The performance of the Chinese economy. powering ahead for a decade at nearly 10% growth per annum is helping us in many ways. We pay less for Chinese-produced goods, giving us wealth to spare for other things. The downward pressure of Chinese prices has helped to combat price rises at home.

China has become the workshop of the world. It supplies us with our white goods and electronics, as well as furniture, appliances, bicycles and textiles. According to Ted Fishman, author of China Inc., 1% of the whole Chinese economy goes to Wal-Mart alone. China has accelerated the pace at which advanced economies switch to producing more advanced goods and services.

Chinese demand for raw materials has given a major economic lift to suppliers of them, including Russia and South America. Chinese demand for energy has pushed up the price of oil to over $50 a barrel, forcing forward the drive to energy conservation in the West, and the development of substitutes like the hydrogen economy. While China has increased pollution as its economy expands, it is bringing nearer the time when it will be rich enough to produce cleanly and safely.

In China itself, economic growth has already lifted millions out of poverty, and promises to do the same for millions more. China has been moving, as several of its Asian neighbours have done, from being a poor nation to becoming a rich one. In economic terms China has been a success story, and it is a success which has benefitted the world as well as the Chinese.

Healthy skepticism of "fair trade" is catching on. In today's Scotsman, Iain Whyte writes:

Fairtrade goods may bring a token respite for a few but will ultimately fail in their goal... Genuine market access can solve the long-term problems, set trade on a genuinely fair footing between free participants, and help the world's poorest build prosperous lives.

Meanwhile, Tim Luckhurst in today's London Times says:

Among ideologically pure free marketeers the CAP is blamed for killing one person in the developing world every 13 seconds. From this perspective fair trade is not even an Elastoplast on a gaping wound. It is a diversion from reality that reduces pressure on the governments of rich countries to fight poverty abroad.

I'm just back from being on Britain's Channel Four News where I was discussing the Fairtrade scheme. The Fairtrade Foundation is calling on the public to "Check out Fairtrade". I agree entirely. Here are some key facts:

• We do not have free trade in farming. Rich countries engage in unfree trade. Developing country farmers are held back by unfree trade, not free trade.

• Fairtrade appeals to a minority of buyers. Only 1% of the world's coffee is Fairtrade. Most people buy according to price and quality.

• Fairtrade helps relieve middle-class guilt. By so doing, it takes the emphasis away from the real problem: Europe's agricultural policies.

• Mechanization means that only a small proportion of the world's coffee producers are actually needed. In Brazil five people and a machine produce the same amount of coffee as 500 people in Guatemala. We should help people adapt, not encourage them to stay in outdated jobs.

• Coffee prices are low because there is too much being produced, not because of the actions of multinational companies. Companies like Starbucks have helped increase consumption of coffee, which is good for producers.

• 25% of the world's Fairtrade coffee comes from Mexico, a relatively affluent country where the average income is $9000 (compared with $700 for Ethiopia). Mexico enjoys free trade agreements with the USA and Europe, and most of its jobs are industrial and service sector jobs. By helping Mexicans stay in the market, the Fairtrade scheme keeps the world price of coffee down and takes business away from poor coffee producers.

• Markets convey information through prices. The low price of coffee tells producers to produce more cheaply or exit the market. At the end of the day, too much coffee is being produced.

Timothy Garton Ash in today's Guardian argues that President Bush's trip to Europe this week highlights the need for more European integration. He says that Bush has met too many different European politicians, and would prefer in future for the US president to merely meet to EU figures, rather than national government ones.

But perhaps it is healthy for EU member countries to have their own voice internationally. Why take twenty-five voices and reduce them on the international stage to just one? When EU members disagree isn't it a good thing that those dissenting voices get heard?

Ultimately, it comes down to whether you prefer competition or consensus. In the competition model, different governments pursue different policies and then we can go and see which policies work best. Similarly, businesses follow different strategies and product lines, some win the marketplace, others lose. In the consensus model, governments collude together and pursue the same policies. Similarly, businesses collude as an industry together, fix prices and get protection from the government. I favour competition - both in governments and in business.

People I spoke to in Brussels last weekend seemed under no illusion that much of any use would come from George W Bush's visit. Smiles, platitudes, as if 'Old Europe' had never been said. But deep down the EU still hates America and the Americans think Europe is a bunch of wimps.

Right. My Brussels newspaper reported 'growing concern' that Tony Blair's planned London conference on Palestinian reform 'could damage the EU's standing in the Middle East peace process'. Excuse me: what 'standing'? When did the EU ever do anything positive and useful to promote peace, either in the Middle East, in Africa (where France still supports thug dictators in its ex-colonies), or in the former Yugoslavia?

If you make people richer, and get them to respect the rule of law, property rights, and democracy; if you get them trading freely with others; if you give their people the security they need to invest in shops and factories; well, then you have a hope of getting folk to live in peace. Rich, democratic countries don't go to war with each other. Their citizens won't support it - they have too much riding on peace, too much to lose.

That's where Britain is trying to get to by helping Palestine and other Middle East countries to restructure their economy and government. The EU has no 'standing' in the process because its dithering 'foreign policy' has simply delayed change and helped perpetuate the very evils that we need to excise from the world.

In Brussels for the CNE Capitalist Ball this weekend, I found a copy of European Voice laid out prominently in my hotel. At first I thought this was more insidious taxpayer-funded propaganda, but in fact it seems quite sound.

Indeed, I thrilled at the headline 'Get your coat, Mr Blair - you've just been asked to leave the EU'. Sadly it wasn't a news report, rather a piece by Charles Grant of the Centre for European Reform saying what might happen if Britain votes 'No' on the Constitution referendum.

