Fast-Track Impasse

U.S. trade polcy is dead in the water. Here's how to get it moving again.

Brink Lindsey from the February 1999 issue

(Page 3 of 4)

But times have changed. The Cold War is over, and free trade's foreign policy trump card is gone. In fact, free trade's association with international negotiations and institutions is now costing it supporters among increasingly nationalist (or anti-internationalist) conservatives. Meanwhile, trade policy is no longer an insider's game, as the issues surrounding globalization have become high-profile, hot-button concerns. Globalphobia as an energized, grassroots phenomenon really took off during the rancorous NAFTA debate, and it has retained if not increased its potency.

As a result, the conventional diversion-and-appeasement strategy is no longer working. When large numbers of ordinary Americans are worried that their economic future is being threatened by imports from cheap-labor countries, happy talk about additional exports for Fortune 500 companies isn't an appropriate response. The failure to address genuine, if misplaced, public concerns allows those concerns to fester and spread. Worse, the diversionary focus on exports conveys the impression that free traders value corporate fat cats over regular folks, magnifying globalphobia's populist appeal.

Among supporters of trade liberalization habituated to old tricks, the reaction to diversion's failure is to redouble appeasement. And so today many stalwarts of the pro-trade camp--from such establishment bastions as the Brookings Institution, the Council on Foreign Relations, and the Institute for International Economics--are urging some kind of compromise on labor and environmental issues in order to woo moderate lefties back into the fold. Such a move is repugnant to believers in free markets: Creating new international regulatory bureaucracies isn't what we signed up for. At some point the process of negotiating trade agreements becomes sufficiently adulterated that it's just not worth doing.

In any event, the case for further appeasement is suspect on purely political grounds. While it may be possible to fudge differences sufficiently to get fast track passed, when it comes to actual trade agreements, it's hard to see how any compromise will work. Here at home, if any conservative support is to be maintained, the concessions on international standards will have to be very narrow and modest. Likewise, at the international level, developing countries will refuse to sign any agreements that condition their continued access to rich-country markets on so-called "upward harmonization" of labor and environmental policies.

So no matter how much the compromisers on the pro-trade side may want to deal, they will have very little to offer. And it's highly unlikely that the labor unions, environmental groups, and Naderites will buy what they're selling. The left is too smart to be placated by blue and green window dressing--especially after the experience of the NAFTA labor and environmental side agreements, which most activists regard as worthless. They will demand tough standards and real enforcement, which they're not going to get. As a result, appeasement won't appease.

What, then, will the compromisers accomplish? They will concede that globalphobic fears of a race to the bottom are justified, and that trade policy ought to do something about it. But then the response that they offer will be manifestly insufficient. And so the leftist contention that free traders care more about multinational corporations than about workers and Mother Nature will gain plausibility. Meanwhile, right-wing globalphobes will regard the mission creep of trade negotiations into labor and environmental policy as proof that free trade is a smokescreen for world government. In short, the odds are that appeasement will end up backfiring: Rather than finessing the opponents of open markets, it will only strengthen and embolden them.

Well, what's the alternative? How do free traders get out of their current jam? It's simple, really: Attack the problem at its root. The free trade cause has fallen on hard times because of growing public fears about the United States' place in the world economy. Rather than ignoring those fears, or giving in to them, free traders should make the case that the fears are groundless. Free traders need to take the misconceptions of globalphobia head-on, seize the intellectual initiative, and champion open markets forthrightly and unapologetically.

To begin with, free traders should commit themselves to a major effort of educating the public. They need to demonstrate the benefits of imports as well as exports, of foreign investment here and of U.S. investment abroad. In particular, they need to portray trade as part of the larger process of ongoing technological and organizational innovation that lies at the heart of wealth creation and rising living standards. In that regard, they need to dispel the notion that job losses due to trade are somehow more onerous than those that attend any other technological or organizational breakthroughs.

Abandoning the old strategy of diversion and appeasement, though, entails more than a shift in rhetoric. It requires programmatic change as well. First and foremost, free traders should identify a handful of the most egregious U.S. trade barriers and launch a campaign for eliminating them unilaterally--that is, regardless of whether other countries make similar reforms. There are plenty of targets to choose from: the anti-competitive anti-dumping law, which punishes perfectly normal business practices in the name of "fair trade"; high tariffs and quotas on textiles and clothing; import restrictions linked to price support programs for farm products; the Jones Act ban on foreign shipping between U.S. ports; similar restrictions on the so-called "cabotage rights" that would allow foreign air carriers to fly domestic routes; limits on foreign investment in broadcasting and air transport; and the list goes on.

Skeptics will respond that unilateral liberalization is a sure political loser. If Americans are scared of opening our markets when the deal is sweetened by market opening abroad, why on earth would anyone expect them to take the medicine straight?

But the purpose of campaigning for unilateral free trade isn't to win legislative victories--at least not in the short term. The point is to change the terms of the debate. On that score, the benefits of a unilateral approach are immediate. First of all, taking this tack forces free traders to go on the intellectual offensive. It's impossible to push for the unilateral elimination of trade barriers without making a frontal assault on the misconceptions of globalphobia. Free traders would have to explain why imports make us richer, not poorer; why trade deficits are meaningless; why the elimination of particular jobs is consistent with, and indeed necessary for, long-term economic health. Americans would finally begin to hear the other side of the story.

Furthermore, the unilateral approach frames issues in terms that give free traders the natural advantage. Rather than simply defending free trade, they would attack its alternative: protectionism in actual practice. Admittedly, the case for free trade is to some degree hypothetical and counterintuitive. On the other hand, the case against protectionism is much clearer: It raises prices, restricts choices, and benefits a favored few at the expense of everyone else. Protectionism is unfair, plain and simple. An attack on U.S. trade barriers would allow free traders to put their opponents on the defensive for a change. The beneficiaries of protection would be forced to explain why they deserve their special privileges, and why the welfare of other American businesses and their workers, not to mention consumers, should be sacrificed on their account.

Attacking particular U.S. trade barriers would allow free traders to reclaim their lost populist roots. In the old days, the trade debate typically pitted Democrats and the common man for free trade against Republicans and big business for protection. Free traders used explicitly populist rhetoric, condemning tariff walls as bastions of corruption and privilege. Today, free trade is all too often depicted as elitist--pumping up the profits of big multinationals at the expense of jobs for working men and women. Unilateralism would help to counteract that stereotype by focusing on those aspects of the free trade cause with the greatest populist appeal: cutting taxes, lowering prices, and eliminating corporate welfare.

Finally, a campaign for unilateral reform would liberate the free trade cause from the tangle of diversionary squabbles in which it is currently ensnared. Concerned about fast track's antidemocratic circumvention of normal congressional procedures? Worried about ceding sovereignty to faceless international bureaucrats? Offended by obnoxious practices (continuing trade barriers, subsidies, human rights abuses, drug trafficking, etc.) in the countries with which we strike trade deals? All of these issues become moot when the only question on the table is whether or not Congress, as a matter of purely domestic economic policy, ought to junk particular bad laws.

While they pursue unilateral reforms, free tradersshouldn't give up on trade negotiations. International agreements can facilitate the liberalization process by enlisting export interests to support free trade at home; also, such agreements provide a useful institutional constraint against protectionist backsliding. But a new U.S. negotiating posture is needed, one that replaces demands for reciprocity with a commitment to free trade principles.