Cadbury

In 2002, imports to the United States from developing nations totaled a whopping $317 billion. (The United States is the single largest market for developing nations' goods.) Exports from the U.S. to those nations totaled $130 billion. Both imports and exports are important, but look at the difference, that is, the trade deficit that resulted for the United States: $187 billion. That's 44 percent of the entire trade deficit that the United States ran last year with all nations.

In other words, with developing countries, the United States buys a good deal more than it sells. Consider a few examples. Last year, the Philippines sold exports worth $11 billion to the United States and bought American imports worth $7 billion, for a deficit (to the U.S.) of $4 billion. Malaysia's exports to the United States exceeded its American imports by $14 billion. For Korea, the surplus relative to the United States is $13 billion; for Brazil, $3 billion.

It may be surprising, but high technology is now the largest export sector for developing countries. Information and communications technology accounted for $450 billion worth of exports by developing nations -- compared with $235 billion for resource-based goods and $405 billion for low-tech goods.

Not only does the United States buy hundreds of billions of dollars worth of goods produced by developing nations, it also invests heavily in those countries. Roughly three out of every eight dollars in foreign direct investment in Africa comes from the United States -- more than from any other country (France is second at 18 percent -- less than half as much). Between 1996 and 2000 (latest figures), the United States invested $9.2 billion in Africa, compared with $4.4 billion invested by France and $3.3 billion by the United Kingdom.

The integration and liberalization of financial markets over the past 20 years has allowed capital to flow to its best uses, with broad benefits globally. An academic paper published earlier this year by Geert Bekaert of Columbia University and two colleagues found that "equity market liberalizations, on average, lead to a one percent increase in annual real economic growth over a five-year period." That figure, say the authors, "is surprisingly large" (after all, GDP growth averages only about 3 percent a year). "Liberalization" means that foreign investors can invest in the securities of other countries -- their stocks and bonds. The researchers also discovered that the countries that gained the most from liberalization were those -- such as developing nations -- that were furthest behind but moving forward in implementing macroeconomic reforms.

For example, in the five years after liberalization, GDP growth in India averaged 5.7 percent annually, compared with 3.2 percent in the five years before liberalization. Thailand's average five-year growth was 8.7 percent after liberalization of its securities markets and 3.5 percent before. Of course, not all developing nations enjoyed such increases, but the average country did, and the results are powerful.

Again, investment is a two-way street. Because the United States is a relatively stable and safe place to invest, it provides an enormous haven for capital investments (in stocks, bonds, real estate, and whole businesses) from abroad. Those capital inflows provide the necessary support for imports into the United States, so that this country can sustain those large trade deficits. Income generated through investments in the United States is often used by foreign entrepreneurs and investors to start and expand businesses at home. Think of the United States as the engine room, powering the world economy.

The success of the United States has come not from its natural resources or its large population but from its free-market system, which allows people, either alone or in groups, to make their own choices (where they work, what they buy, what they pay), with little government interference. Capital and labor move to where they are most efficient. No wonder studies have shown a direct correlation between how free an economy is and how successful it is.

Liberalized trade -- in broadly multilateral, regional or bilateral agreements -- is a key ingredient in the recipe for prosperity. And the benefits for developing countries are even greater -- on a proportional basis -- than for the United States. New global trade negotiations will, if they succeed, generate $90 billion to $190 billion a year in higher incomes for developing nations, according to a study by Joseph Francois of Erasmus University in Rotterdam. Recent World Bank research found that developing countries that embraced globalization grew three-and-a-half times faster than developing countries that did not. As Kofi Annan, the United Nations secretary general, put it, "The