Spain, of course, has just voted hugely in favour (though on a mere 40% turn-out, it means that less than a third of eligible voters actually came out to support the Constitution).

Any country could destabilize the Constitution. If it were a founding EU member, like France, the whole enterprise could be lost. If a Denmark or a Czech Republic voted it down, they'd probably be asked to vote again until they got the answer right. But the Brits are too bloody-minded for that treatment. And yet Britain is another mere latecomer, as far below the salt at the EU table as Estonia or Latvia, so if we voted 'No' we'd probably be booted out and offered some Norway- or Leichetenstein- or Iceland-style arrangement - in the European Economic Area but not members of the EU.

Of course, Norway, Leichtenstein and Iceland are stinking rich countries, so you might wonder: what's wrong with that? I'm certainly beginning to.

The Fairtrade scheme has come under criticism by Britain's Transport and General Workers' Union for not promoting "union rights". While all the major multinational coffee producers are unionized, none of the major Fairtrade producers (Cafedirect, Clipper, Green & Blacks and Day Chocolate) are unionized or have a recognition contract with a union.

According to the T&GWU, "We organise members across the food manufacturing sector and cannot differentiate between members in different firms. We certainly cannot promote fair trade when they don't use union labour - especially against companies that do recognise unions and engage in collective bargaining."

Is there a deal on development? Gordon Brown tells us there is, but it seems vague on detail. He took a commendable lead in pushing poverty up the world's agenda, and there is a new commitment by rich countries to do something. But they cannot agree on what to do. This is why they promise 'up to' 100% debt relief, and on a 'case by case' basis, falling short of an historic and sweeping commitment to end poverty.

Gordon Brown touted an International Finance Facility to raise cash by selling bonds, enabling future aid to be given now. The US, Canada and Japan were skeptical. He wanted the IMF gold reserves revalued and sold to help write of debts, which the US and Germany apparently did not support (perhaps along with people whose portfolios include gold).

The disagreement over methods has been concealed by an agreement to study the various proposals put forward, including the no-chance French proposal for an international tax on aviation fuel. As Times economic editor Gary Duncan put it,

…while the G7 now agree that something must be done about Africa, they remain deeply divided over what. Saturday's communiqué embraces the need to take action and to provide more resources. But it fails to even hint at a deal by which these objectives can be achieved. It merely papers over the diverse positions of the different G7 members by committing them to look at every idea cast upon the table: British, American, Japanese, and French. There is no consensus and much conflict. Like the separate realities of Africa and the West, the competing approaches taken by G7 members remain worlds apart.

The Adam Smith Institute has long advocated debt relief, coupled with measures to prevent new unproductive debt being incurred. We have supported humanitarian aid on projects to fight AIDS, conquer malaria and provide clean water. But the biggest help will be to open our markets and to stop subsidizing our industries in competition. As more and more people are recognizing, it isn’t about sharing our wealth with them, but about helping them to create their own. Yes, let’s be generous because we can. But the aim must be to make them independent of that generosity.

Something has happened to how people perceive the role of trade in development. Even last year this was anathema to many NGOs, who saw it as a tool used by Western multi-nationals to profit by exploiting poor countries. Rich countries had to be bullied and shamed into handing over more of their wealth to desperate poor countries.

Now it’s changed. Suddenly someone has taught some of the NGOs about wealth creation. They used to be terribly concerned about the distribution of the world’s wealth, now they are joining us in trying to have more wealth created. They used to talk about us exploiting them by buying their goods too cheaply. Some still do, and some still misuse donations for anti-capitalist political campaigns, but increasing numbers are joining us in urging rich countries to open their markets so that poorer people can create wealth by selling us their goods.

Of course, even as they embrace trade many still think in pre-Adam Smith terms of maximizing exports and minimizing imports, and urge them to protect their own markets with tariffs as they enter our markets. But we can be confident that this error, too, will not last long.

The wall of opposition to the use of trade to promote development is crumbling so swiftly and completely, that it calls to mind the gripping climax to the 1960 movie, Village of the Damned, when Zellaby (George Sanders) tries to conceal his thoughts from the alien children by constructing a brick wall in his mind. But we see the wall crumbling under their relentless pressure. This seems to be happening to the wall which blocks off trade and enterprise as the pathway from poverty.

The Economic Freedom of the World: 2004 Report recently released by Canada's Fraser Institute rates countries according to their economic freedom. It shows that free nations attract nearly $11,000 of investment per worker, 12 times more than the $845 investment per worker in unfree economies. Free economies attract $3,117 of foreign direct investment (FDI) per worker, compared to $68 for the least free nations. Economically free nations experienced 3.4 percent growth a year from 1980 to 2000, compared to just 0.4 percent for unfree nations.

Nations in the top fifth of economic freedom have an average per capita income of $26,100 compared to $2,800 in nations in the bottom fifth of economic freedom and economic freedom benefits the lives of all people including the poor. In nations in the top fifth of economic freedom, the average income of the poorest 10 percent of the population was $6,877 compared to just $823 in the least free nations.

Prosperity is as possible in Asia and Africa as it is anywhere else in the world. It is not related to natural resources or to climate or to population density but only to better or worse governance. Two of the most free and prosperous nations on earth are in Asia. Botswana is the freest country in sub-Saharan Africa and also enjoys much higher levels of income than the average in the area. In 1970 Botswana's per capita GDP was less than the average in the region at US $590 but by 2003 it had risen to $3,950 while the average had shrunk to US$564.

