Free Traders Pick Bad Time to Press for Liberalization
October 19, 1999
by Irwin Stelzer
The Sunday Times (London)
03 October 1999
A good idea at the worst possible time. That's about the best that can be said about the round of world trade liberalisation talks scheduled to begin in Seattle next month.
Start with the situation in America. The nation's trade deficit is running at record levels, threatening to crowd the 4% of GDP level that many economists say will cause foreigners to want to get rid of their already-huge holdings of dollars. Although freer trade should stimulate America's exports at least in equal amount to its imports, only those affected by higher imports will be heard from. And they will argue that any concessions that the American side may make will swell imports and, hence, the trade deficit, driving down the dollar. The sinking dollar, they say, will cause the cost of imports to rise, igniting inflation and forcing the Federal Reserve Board's monetary policy committee to raise interest rates, perhaps by so much as to trigger a recession in America.
The economics of America's trade position are not all that will overhang the Seattle conference. The conference comes in the middle of vice president Al Gore's increasingly desperate quest for his party's presidential nomination. Every day brings worse news for the man who was once considered a sure-bet for the nomination. His one opponent, Bill Bradley, is matching Gore in fund raising, is leading in the polls in the key primary states of New Hampshire and New York, and is running more strongly in the nationwide polls against the likely Republican nominee, George W. Bush.
Gore needs the trade unions to get their money and troops behind him. But the big industrial unions, most notably the steel and auto workers, are angry at what they consider to be the Clinton-Gore administration's refusal to take effective action to stem the tide of imported steel and vehicles. So they are holding back, watching events, particularly those in Seattle, where they want the American delegation to convert the trade-opening talks into trade-restricting ones.
Add to the political stew the likely candidacy of Pat Buchanan on the ticket of a third party, the Reform party. Spawned by Ross Perot, and long opposed to the North Atlantic Free Trade and other market-opening trade agreements, the Reform Party is eligible for $12.5 million in federal funds to buy television time and otherwise support its candidate. A busted flush in his Republican Party, Buchanan would use the Reform Party's platform and money to keep the trade issue at the forefront of the presidential and congressional election campaigns next year.
Then there is China. The administration is eager to have China join the World Trade Organization, as are most members of the business community, who see the more-than one billion Chinese as potential customers. But the business leaders, most of them Republicans, find themselves arrayed against the members of their party who see China as a repressive regime, encouraging abortion, persecuting religious leaders, and threatening peace and stability in Asia. This means that Republican members of congress, who can ordinarily be counted on to vote for free trade agreements, will be split between those who want to see more trade with China, and those who want to isolate it until it adopts more humane domestic policies and a more pacific foreign policy.
The Republican right is not alone in its opposition to new trade agreements. Liberal (in the American sense) groups are also opposed to anything that will, as they would put it, encourage the use of child and sweated labour in the developing world. In their minds, the workers in the developing world who produce the tee-shirts, trainers and other consumer goods that Americans have been importing in increasing amounts are being exploited by greedy multinational companies in unsafe and unhealthy factories for barely subsistence wages. More trade, they argue, simply means more exploitation of defenceless workers and more profits for big business.
They are backed by the environmentalists, who fear that open markets will enable overseas companies that keep their costs low by polluting the environment, rather than by shelling out for anti-pollution equipment, to out-compete more responsible companies.
Add the groups that say they want to protect the environment to those that say they want to protect overseas workers, and you have coalition of 1,100 so-called "public interest groups" in 87 countries who claim that the last (Uruguay) round of trade agreements "have functioned principally to prise open markets for the benefit of transnational corporations at the expense of national economies; workers, farmers and other people; and the environment."
Not all of the trouble will come from the American side. European Union farm ministers are determined to protect their constituents from the competition of America's far more efficient agriculture, and plan to use everything from animal rights and environmental issues to the question of U.S. farm subsidies to prevent freer trade in agricultural products. Not to mention the bogus health issue of the use by American farmers of the latest gene technology to increase productivity and lower costs. France's agriculture minister, in the great protectionist tradition of his country, has accused America's multinationals of attempting to "flood the world with their products, whether genetically modified or not," and French farmers blockade McDonald's shops in protest against a WTO decision that their country end its discrimination against bananas grown by American-owned companies.
The developing countries, too, are approaching the Seattle talks in a ungiving mood. They worry that America will insist that trade in intellectual property be made fairer by the elimination of theft of such products and by the unauthorized counterfeiting of everything from computer programmes to recorded music.
It's too late to cancel the Seattle conference, but many free trade advocates wish that the timing had been better. They will consider it a victory if they can emerge with the current trading system unfettered by new restrictions, and live to fight another day for freer trade.
Irwin Stelzer is a Senior Fellow and Director of Economic Policy Studies for the Hudson Institute. He is also the U.S. economist and political columnist for The Sunday Times (London) and The Courier Mail (Australia), a columnist for The New York Post, and an honorary fellow of the Centre for Socio-Legal Studies for Wolfson College at Oxford University. He is the founder and former president of National Economic Research Associates and a consultant to several U.S. and United Kingdom industries on a variety of commercial and policy issues. He has a doctorate in economics from Cornell University and has taught at institutions such as Cornell, the University of Connecticut, New York University, and Nuffield College, Oxford.