US credo: competition and free trade

In early September, representatives from 146 countries that comprise the World Trade Organisation (WTO) will assemble in Cancun to determine the course of global trade negotiations. At this point, the meeting seems more likely to highlight differences than agreements. One concerned observer, Prof Jagdish Bhagwati of Columbia and the Council on Foreign Relations, wrote on these pages that the US should respond to this risk by forgoing our other efforts to open markets. This course would both weaken our hand in the WTO and give up the benefits from advancing free trade on multiple fronts. The Bush administration’s reinvigoration of America’s drive for free trade — globally, regionally, and with individual countries - has created a momentum that strengthens US influence. It is a little puzzling to read criticism of this administration for negotiating too many international agreements to advance economic growth, development and the rule of law! The president’s strategy has already produced results. Congress restored the executive’s trade negotiating authority after an eight-year lapse, demonstrating a united commitment to new global trade negotiations. Simultaneously, the US helped launch these negotiations in Doha in 2001, reversing the prior debacle in Seattle. And we completed the stalled effort to bring China and Taiwan into the WTO, triggering openings for US businesses and farmers negotiated over 15 years.

It is critical for the US - along with the European Union - to propel the Doha trade and development agenda. That is why America has challenged our WTO partners to view this negotiation as a once-in-a- generation opportunity. We have proposed the elimination of all tariffs on manufactured goods by 2015. In agriculture, the US has called for eliminating export subsidies, cutting $100 billion from domestic subsidies, distort production and trade, and slashing tariffs to no higher than 25% with the US average dropping to 5 percent. The US has also pressed to open services markets, which the World Bank estimates could add $900 billion a year to developing economies alone. Now the EU has decided on a reform of its Common Agricultural Policy, we are urging it to translate its internal changes into aggressive international proposals. We would also welcome leadership from Japan, which has benefitted so much from the international trading system. To succeed, all WTO members must have a sense of mutual responsibility, while recognising the necessity of special treatment for the poor and most vulnerable. Some argue that there is no need for developing countries to lower trade barriers, even though 70 percent of the tariffs paid by developing countries are to other developing countries. Yet developing country barriers protect the privileged few, with the price paid by poor consumers. The WTO’s influence will wane if it comes to embody a new “dependency theory” of trade, blaming developed countries while not seeking even the gradual removal of trade barriers in developing economies. So what should the US do if other nations choose protectionism over free trade? Under the WTO’s procedures, one nation can block progress. It would be a grave mistake to permit any one country to veto America’s drive for global free trade. Our strategy is based on a concept that any economics professor should appreciate: competition. If some countries hide behind the false security of protectionism, the US will work with those that believe true economic strength is achieved through openness. The strategy is simple: The US is spurring a competition in liberalisation. In the wake of the disastrous protectionism of the 1930’s, Secretary of State Cordell Hull employed this logic to cut tariffs and build momentum for global trade rules by negotiating 32 bilateral agreements.

That is why the US has pressed forward with a portfolio of free trade agreements while doing all we can to make the WTO negotiations succeed. Our FTAs are encouraging reformers - many in fragile democracies - in Latin America, Africa, the Middle East, and the Asia-pacific region. These partners have become some of the WTO’s foremost champions for open markets. America’s FTAs break new ground - they establish prototypes for liberalisation in areas such as services, e-commerce, intellectual property for knowledge societies, transparency in government regulation, and better enforcement of labour and environmental protections. Given the new dimensions of globalisation, we need to demonstrate that trade rules can adapt to meet new needs and circumstances. Our FTAs also level the playing field for US businesses because others - especially the EU - negotiated a host of agreements in the `90s while the US stood on the sidelines. This very week, House and Senate Committees will consider the implementing legislation for our new state-of-the-art FTAs with Singapore and Chile. Our free trade negotiations with Central America and the Southern African Customs Union are helping developing countries gain from regional integration and stronger economic ties to America. We hope other us agreements - for example, with Jordan, Morocco, and Bahrain - will serve as models for their neighbours that need to embrace openness.

The Bush administration’s strategy also recognises that the Constitution gives Congress the power to regulate trade. During the last round of global trade negotiations - which took over seven years - when the executive could not keep free trade on offense, the protectionists were delighted to fill the vacuum. In trade as in politics, one cannot beat something with nothing. For years, study groups at the council on Foreign Relations have urged the US government to make its foreign and economic policies mutually supportive. Now that President Bush is doing so to advance growth and development, open markets for US workers and farmers, promote economic and political liberty, and build the economic foundations for stronger security ties, some scholars seem to urge a return to trade policy parochialism in only one forum. We will do our best at Cancun to keep the Doha negotiations on track. But if others falter, the Bush administration will keep negotiating for free trade-to create jobs, keep America competitive, and create opportunities for modernising reformers around the world. (Zoellicks comments were published recently in the Wall Street Journal)