Linda Whetstone is chairman of the International Policy Network.

Catching on rather late to the way Blair and Brown are leading initiatives against poverty, Jacques Chirac has produced one of his own. The Economist suggests this might be an attempt to grab some limelight (for non-subscribers: p78 of current issue).

Chirac proposes an 'international solidarity levy,' which is a tax to the rest of us, to finance development directly. He proposes a tax on international financial transactions, a levy on countries which maintain bank secrecy, and a special tax on fuel used in air and sea transport, or a $1 levy on airplane tickets.

The tax on financial transactions is, of course, the Tobin tax which has been kicked around for more than 30 years. It would hit liquidity and could not distinguish normal trading from speculation. In covering all transactions, including those by private individuals, it would incur immense bureaucratic and administrative costs. It would not work unless it were universally applied and enforced equally.

The levy on bank secrecy can be taken as part of the EU attempt to harmonize taxes, and to punish places like Switzerland which allow people to escape from this imposition. This has more to do with stopping people escaping the high tax policies of many EU countries than with helping Africa.

Aviation fuel taxes or ticket levies are popular with some environmentalists who want air travel restricted to the rich, and think budget airlines are an environmental disaster. They, with Chirac, might want to see an end to the opportunities and choices which cheap air travel has brought to millions, but many disagree. The airline industry is in such poor financial shape that new burdens like this could knock it for six, knocking with it the industries which depend and thrive upon it, together with the employment they sustain.

Blair and Brown, instead of seeking compulsory new international taxes with all the consequences that would follow, have chosen to persuade rich countries to help fight AIDS and Malaria, and to support debt relief. Jacques Chirac might command more respect if he handed to those causes the subsidy France gives to its national airline, plus the subsidy which France and the EU give to his farmers.

After decades of failure to make projects and grants work, we seem to have learned little about poor countries. The Chancellor is currently in Africa, but a week will leave him no wiser. It takes years at grass roots level to understand how a poor country works, especially in Africa. There is an enterprising spirit, but it struggles in a sea of corruption. No medicine in hospital is given without a consideration for the nurse. No entitlement at the end of a queue is dispensed without a bribe. When Nigeria decided to give farmers free fertilizer, the farmers still had to pay the bureaucrats to get it. No rent remains uncollected in efficient local markets.

Poor countries, following their previous colonial administrators, are quite capable of crippling their own trade. For long periods in W Africa the export tax on cocoa was around 90% of export price. The farm gate price is seldom more than 1/5 of export price. Work out how much the grower received compared with what government took.

In Sri Lanka when the price of tea went up by 1p on world markets the government took it all as tax - a 100% marginal rate. Similar rates applied to rubber, coconuts, palm products and other farm products in the mid-eighties.

In corrupt countries aid cash goes into a black hole, often via Swiss bank accounts. Many countries remain poor because they are corrupt. It is not aid cash they lack, but good government. Adam Smith wrote of the need for peace, easy taxes, and a tolerable administration of justice. The lack of tolerable justice thwarts property rights, contract enforcement, and much that is essential for wealth-creation.

We can fund the fight against Aids and Malaria, and help with access to clean water. But please, no more talk about development aid. It is more useful to negotiate bilateral deals which erase corruption in return for trade access. That’s the way to reduce poverty.

I'm currently reading Philippe Legrain's book Open World: The Truth about Globalisation. In it, he takes apart many of the myths about globalization, carefully considering both sides of the debate.

Are campaigners working in the poor's best interests when they argue against globalization? Legrain points out that globalizing countries grew by 5 per cent in the 1990s, compared with only 1.4 per cent for non-globalizing ones. Poor countries that have adopted globalization are catching up with rich countries. These poor countries include the likes of China, India, Brazil, Mexico, Vietnam and Bangladesh. The bad news is is the poor countries that are not globalizing - like most of Africa and many Muslim countries - are staying poor.

As for the argument that poor countries should keep their tariff barriers, he shows that whenever poor countries do this, it is counterproductive. "In the 1960s," he says, "the fashionable plan for going from poverty to prosperity was to industrialise through import substitution. Poor countries should stop importing steel, cars and other industrial products... barriers could eventually be lifted, it was argued, once domestic companies had grown strong enough to fend for themselves."

Unfortunately, it was a complete disaster. In India, for example, it created national champions who "fleeced consumers, selling shoddy goods for inflated prices. Rather than investing their profits in better technology, they chose to lobby for more special favours from government... The fat cats lived the life of Riley; the poor, often literally, starved." The economy stagnated and, in the 1960s and 70s, living standards fell.

Today's Wall Street Journal Europe attacks those who complain that the US needs to export more and import less. These people believe that "the economy is being put in jeopardy by some monster called the current account deficit".

Much of the same thinking abounds in the UK, too. The Chancellor of the Exchequer gets attacked for an 'imbalance' in our economy due to a 'trade deficit'. A 'trade deficit' sounds like a bad thing. But as the Journal points out, the only country which exports more current account goods than the US is Germany, and it is not doing too well. Despite a 'trade surplus', Germany's growth was only 1.2% following three years of near-total stagnation. It also has double the unemployment rate of the US.

In other words, having a 'trade surplus' is no indication of economic success.

When debating about globalization, it often becomes obvious that (the ideological) supporters of 'trade justice' and 'fair trade' have a pretty modest vision of the perfect future for farmers in poor countries. They want them to be doing them exactly the same job in the future as they do today - but for more money. They look in horror at Brazil's coffee industry, where mechanization means that 5 people and a machine can do the same work as 500 workers in Guatemala. They look romantically at traditional farming techniques - where workers spend long days doing back-breaking toil - and think they should stay doing that.

