How To Move Toward Genuine Free Trade
TRADE-POLICY issues are heating up again. Although a new round of multilateral negotiations is under way through the 40-year-old General Agreement on Tariffs and Trade, the United States has launched an extraordinary offensive in a different channel of trade diplomacy. It has not only officially designated specific countries as exceptionally unfair in impeding US access to their markets; it is also threatening retaliation if these obstructions are not removed in a specified time.Skip to next paragraph
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Meritorious motivations underlie these new tactics, which were mandated by Congress in Section 301 of the 1988 trade law. Fairness, reciprocity, and a level playing field (foreign barriers far exceed our own) are stressed. We seek a world trading system in which American business, if given a fair chance, has a good chance to succeed. This would help to reduce our massive trade deficit and our monumental foreign debt.
The degree to which lost US business opportunities abroad are attributable to foreign barriers is debatable. Even more in dispute are the merits of the newfangled offensive. If there were no alternative to unilateral definitions of fairness and to militant reactions against barriers we deem unfair, then tilting with Super 301 (as the statutory mandate is called) might be justified as an unpleasant necessity in the face of foreign inertia.
But US recourse to such power tactics when multilateral machinery is in place, in fact while a multilateral negotiation is under way, suggests that a supercharged offensive like Super 301 isn't ``super'' at all as tact and tactics.
The US should press relentlessly for trade equity through the multilateral machinery at its disposal, even risking collapse of the current GATT round if what urgently needs to be accomplished is thwarted by recalcitrant protectionism.
Whatever the outcome of these negotiations, much will remain to be done to build a more open world economy. The US should get ready for other initiatives, always consistent with international rules. Deserving priority attention is a definitive, explicitly free-trade strategy, ironically something that the US's avowedly ``free trade'' policy has never had. This alone can encompass the complete range of barriers and practices impairing fair international competition: Being so comprehensive, this alone can generate a balance of concessions that each contracting party could consider equitable.
The goal would be not only totally free trade in accordance with a realistic timetable, but, inseparably, totally fair trade as well. Also vital to its viability are domestic adjustment/redevelopment strategies (consistent with a code of negotiated standards) to help ensure that free trade amply serves the national interests of the member countries, including, for the United States, the interests of every state in the Union.
Special provision would have to be made for the world's less-developed countries, which need equitable access to this free-trade area but cannot afford comparable commitments. These countries should not, however, get a free ride devoid of broad policy obligations (on trade, labor standards, etc.) in accord with their evolving capabilities.
The invitation to participate in forming the free-trade area should go multilaterally to all economically advanced countries, not bilaterally to one country, then another. All these countries would ultimately join: None could long afford to stay out.
A succession of bilateral free-trade pacts (beyond the existing agreements with Israel and Canada) would disrupt the highly productive multilateral trading system the US inspired after World War II.
In addition, the domestic adjustment strategy to backstop free trade with a gradual succession of countries bilaterally is not likely to be impelled by so fragmented a free-trade policy.
The US government does not appear prepared (or to be preparing) for a multilateral free-and-fair-trade strategy. Nor, with barely an exception, is there any advocacy of such an initiative anywhere else - even among the legions of self-styled ``free traders'' in academia, companies engaged in international business, or the vast array of think tanks.