Free Trade Sows Seeds for Democracy

One of the most powerful forces for spreading democracy and human rights in East Asia and the rest of the world today may be the freedom to trade (search).

Political scientists have long noted the connection between economic development, political reform and democracy. Increased trade and economic integration promote civil and political freedoms directly by opening a society to new technology, communications and democratic ideas. Economic liberalization provides a counterweight to governmental power and creates space for civil society. And by promoting faster growth, trade promotes political freedom indirectly by creating an economically independent and politically aware middle class.

In an April 2002 speech urging Congress to grant him trade promotion authority, President Bush argued, "Societies that are open to commerce across their borders are more open to democracy within their borders." In a new study for the Cato Institute, "Trading Tyranny for Freedom: How Open Markets Till the Soil for Democracy," I conclude that that those assumptions rest on solid ground.

Around the globe, the recent trend towards globalization has been accompanied by a trend toward greater political and civil liberty. In the past 30 years, cross-border flows of trade, investment and currency have increased dramatically, and far faster than output itself. During that same period, political and civil liberties have been spreading around the world.

Every year, the New York-based human rights think tank Freedom House (searchrates every country in the world according to its political and civil freedom. It classifies countries as either "Free"--where governments are freely elected and civil liberties are fully protected; "Partly Free"--where there is limited respect for political rights and civil liberties; and "Not Free"--where basic political rights are absent and basic civil liberties were widely and systematically denied.

According to Freedom House, the share of the world's population living in countries that are "Free" has jumped from 35 percent to 44 percent. The share living in countries that are "Not Free" has dropped from 47 to 35 percent. And the share in countries that are "Partly Free" has increased slightly from 18 to 21 percent.

If we combine the ratings for political freedom with ratings for economic freedom, and in particular the freedom to trade with foreigners (from the Fraser Institute's most recent Economic Freedom of the World Report), we find that nations with open and free economies are far more likely to enjoy full political and civil liberties than those with closed and state-dominated economies.

Specifically, among the 25 rated countries in the top quintile of economic openness, 21 are rated "Free" by Freedom House and only one is rated "Not Free." In contrast, among the quintile of countries that are the least open economically, only seven are rated "Free" and nine are rated "Not Free." In other words, the most economically open countries are three times more likely to enjoy full political and civil freedoms as those that are economically closed. Those that are closed are nine times more likely to completely suppress civil and political freedoms as those that are open.

The percentage of countries rated as "Free" rises in each quintile as the freedom to exchange with foreigners rises, while the percentage rated as "Not Free" falls. In fact, 17 of the 20 countries rated as "Not Free" are found in the bottom two quintiles of economic openness, and only three--Mainland China and two oil-rich Gulf states--are in the top three quintiles. The percentage of nations rated as "Partly Free" also drops precipitously in the top two quintiles of economic openness.

One unmistakable lesson from the cross-country data is that governments that grant their citizens a large measure of freedom to engage in international commerce find it dauntingly difficult to simultaneously deprive them of political and civil liberties. A corollary lesson is that governments that "protect" their citizens behind tariff walls and other barriers to international commerce find it much easier to deny those same liberties.

When we examine the trend within countries during the past 30 years, we observe that a nation's growing openness to trade and globalization does often accompany an expansion of political and civil freedoms. For example, 20 years ago, both South Korea and Taiwan were essentially one-party states without free elections or full civil liberties. Today, due in large measure to economic liberalization, trade reform, and the economic growth they spurred, both are thriving democracies where a large and well-educated middle class enjoys the full range of civil liberties. In both countries, opposition parties have gained political power against long-time ruling parties.

In Mainland China, the link between trade and political reform offers the best hope for encouraging democracy and greater respect for human rights in the world's most populous nation. After two decades of reform and rapid growth, an expanding middle class is experiencing for the first time the independence of home ownership, travel abroad, and cooperation with others in economic enterprise free of government control. The number of telephone lines, mobile phones and Internet users has risen exponentially in the past decade. China's entry into the World Trade Organization (searchin 2001 has only accelerated those trends.

So far, the people of Mainland China have seen only marginal improvements in civil liberties and none in political liberties. But the people of China are undeniably less oppressed than they were during the tumult of the Cultural Revolution under Mao Tse-Tung. In the free-trade enclave of Hong Kong, public protests last year derailed a government proposal to enact anti-subversion legislation under Article 23 (search). Although no such public opposition is yet tolerated on the mainland, China's political elite seems to grasp that globalization and development will eventually have political consequences.

Human liberties cannot be neatly compartmentalized. Expanding the freedom of people to engage in transactions across international borders over time enlarges their freedom to exercise autonomy over other, non-commercial aspects of their daily lives and to shape and chose a government that will protect those basic rights.

Daniel T. Griswold is associate director of the Center for Trade Policy Studies at Cato Institute. His study is available at