This is why the Fairtrade scheme encourages farmers to keep in the market - rather than helping them to exit. By keeping the better-off coffee farmers who live in more open markets in the coffee market, they depress coffee prices and cause greater poverty among coffee farmers as a whole.

This is also why organizations like Christian Aid have opposed the repeal of the Multi Fibre Agreement because it will enable very poor countries to start producing textiles and encourage less poor countries to switch away from textiles.

The message of the 'trade justice' lobby: static economy good, dynamic economy bad.

Will 2005 be a year to worry about China? Growing at upwards of 9% per year since Deng Xiaoping’s economic reforms of the 1970s, China is already a world powerhouse, stimulating world growth by its demand for raw materials and selling us more of its finished goods. With a few years its economy will overtake those of Britain and Germany, and that of the US two or three decades later.

The worry is that China with its very cheap labour will make the world's goods, taking our jobs from the rest of us. Gary Duncan in a Times article is not worried. He says that:

Crucially though, such a proposition flies in the face of the basic economics of trade under the theory of comparative advantage first set out by David Ricardo. Comparative advantage means that countries are best off when they specialize in doing what they can do most cheaply, and then trade with others.

So, China's pool of cheap, relatively unskilled labour means that its advantage lies in concentrating on light, labour-intensive manufacturing while importing high-tech, high-value-added goods made in the West. China is not only a big producer but also a vast market for Western-made, capital-intensive goods. By the end of the decade, projections suggest that 100 million Chinese will have incomes matching those in Western Europe.

Duncan points out that we used to share the same worry first about Japan, then about the Asian tigers including South Korea which followed. It didn't happen. In 1965, Japan and the Asian tigers accounted for about 4 per cent of world GDP; today they account for about 16 per cent. Similarly, from about 4 per cent of world output today, China may account for 11 per cent or more in 20 years' time. They followed similar paths of expansion.

The message is "don't worry." China is growing richer and creating wealth on a world scale. We can trade our high-value-added goods with that wealth and get richer ourselves. Millions will be lifted out of poverty there, and increased choices and opportunities here.

Quiz Time - Treat yourself a fine Havana cigar after naming the small island subject to intermittent blockades, military intimidation, and a constant barrage of economic and diplomatic pressure by a neighbouring superpower.

Light up that corona, senor, if you mentioned Taiwan. Okay, that or Cuba. Both were agricultural and desperately poor fifty and more years ago and both have faced pressure from superpowers - tiny, communist Cuba by the capitalist United States and tiny, capitalist Taiwan by the communist People's Republic of China. But the similarities stop there.

In 1960, Taiwan's per capita income was about a measly $150 while Cubans were more than twice as wealthy, estimated at almost $400. Today, Taiwan's per capita income is $23,500 and still growing, while Cuba's is only $2900. Why?

Taiwan always gave its citizens enormous economic freedom, then in the past 25 years made itself into a vibrant democracy. Cuba offers virtually no economic freedom and no democracy at all. So Taiwanese relax in the same holiday resorts that you visit, while the Cubans cannot go anywhere unless they steal a leaky boat and paddle toward Florida.

In other words, the Taiwanese are free to manufacture goods and provide services that the rest of the world wants (read the label on your microchip), and the world rewards them with well-deserved wealth. Meanwhile Cubans are pretty much serfs and vassals of Senor Castro and his communista bureaucrats, and an island full of poor, teenaged girls try to sell themselves to middle-aged French waiters on cheapo package holidays.

Next time the parlour-pinks and limousine-lefties whine about US-Cuban relations, ask them why Cuba isn't as rich as Taiwan.

The Multi Fibre Agreement (MFA) expires this year. Graham Seargeant sheds no tears for it in his Times column, describing it as "the most notorious example of Western countries protecting their industries from the poor."

Many developing nations use textiles as their first springboard to economic growth, including Britain which led the way. Those who followed have faced rich countries anxious to protect their developed industries from cut-price competition. The MFA was a major instrument in closing their markets to these cheaper imports, and subsequently in keeping poorer counties to low-value unfinished goods. It has kept them from becoming richer. As Seargeant puts it:

The MFA allowed a fiendishly complex system of individual quotas to be imposed on low-cost exporting nations, perhaps the most damaging kind of trade barrier. It slowed import growth in a way that denied the price mechanism, set exporters against each other, invited ever more devious fiddling, encouraged corruption in distributing scarce quotas in exporting countries and subjected trade to bilateral political favours.

Not everyone takes relief at the MFA's exit from the scene. Christian Aid, reports Seargeant, "wants 'rich' retailers to stay loyal to suppliers and not go for the cheapest prices." Some of the would-be exporters also fear that developed counties, especially the USA, will use other tariff barriers to protect their struggling textile industries.

The real problem with the MFA was that it tried to manage and control an industry in which the world could have gained much more without such involvement. Free trade brings economic churn. Industries in developed countries have to keep moving as new nations compete against them. They have to move up-market, or switch to new products. The stability and comfort of settled jobs and permanent markets is not there. Nor should it be. The world gains from the progress and prosperity, and poor countries can lift themselves out of poverty.

Globalization and free trade cause dislocation and some pain, but the gains from them are immense. A managed protectionist system of tariffs, quotas and artificial prices denies us these benefits, and is ultimately unsustainable as well as undesirable. Goodbye MFA, and no parting tears.

