For a GOP president, George Bush hasn't been very assertive in pushing free trade. This has changed in recent days. He sent Alan Greenspan to China to open its financial markets and made a dramatic concession on farm supports to help jump-start global trade talks.
These are desperate days for champions of open markets. The US trade deficit with China has hit a record level, while its overall deficit is the third highest ever. And Congress is steaming with protectionist anger, barely able to pass even the mildest measure to expand trade without backroom arm-twisting.
Meanwhile, a deadline looms in December for talks aimed at expanding free trade among the 148 nations of the World Trade Organization. Those talks, known as the Doha Round, have been dragging for five years. To break a diplomatic logjam, Mr. Bush offered last week to reduce government supports for US farmers by 60 percent.
The move was intended to elicit a comparable concession from the European Union. Instead, the EU's counteroffer, while generous on the face of it, was full of holes in order to protect the EU's pampered and politically powerful farmers, and it may lead to tense negotiations on Tuesday between Bush and EU officials. The Doha Round hinges on a US-EU deal on agriculture, but many in the EU are intent on preserving their tourist-drawing rural landscapes and the quaint lifestyles of uncompetitive farms.
Bush's second-term record may end up being very mixed indeed, but by achieving real results in free trade that will benefit both Americans and the world's poor, he will at least have made a lasting mark on an important economic front. In recent decades, the US has made many trade concessions, which have largely opened its industrial markets. But the Doha Round is necessary for the US to have access for its exports in two areas where it still remains comparatively strong: agriculture and services (especially financial ones).
The US needs a new grand deal to help balance the trade framework for itself and many nations, but also to stave off growing congressional resentment toward Chinese exports, and China in general. This year's flood of Chinese textile imports has stepped up US pressure on China to further loosen a strong government hand in its economy, especially in banking and currency controls, and allow a greater role for foreign firms.
Mr. Greenspan, as well as Treasury Secretary John Snow, are on a mission in China to urge such reforms and help prevent Congress from slapping tariffs on Chinese imports. The Treasury must report next month on whether China remains a currency "manipulator." Despite China's recent and limited loosening of the yuan, the currency remains highly overvalued, making its exports unfairly inexpensive - a great deal for American consumers but job- destroying for US factory workers.
Bush received little notice when he said earlier this year that "the surest path to greater wealth is greater trade." But he would receive history's honors if he now forces two global economic giants, China and the EU, to join the US in further expanding the multilateral trading system. Failure to so would only enhance a US tendency toward unilateralism.•