When
the World Trade Organization (WTO) meets in Seattle on November
30th, a cacophony of competing interests is expected to disrupt its
agenda. At this Ministerial meeting of its 134 member nations, the
WTO intends to launch a new round of multilateral trade
negotiations to address trade liberalization in market sectors
ranging from agriculture and services to manufacturing and
electronic commerce. But the varied and often competing agendas of
its members--not to mention the myriad special interest groups that
plan to attend the meeting--could derail this round of negotiations
before it even begins.
The
Clinton Administration has said that it will use the meeting to
press for lowering tariff and non-tariff barriers in such areas as
services, telecommunications, and agricultural-biotechnology. In
addition, it will rightly seek an extension of the present
moratorium on Internet taxation. Still, while the Administration
should be praised for its support of these free-trade initiatives,
it also must demonstrate leadership on issues that engender
domestic political criticism. At every opportunity, the
Administration should press for lower trade barriers across a broad
spectrum of market sectors. Most important, the United States
should lead by example: It should pledge to lower U.S. trade
barriers to show that it is indeed serious about free trade and is
willing to follow its own advice.
Leading by Example. If the United
States insists on maintaining its barriers to trade, it can hardly
expect other countries to lower theirs. The textile industry is one
area in which the United States retains trade barriers while
demanding that other nations reduce theirs. During recent
negotiations with China on the latter's accession to the WTO, the
United States stipulated that it retain its quotas on Chinese
textiles--a demand Chinese officials naturally resented. Other
countries also criticize the United States for clinging to its
anti-dumping laws--which they rightly recognize as another form of
trade barrier--even as it calls for trade liberalization from
others.
When
the Administration takes such a negotiating stance, it paints
itself as a hypocrite and acts in a manner unworthy of a world
leader. The Administration should use the opportunity presented by
the Seattle Ministerial to announce that it will reduce its tariff
and non-tariff barriers on non-
agricultural goods, particularly textiles, and encourage other
member states to do the same.
Focusing on Trade Liberalization.
The United States must keep the WTO meeting focused on its
objective--lowering trade barriers on a multilateral basis. The
presence of so many interest groups at the meeting could distract
the Administration from this objective and lure it into the
temporary gratification of advancing its domestic political
interests in areas such as the environment or labor. But other
organizations offer better forums for addressing these issues and
give them the attention they merit. Muddying the waters at the WTO
would only cause free-trade initiatives to fail, without advancing
the cause of environment or labor.
Moreover, the means for achieving all of
these objectives is the same: free trade. As the Index of Economic
Freedom, published annually by The Heritage Foundation and
the Wall Street Journal, shows, free-trade policies create
the best road to prosperity for any nation; and with prosperity
comes the means to act on social concerns. History shows that as
countries become wealthier, they generally enact tougher labor and
environmental standards.
Reducing Trade Barriers. Attempts
to raise barriers to trade at this meeting will ultimately harm
consumers. An example is the use of sanctions in the U.S.-European
Union (EU) banana war. When the EU would not abide by the WTO
ruling on the EU's use of protectionist banana import policies, the
WTO granted the United States the right to impose retaliatory
sanctions. Some would argue that such sanctions are a means to
effect "fair" trade. This argument is false. The only fair trade is
that which allows consumers of every nation the maximum freedom of
choice for a fair--that is, competitive--price. In other words,
free trade is the only fair trade. Sanctions have popular appeal
and are politically expedient, but they harm U.S. consumers as well
as those in the sanctioned country.
A
forthcoming study by the International Institute of Economics
indicates that trade protection costs the EU approximately 6
percent to 7 percent of its gross domestic product--as much as
Spain produces in a year. Although some might argue that preserving
domestic jobs justifies the cost of protectionism, the same study
shows that such measures cost the EU $228,000 for every domestic
job saved, and in the end saved only 3 percent of the jobs in the
affected sectors.
Protectionism in the form of trade
barriers also harms economic development in developing nations. In
fact, the negative impact of protectionist policies is greater for
developing countries than any positive benefit they could receive
from foreign assistance. J. Michael Finger, an economist at the
World Bank, calculated that import restrictions hamper developing
countries' national income by about twice the amount they receive
in foreign aid.
Conclusion. Trade barriers are
clearly detrimental to an economy, raising costs and offering less
choice to consumers. Consumers benefit most by having the freedom
to buy the products they desire at the best price they can obtain.
The WTO meeting presents a forum in which the United States can
well argue the benefits of free trade and assert its commitment to
that principle. It should encourage other nations to do so as well,
reassured by the fact that all will be bound by a multilateral
trade agreement, with the same willingness to adhere to the rule of
law and the same adjudication process should they violate it. Such
policies also serve U.S. strategic interests: International
adherence to the rule of law lessens the likelihood that a nation
will arbitrarily change policies to suit political expedience. The
United States should remain a strong advocate of the WTO's use of
the rule of law to guide multilateral trade, because the
alternative to adjudication through the WTO is trade war from which
no one will benefit. It is time for the United States to
demonstrate leadership by lowering its own barriers in order to
advance a free-trade agenda at the Seattle Ministerial.
Denise H. Froning is a
former Policy Analyst in the Center for International Trade and
Economics at The Heritage Foundation.