Those of us who believe in a society that protects individuals obviously do not like oppressive regimes, such as those run by military dictators or communists. It is often argued that sanctions are a good way of opposing such regimes and help us show solidarity with those being oppressed.

The problem with sanctions is that they are rarely very effective. They tend to leave a country's elite in power. The elite remain wealthy, creaming wealth from the population. Overseas investment pulls out, and poverty and starvation grow among the population. In Iraq, sanctions were ineffective at removing Hussein or getting co-operation with the UN, but they did cause considerable suffering among the people.

Matthew Parris, in his autobiography Chance Witness, says that though his family opposed the policies of Ian Smith's Rhodesia (where they lived), their lives were made more difficult through sanctions. As a result, many liberal whites - who rightly opposed white-only rule - became more supportive of Smith because they now had a mutual foe: the sanctions. Smith remained in office for a decade and a half.

Particularly bizarre are the US's sanctions against Cuba, where the average income is $2900 a year. Since the rest of the world trades with Cuba, the sanctions are more about being seen to oppose Castro than about doing anything. But sanctions allow supporters of Castro to claim that the poverty in that country is caused by sanctions, rather than by the country's economic policies.

Some people argue that industries need protection from overseas competition because that is in the interests of the British economy. In reality, protectionism may be good for particular groups of people, but it is never good for an economy as a whole. How is this the case?

Consumers buy goods from another country because they are better in quality or price than the goods available domestically. Sometimes it is because the good is only produced overseas. Being 'better in quality' should be taken in a broad sense, as some people regard British real ale as the best quality beer, while others regard Belgium beer as the best. Consumers have different tastes and imported beer from countries like Belgium enables different tastes to be catered for.

Odd though it might sound, trade would be beneficial even in the implausibly extreme case of Belgium being better than the UK at producing everything. This is because it is Belgium's interest to specialize in those products that it can make most money on, and to use money they make to buy in the other things they need. So Britain and Belgium - even in this example - would benefit from some specialization and then trading their excess goods with the other. This is what is referred to as the Law of Comparative Advantage.

Trading allows more goods to be produced in total for the same amount of inputs, and therefore is more efficient. It is for this reason that protectionism and subsidies harm consumers and businesses alike. They prevent consumers from buying the goods they want at the prices they want and they prevent businesses from taking advantage of their relative low costs and selling cheaply abroad.

A piece by Tony Glover in The Business tells us that the most popular off-duty pursuit among Bangalore’s young IT professionals is not computer games but giant quiz sessions revolving around the Jeeves and Wooster stories of P G Wodehouse. By day many of them work in Britain’s outsourced industries, but evenings and weekends are spent in the "I say, tally-ho" world depicted in the Wodehouse stories.

According to Saurabh Srivastava, executive chairman of IT outsourcing company Xansa India, Britain's long-standing cultural ties with its former colony have given it a lead over non-English speaking European countries, who have not be able to take advantage of India's regiments of low-cost IT professionals.

Offshoring has given Britain a massive opportunity to dominate the [Indian] continent. UK banks and financial services companies have drastically reduced their overhead by outsourcing back office functions, while Continental financial institutions in Germany and France are still carrying the weight of massive in-house IT departments.

This adds more strength to the case that outsourcing generates jobs by making home industries more competitive, as well as creating new markets for home goods and services. The Confederation of British Industry says, "The practice of offshoring is but one manifestation of the growing integration of the world economy and is expected accelerate in coming years." It also makes the point that jobs being lost overseas tend to be semi-skilled, while those created are generally skilled or graduate jobs.

It is good that our cultural ties with India and its widespread use of English have given the UK a lead in this area, and satisfying that India’s rising class of educated high achievers takes pleasure in the timeless world of pre-war English social life. Dashed good, in fact.

Here I am in Oslo (brrr) for the launch of my book on Hayek - translated into Norwegian, thanks to my friend Dag Ekelberg, who runs the think-tank Civita here in Norway. I must say, he works wonders. He had 90 people in a tapas bar in downtown Oslo, talking about Hayek - in English, as a courtesy to me. That takes some doing. Bravo!

Civita has produced four books already since February, and is really stirring up public debate in Norway. The country needs it, let me say. It seems so consensualist, slightly stuck in the 1970s. When I got there, the trains were on strike, so were the lift mechanics, and various others... A bit like Britain before Mrs T gave us all a dose of competition.

Anyway, at our meeting on Hayek I was sparring with Professor Bernt Hagtvet from the University of Oslo, a larger-than-life character who is quite a celebrity hereabouts. He quizzed me about what Hayek might have thought about globalization, about the odd phenomenon of China (a largely privatized economy, but with a strict control of personal life), about the general squishiness of modern Western societies. All good questions, but you can't expect Hayek to anticipate every problem that came after him. Read the book!

It is sometimes believed that being anti-immigration helps politicians win elections. After all, opinion polls show that many people are concerned about immigration. The Tories made an anti-immigration message a key part of their 2001 General Election strategy. Should the Tories stick to this line at the next election?

In the US election, President Bush rightly supported greater immigration into the US throughout his campaign. Did conservative voters reject him? According to Cato's Daniel Griswold:

There is no evidence that President Bush paid a political price for his support for a more compassionate and just immigration system. His conservative base came out in force to support him, while the evidence mounts that immigration reform helped Bush with Hispanics. As a post-election news story in the Wall Street Journal concluded, "His longstanding appeals to Hispanics, on issues such as immigration, helped him carry 42 percent of their votes nationally - compared with 35 percent in 2000 - and a majority in Florida. That helped him achieve a comfortable victory in the critical battleground state."

