Last week saw Laos formally become the World Trade Organization’s (WTO) 158th member. Before the ink had time to dry on the agreement, Asia-based pundits were already weighing in about the potential benefits of such a move, which took fifteen years in the making.
Gretchen A. Kunze, the Laos-based representative for The Asia Foundation writes that “[f]or Laos, membership is a solid indicator of the nation’s growing engagement in the global economy…In recent years, the small, landlocked country has achieved some of the world’s highest economic growth, generally ranging between 7-8 percent annually. As of yet the benefits of the booming economy have not spread much beyond the capital city of Vientiane, and Laos remains among the world’s poorest nations.”
But it is not just the fact that most of the country’s wealth is concentrated in the capital city, but rather that the income is unequally distributed throughout the country. A search of the World Bank’s world development indicators shows the shocking statistic that 66% of the country lives on less than $2/day.
The great hope here is that the WTO accession will provide a stamp of legitimacy that will attract increased foreign investors and thereby drive economic growth and reduce poverty. There are unofficial murmurs that the nation would also like to diversify its investors. Powerful neighboring countries – China, Vietnam, and Thailand – have dominated foreign investment in Laos. Until now, Western countries in particular have deemed the country’s investment and regulatory environment far too risky, and have passed over Laos in favor of countries with a more predictable legal and regulatory environment. The Lao people hope that the WTO acceptance will change that.
Let’s review some of the neoliberal conditions required to legitimize one’s country in the eyes of the WTO. Firstly, trade policy needs to be liberalized. This will assuredly send Laos’ millions of peasant farmers into even deeper poverty. With no legal protection against Laos forcibly opening up its markets to cheaper exports, the country’s poor, rural majority will either have to accept much lower prices on staple crops or will be unable to sell it to anyone. Rice exports currently account for 40% of the country’s GDP.
Moreover, as we saw in Haiti over the past decade, the local population becomes unable to feed itself and is left to the unpredictable trends of the global market. Even former US President Bill Clinton has come out against such free trade policies.
Another condition for membership is the deregulation of labor practices. Now, despite being a one-party autocracy, Laos is certainly no socialist utopia. The decision to join the WTO will lead to the increase in sweatshops in Laos, as has been the case in neighboring countries. I’m sure, as Ms. Kunze argues, Laos will attract more foreign direct investment (FDI) but at what social cost? Will we see that 66% of people living on the pittance of $2/day tick up even higher in the coming years?
Prashanth Parameswaran of The Diplomat does an impressive job of breaking down the hurdles Laos faces in order to extract some benefits to this agreement — including the country’s rampant corruption and political repression — but ultimately concludes that joining the WTO is “a tremendous achievement for a rapidly growing economy.”
However, let’s not forget — and the two authors above do point this out in their respective articles, to their credit — that Laos’ growing economy is due mostly to its abundance of natural resources, not to any brilliant economic strategic thinking on the part of Vientiane.
Laos is an economic backwater whose political leaders still seem stuck in the Cold War era. The political elites do not care about the well-being of their citizens. I wrote about the disturbing case of Sombath Somphone’s disappearance a few weeks ago. Additionally, there was the proposed dam project of the Mekong River, an adventure which would have cost upwards of $3.5 billion and which ecological experts had asserted could have led to a dire food security calamity for the impoverished people living along the river.
Many writers and analysts are sending plaudits Vientiane’s way for this historic decision. I’m sending condolences to the poorest of Laos whose piece of the pie will likely shrink even more from the negligible morsel it currently is.