The United States is not willing to eliminate its generous farm subsidies or its restrictions on the entry into the US market of products like sugar and beef from Brazil, Stiglitz told IPS in an interview Friday in the Ecuadorian capital.

As such, he said, the Free Trade Area of the Americas (FTAA) being negotiated by 34 countries of the Western Hemisphere will not benefit the economies of Latin America and the Caribbean, but will instead prolong an unequal relationship.

The United States maintains that it will begin dismantling tariffs under the FTAA in 2005, but it would be more just if it would resolve the existing disparities before moving forward with the trade negotiations, said the Nobel laureate.

Stiglitz, former chief economist of the World Bank, was in Quito invited by the Central Bank of Ecuador to lead a series of conferences.

The expert stated that the ''dollarization'' models, like Ecuador's, or the one-to-one parity of the local currency with the US dollar, as is the case of Argentina, increase vulnerability to the ups and downs of the global economy.

''What is happening in Argentina, with its fixed exchange rate, has demonstrated some of the problems that can arise from a scheme like that,'' in particular, an overvaluation of the dollar and an undervaluation of the Argentine peso, he said.

The economic crisis has caused a dramatic depreciation of the Brazilian real, while Argentina has found it difficult to export its goods to Brazil or to Europe because of its fixed exchange rate.

Furthermore, Stiglitz argues that the slowdown of the international economy could bring those countries that are tied to the dollar profound uncertainty with respect to their ability to compete on the global market.

And the weakened economies of the United States and Japan are fueling a worldwide recession, which conspires against the economies of Latin America, he said.

''It used to be said that when the United States sneezed, Mexico caught a cold. With globalization, the United States sneezes and all Latin America, and much of the rest of the world end up with a bad case of the flu. Unfortunately, the United States now has pneumonia,'' he said.

The economist, a professor at Columbia University in New York, says the crisis affecting Argentina and Brazil is likely to worsen because ''commodity sales will fall, and the countries that export to the United States will have to do so at lower prices.''

Prior to the Sep 11 terrorist attacks, the US economy was seeing a slowdown in economic growth, though it had not yet given way to full recession. However, ''the attacks are now pushing the economy into a recession,'' stated the expert.

Stiglitz took aim at the World Trade Organization (WTO) for defending the interests of industrialized countries to the detriment of the developing world. Though almost all countries are included in its membership, ''the WTO bases its resolutions on the interests of the inhabitants of the (industrialized) North,'' he said.

One example of this is the push the wealthy nations gave the agreement on intellectual property rights in the Uruguay Round of multilateral trade negotiations, which culminated in the creation of the WTO, he pointed out.

The Sep 11 attacks could also harm the globalization process itself because Washington is adopting extreme security measures that will inflate its budget.

Furthermore, there are more and more layoffs each day in various sectors of the US workforce, which will hurt purchasing power, and therefore contribute to the recession.

Stiglitz does not think Washington is applying the appropriate measures, but is instead staking its bets on ''the typical market policy, which is ineffective in staving off the wave of recession.''

More than ever, given the current context, the United States should focus on fiscal policies and aim government spending at combating the effects of the terrorist attacks. The recovery of the economy, which could take a long time, depends on effective stimuli from the government, he said.

In comments on the case of Ecuador, Stiglitz said that while the national economy recorded moderate growth last year, production is still not much better than what it was during the crisis two years ago, and that the stagnation of the standard of living here is cause for great concern.

The economist also questioned the five-percent economic growth rate established among the conditions of an agreement between Ecuador and the International Monetary Fund (IMF).

He said he would not give much credence to such projections because they are based on old models, and he insinuated that the IMF invents some of the figures involved in its calculations.

Stiglitz is a co-recipient of this year's Nobel Prize for economics alongside George Akerlof and Michael Spence, also of the United States. Through their research conducted in the 1970s and 1980s, the three highlighted the distorting impacts on the market by what they called ''asymmetric information.''

Their approach is based on the premise that one of the parties in a trade relationship is always at a disadvantage when it comes to information on the item being negotiated. Government must step in to correct the problem by playing a stronger role in the market, say the three laureates.

Stiglitz explained in Quito that the market economy is characterized by imperfect information, which carries grave consequences for the development of economies at the global level. The models that have been applied are erroneous because they ignore important phenomena like unemployment.

According to the economist, this is due to the fact that ''existing models are based on assumptions that information is perfect, when the free market is characterized by imperfection.''

Stiglitz chaired the Council of Economic Advisers during the first years of the Bill Clinton presidency (1993-2001), and later served as chief economist at the World Bank.

He stepped down from that post in late 1999 after issuing repeated criticisms of the IMF for its handling of Southeast Asia's financial crisis of 1997-1998.

His commentaries sparked the ire of top financial officials of the time, including World Bank president James Wolfensohn, IMF managing director Michel Camdessus, and US Treasury Secretary Lawrence Summers.

Since then, Stiglitz has dedicated himself to the academic sphere, teaching economics, business and international affairs at Columbia University.

Upon announcing the Nobel Prize winners on Oct 10, the award's committee in Norway underscored Stiglitz's numerous contributions towards ''transforming they way economists think about markets.''

Copyright 2001 IPS -Inter Press Service

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