It might be that British opponents of immigration will vote Conservative anyway. Perhaps a better election strategy would be to take a pro-immigration line - but against the existing system which encourages everyone to claim to be an 'asylum seeker'. It would certainly make better policy.

I was shopping on Oxford Street in London today at a prominent multinational clothing company. I took my three tops to the checkout and handed over some £20 notes. The young woman serving we asked, "Can I trust that these are genuine notes? Our tester isn't working today." Of course, I said. She then explained that when she had been at school, she'd bought a fake £20 note for a fiver, gone along to McDonald's, bought a hamburger and got lots of genuine change. "I don't think there's anything wrong with doing that. These multinationals don't deserve to be so rich, it's not as though ordinary people suffer. I'm all in favour of entrepreneurs - it's just Big Business I'm against. I'm in favour of robbing from the rich and giving to the poor. You might think it a cop-out to me to work here, but I need to earn some money to help me through university."

The clothes I bought are pretty damn cool, and that was why I shopped there. The only reason why that company is a big business is because millions of people like me like their clothes. I wasn't forced to buy from them - I chose them because they gave me what I wanted. Her distinction between being an entrepreneur and being a big business is rather odd. Big businesses get displaced if they lose the entrepreneurial spirit and stop reacting to consumer demand. These new competitors then become big businesses. The clothes shop I was using isn't all that old and has won market share from older competitors. Its success is something we should celebrate, not resent. Besides, being against multinations is so 1990s.

Some people argue that that, as part of trading ethically, we should avoid buying from countries that are oppressive. Others go further, saying that the government should prevent trade with such countries. It certainly seems sensible to impose sanctions on a country that we are at war with, preventing shipments that might benefit the other country's war effort. But it seems to me that, as a general rule, trade sanctions, whether done on an individual or governmental basis, might do more harm than good. I don't want dictators and oppressors to gain financially, but if jobs are lost in oppressive countries, does that help topple the leadership, or does it just help make the lives of the people even worse?

I was recently giving a lecture at the University of St Andrews Liberty Club. One of the audience pointed out that she was wearing expensive clothes that she could have done without. Perhaps, she suggested, that we in rich countries are selfish by consuming so much. The question reminded me of Buy Nothing Day - each November there is a campaign to encourage us not to shop on a particular day. The people behind the campaign seem to think that we buy too much, and that this deprives others in the world.

Unfortunately, those who argue that we should consume less in order to help poor countries are suffering from sloppy thinking. When we go shopping, we buy products from all over the world, including from very poor countries. Refraining from engaging in this trade is bad for poor countries because it reduces their ability to create wealth and their income. To the extent that Buy Nothing Day has any effect, it is to hurt those in poor countries.

More good news from rapidly developing economies. This time it is India, close behind China in its push to achieve growth through market economics and trade. Gary Duncan, Economics Editor of the Times, reports that:

Radical free-market reforms since the early Nineties have helped to make India one of the world’s most dynamic economies. In recent years, India has seen growth which, if it continues at present rates, could allow the sub-continent to overtake Britain, France, and Italy in terms of GDP by the end of the next decade.

The elections earlier this year replaced the ruling National Democratic Alliance (NDA) by a Congress-led coalition, and were briefly hailed by Western left-wingers as a defeat for the economic reforms. However, Sonja Gandhi chose Manmohan Singh, the original architect of those reforms, as prime minister. This makes it unlikely that India will return to its traditional economy (and traditional poverty). Duncan tells us that:

Growth is expected to slow to a pace of about 5 to 6 per cent over this year owing to patchy monsoon rains, which are crucial to India’s agricultural sector, and high global oil prices. However, leading economists expect that India will continue to grow strongly at average rates of 5 per cent or more over the long term.

Anne Krueger, the first deputy managing director of the IMF, is reported as saying that India could enjoy growth as fast as 10 per cent for a number of years. Continued growth will lift more people out of poverty each year. The rise of India and China to the status of major economic powers tends to be overlooked by those reacting more to political news, but it promises to bring far-reaching changes to the world as it spreads the benefits of wealth to such a huge chunk of humankind. The wealth-creating power of the market offers the prospect that poverty could become the exception, rather than the norm, for most of humanity.

A World Bank report says that rapid growth in East Asia has lifted 250m people there out of extreme poverty within the last five years, some 40m last year alone. The region, which includes China, includes emerging market economies such as Malaysia and Thailand, plus Indonesia and Vietnam, as well as small island economies such as the Solomons and Fiji. It does not include India, which has also seen rapid growth lift millions more out of poverty.

This is excellent news. It supports the idea that poverty is best fought by creating wealth, not by transferring it. Now that most of the world has stepped onto that upward path leading to wealth via market economics and trade, we can look forward to increasing numbers escaping from the cycle of subsistence and starvation which has been humankind’s lot for millennia.

No doubt people will still lobby for more foreign aid to be given to the governments of poorer countries, but if we invest in their economies and buy their goods, we will probably be doing more to help them.

(The World Bank report is covered in the Times, CNN and the BBC.)

It's 20 years since Band Aid released "Feed the World" in order to raise money for starvation relief in Africa. But did it do any good?

In individual cases, yes, obviously. But humanitarian aid does not get to the root cause of the problem. Once again we have a crisis, this time on Sudan's western border with Chad, where Sudan's scumbag government and the militias it supports have attacked and killed thousands, simply on the grounds of their ethnicity and religion. There, it's pointless to send food aid because the government simply isn't letting it get to the people who need it.

