumers would have been winners as well in this happy globalization tale. Alas, this, like most fairy tales, is too good to be true. Under the innocuously sounding “rules of origin” (NAFTA Annex 401), this shirt is not regarded as an “originating good,” meaning one originating from a NAFTA country. Hence it is not duty-free but instead subject to handsome tariffs. These tariffs are nothing but extra taxes, which are borne disproportionately by low-income consumers. So, in reality, everyone loses, except for one special interest. Who is behind this awful scheme? Domestic textile and apparel producers that are big enough to lobby the government to legislate those eccentric rules. Why? Protection, of course (what else?). There is yet more bad news for small foreign players. If these players nonetheless remain competitive and thus undersell these big guys, the latter will accuse the former of “dumping.” Unlike in domestic trade, it may be a sin to sell cheap in international trade. Once these small exporters are stigmatized as dumpers, the importing country will offset their competitive edges by imposing hefty, often prohibitive, tariffs on them. Even though no anti-dumping duties may be imposed at the end of investigations, responding to long questionnaires from the anti-dumping authority itself is harassment to these small guys. Therefore, without tackling these distorted trade rules, globalization and international trade will continue to serve mostly big players and remain quite a limited blessing to the world’s poor nations and poor people. It would be politically infeasible, if not impossible, to remedy these distorted trade rules domestically, at least in the short term. Perhaps international trade law, such as the WTO norms, may offer a better solution to this problem. Sungjoon Cho is an assistant professor of law at Chicago-Kent College of Law, Illinois Institute of Technology.

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