TRADE : Third World Finds ‘Free’ Markets Closed : A U.N. study finds that barriers cost developing nations $500 billion a year--10 times what they get in aid.

Economists continually badger the poor countries of the world to rid their economies of protection, restriction and Marxist cant and transform them into free markets.

But when the poor countries do, they find that the global markets run by the rich countries are hardly free but closed and impenetrable instead. The rich do not practice what they preach.

That is the central theme of the annual report on human development released Thursday by the U.N. Development Program. The barriers to international trade--set up by the rich--cost “developing countries $500 billion a year--10 times what they receive in foreign assistance,” the report says.

BACKGROUND: Annual reports of the U.N. Development Program, the main U.N. arm in foreign aid, attract interest because of their human development indexes, a measure that combines income, education and life expectancy to determine the most developed and least developed countries of the world.

Canada displaced Japan this year as the most developed. The United States was sixth. At the other end of the scale, Afghanistan ranked 158th, Sierra Leone 159th and Guinea 160th.

The reports also assess the poor state of the developing world and a deliver a plea for help. This year’s critique, by spotlighting the closed global markets, covered new ground.

KEY ISSUES: “There is a terrible contradiction between national markets and global markets,” former Pakistani Finance Minister Mahub ul Haq, head of the team that wrote the report, said in an interview. “That’s the central issue.”

The U.N. Development Program estimates that developing countries lose $250 billion a year because their workers cannot work everywhere, $60 billion a year because of trade barriers raised by rich countries against the sale of Third World commodities and $190 billion because it is more expensive for Third World countries to borrow and obtain other financial services.

One of the great problems is debt. To pay back money owed to banks in the industrialized world, the poorer countries furiously increased the production of their main commodities. This overproduction, in turn, led to lower prices.

The U.N. Development Program, by factoring in these price reductions, concluded that the developing countries effectively paid an interest rate of 17% during the 1980s while the industrialized countries enjoyed 4% interest rates.

In the last three decades, the developing world has narrowed the gap with the industrialized world in life expectancy, literacy, infant mortality and nutrition. But the gap is widening in education, research and development, use of telephones and numbers of radios.

OUTLOOK: Haq believes that a new burst of creativity by political leaders is needed to transform the world economy much the way it was transformed after World War II. But his hope is tempered.

“The world has never (before) seen the changes of the last few years--the fall of communism, the end of the Cold War, even the end of apartheid . . . ,” he said. “But where is the human creativity to take advantage of this?”

Aside from recommending the opening of global markets, increases in foreign aid and a reduction in Third World debt, the report proposes the creation of a new U.N. Development Security Council with 22 members representing the rich and the developing worlds.

The Haves and the Have-Nots

A U.N. Development Program report rates 160 nations on their development. The measure used in the rating--called a human development index--combines income, education and life expectancy. It is referred to here as HDI value. Top 10

HDI Rank Country value 1. Canada .982 2. Japan .981 3. Norway .978 4. Switzerland .977 5. Sweden .976 6. United States .976 7. Australia .971 8. France .969 9. Netherlands .968 10. Britain .962

Bottom 10

HDI Rank Country value 151. Somalia .088 152. Guinea-Bissau .088 153. Djibouti .084 154. Gambia .083 155. Mali .081 156. Niger .078 157. Burkina Faso .074 158. Afghanistan .065 159. Sierra Leone .062 160. Guinea .052

Progress in Developing Countries Life expectancy: At 63 years, it has risen 17 years since 1960. Health care: Access to safe water has increased by more than two-thirds in the past 20 years. Education: Adult literacy rate has increased by more than one-third since 1970. Deprivation in Developing Countries Nutrition: More than a quarter of the world’s people do not get enough food, and nearly 1 billion go hungry. Children: Nearly 1 million children in sub-Saharan Africa are infected with HIV. Income: 1.2 billion people live in absolute poverty, barely surviving. Source: U.N. Development Program