Adam Smith wrote that to lift a country out of poverty, you need "peace, easy taxes, and a tolerable administration of justice". But our world institutions haven't exactly excelled in bringing those conditions about.

Indeed, what use is a UN where all countries, however vicious, count equally - where even genocidal Sudan can be voted on to the Human Rights Commission? It's time the world's liberal and democratic nations got together: as Brookings scholars Ivo Daalder and James Lindsay wrote in this weekend's Financial Times, we need a formal alliance of democracies. A world body that would make it very plain to tyrannical and genocidal governments that their age has passed, and that would act positively to spread democracy and the virtues of peace and free trade across the planet. For there is no prospect of prosperity until those essential conditions exist.

The Dublin Economics Workshop in Kenmare last weekend made me understand just how committed to Europe are the Irish. Some love the EU for all those social funds (but they've added barely half a percent to Ireland's recent surge in economic growth). Or for all the farm subsidies (the country is certainly a patchwork of tiny fields like over-subsidized France, but in fact farming is now pretty insignificant in Ireland.

The Economist this week cites several structural an policy changes that have made sleepy Ireland now the Celtic Tiger. Of those, I'd say the huge tax cuts, particularly in corporate taxes, are what did it. Of course, if you cut tax and sort out your supply side, it helps to have a wider, single market on the demand side. So you can credit EU membership with helping, if not creating, the turn-around.

But now Ireland is in trouble again. The boom has left it a high-cost, high-wage economy: the manufacturers that came in because of cheap labour and zero corporate taxes are now drifting away again. And property prices have gone sky-high.

To me, that looks like the consequence of inflation. We had the same over-heating in the early 1970s in the UK, and property soared then too. And inflation, in turn, is a consequence of Euro membership: interest rates too hight for faltering Germany have been too low for booming Ireland. But love is blind, and in Ireland you feel rude if you even hint that something European might be the problem. I fear it will end in tears.

Turkey, you may have noticed, is a step nearer to EU membership, having been given a cautious 'Yes' by the EU Commission.

You may have noticed. But Britain's Foreign Office doesn't seem to have. I've just had a very distressed call from Ozen Demircan, a board member of the Economists Platform in Ankara, cancelling a meeting in London. He'd applied for a UK visa months ago, and has been pestering them daily for the last three weeks, but... stony silence.

It's not because my friend Ozen is some bad guy. Quite the opposite. It's just that Britain's visa system has broken down. Blame politicians.

A while back, the UK government impressed us with how it wanted Britain's thrusting entrepreneurial economy to have unfettered access to the world's best brains. It unveiled (ta-da) the Highly Skilled Migrants programme to fast-track their visa applications so huge numbers of them could jet into Britain. Embassies were told to rush visas through.

They did. But when the newspapers started to report that obvious frauds (like the one-legged 'roofer' from Romania) were getting in, politicians flipped to exactly the opposite extreme.

The result is that businesspeople now have to wait weeks or months, like my friend, to get permission even to visit the UK. If you want to work here, it's worse. The delay under the HSM scheme is around 3 months. If you are already here and want to extend your visa, you can wait 5 months (indeed, you're 2 months quicker to go home and apply afresh).

Maybe it's time we simply contracted out the whole business? There must be some Highly Skilled Migrants out there who could run it?

Coleen McLoughlin, the teenage girlfriend of the £27m Manchester United football star, has been in trouble with the authorities. Returning to Manchester from a trip to New York, Cusoms officials found she had £40,000-worth of undeclared designer clothes and jewellery in her bag. She said she was "entirely unaware" that she had to pay import duty on valuables over a total value of £145.

Any why should she be? Charging tourists, even rich ones, for the items they carry in from abroad, makes no sense at all. It's a nice little earner for the Treasury, of course. But it has very little rationale. And since every country has its own different rules, confusion abounds.

We should scrap all import duties, and demand that other countries do the same. It's time to cut through the tedious horse-trading of the WTO talks. If tourists can buy better, more fashionable, or cheaper clothes and jewellery elsewhere, why shouldn't they bring them in? It might encourage our own producers to do better.

If you're worried about drugs coming in then hire sniffer dogs, but let's give airport Customs officials early retirement.

Stephen Pollard, writing in today's Times of London, discusses Christian Aid's campaign against free trade. He writes:

There are two possible explanations for Christian Aid's misguided campaign. One is that those behind it are so stupid that they simply do not know that free trade involves abolishing subsidies, pulling down trade barriers.

The other is that they know that full well, but have an anti-globalisation, anti-prosperity agenda that they are attempting to disguise with an apparent but misleading concern for the developing world.

A recent paper by the Centre for the New Europe calculated that one person dies every 13 seconds somewhere in the world - mainly in Africa - because of the EU's protectionism. The Christian Aid campaign's stated aim would make that figure even worse.

I'm just back from a debate on the lunchtime Channel Four News about Christian Aid's campaign against free trade. They have been running adverts in the national press attacking free trade, saying that it causes poverty.

Unfortunately, their campaign is very confused. They attack the EU's protectionist farming policies - which lead to subsidised goods being dumped onto world markets - and call this 'free trade'. But far from being free trade, the EU's protectionism is an example of unfree trade.

Christian Aid does not think poor countries should liberalise. Yet it is precisely the countries which have liberalised that have got rich. India spent the first thirty years after independence engaging in protectionism. It stayed poor. It is only since India embarked on liberalisation that it has experienced high levels of economic growth. This has lifted millions of people out of poverty. Hong Kong in the second half of the 20th century adopted free trade and became a model example of how a country with low skills and very limited natural resources can become wealthy.

The problem is not that we have too much free trade: we have too little.

A new blog, The Road to Euro-Serfdom (a play on title of F. A. Hayek's most famous book), does not seem too impressed by Jaques Chirac's call for a global tax to relieve world poverty. Of course, such a tax is very unlikely to happen, so Chirac's call is a costless way of looking like he is doing something about poverty. But much better would be if Chirac became a campaigner against EU protectionism. If the EU stopped trying to be 'fair' to EU farmers and opened itself up to free trade, it would save the life of one needlessly poor person every thirteen seconds (source: Centre for the New Europe). Now isn't that something really worth doing?

A new report from the World Bank, Doing Business in 2005, shows that poor countries impose on average three times the administrative costs and twice the number of bureaucratic procedures as rich countries. The current issue of The Economist picks out some of the striking contrasts.

For example, registering property requires one step in Norway, but 16 in Algeria. Incorporating a business takes two days in Canada, but 153 in Mozambique. Sacking a worker in Guatemala costs a firm three years’ worth of wages, compared with almost nothing in New Zealand…

In Haiti, for example, it takes 203 days to register a company, which is 201 days longer than in Australia. In Sierra Leone it costs 1,268% of average income, compared with nothing in Denmark. To register in Ethiopia, a would-be entrepreneur must deposit the equivalent of 18 years’ average income in a bank account, which is then frozen.

In Lagos, Nigeria’s commercial capital, recording a property sale involves 21 procedures and takes 274 days. Official fees amount to 27% of the value of the transaction. In Norway the task takes less than a day and costs only 2.5% of the price of the property.

Relief from poverty does not come from a few crumbs tossed from rich tables; it arises from domestic economic growth. It is difficult to force people to be entrepreneurial, but they can be encouraged to be so if it is both easy and rewarding. The burdens and the fees should be lower, not higher, in the poorer countries because they need the growth more.

It would be helpful if a model schedule could be drawn up setting out 'best practice' to be followed in encouraging small firms to become established and business deals to be transacted. Countries which signed up to that schedule would gain the benefits in both investment and growth, and their citizens would climb out of poverty.

Bruce Bartlett explains how insourced jobs to the USA pay 16% more than the average domestic job. While some companies are coming under criticism for moving jobs abroad in reality they are simply freeing up workers who can be more gainfully employed in white collar jobs while simple manufacturing tasks are outsourced to countries such as China.

Machine diggers took the jobs of workmen with spades. At the time, there were people who objected. But on that basis, should we create jobs by replacing each man with a spade with 50 men using teaspoons? Despite specific jobs being lost, the total number of jobs has increased. On the same vein outsourcing jobs to other countries frees up labour that can then be more productively employed.

One country's outsourcing is another country's insourcing. Advantages like those apparent with international trade occur, it makes sense that if a foreign country can supply us with a commodity cheaper than we ourselves can make it, better buy it off them. This is no less true with labour. According to the McKinsey Global Institute for every $1 outsourced the United States gains between $1.12-$1.14. The less developed country insourcing the jobs also experiences rising wage rates and lesser unemployment. Thus the standard of living increases in both countries.

People from both Left and Right tell us to buy home-produced goods. They believe countries get richer by exporting, and are made poorer when they import. Better to buy things made at home, they say. A former Prime Minister Harold Wilson famously supported a campaign called I'm Backing Britain.

Some NGOs push a modern form of this theory. They oppose the idea of western exports to the third world, believing that this redistributes wealth from poor to rich countries. They think there is a fixed quantity of wealth, and that rich countries are enriched by taking it from the poor.

The idea that trade is about making others poorer was shattered by Adam Smith, David Ricardo and others, but their insight is not generally understood at a popular level.

Countries get richer through international trade because trade increases efficiency and reduces costs. I might, as an individual, try to be self-sufficient by making my own shoes, I suppose I could find a cow to get leather from, I could process it, trim it, and add the wood and hemp to assemble it. It would take weeks for much lower quality than I could find in any shoe shop. As Smith pointed out, specialization of labour increases wealth. In other words, imports usually make us richer.

We buy cheaper from abroad and are richer by the amount we saved. They, in turn are richer because they have our money. Everyone gains. Those who say it is in our interests to buy British are simply echoing the mercantilist myth. It may be in the interest of a particular British company if everyone buys British products, but it is not in the general interest.

There is an old saying that everyone wants competition when they are buying, but protection when they are selling. The truth is that it serves everyone’s interest if we have free trade in both.

Another cliff-hanger, another WTO deal. Although it could take another two years to fill in the fine print, the deal commits the developed countries to phase out agricultural support, starting with export subsidies.

This is excellent news for developing countries. For years rich countries have talked piously about free trade, while denying access to their own markets for the products poorer countries could sell them. The developing countries have been poorly advised by organizations whose ethos is anti-capitalist and anti-trade. Instead of joining the world's economy, they have been encouraged to 'protect' it from the very investment which could advance it. Instead of responding to market changes, they have been encouraged to believe that these should be thwarted, if possible, by intervention.

In fact trade, not aid, has been the route to betterment. Countries which have traded have grown wealthier, whereas those which have not traded have performed poorly. Aid could be used to cancel debt. It could be used to promote access to clean water. It could be used to conquer malaria, aids and other diseases. But for growth and prosperity, it is trade which delivers.

Another low cost airline in US has just chosen Airbuses. These aircraft are at the centre of a trade dispute between EU and US. Just as produc