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 4 of 4)

In traditional trade negotiations, countries offer to reduce import barriers in exchange for other countries' offers of equivalent reductions. In other words, freer markets at home are treated as the price we pay for freer markets abroad. Indeed, in the parlance of GATT negotiations, a commitment to reduce tariffs is known officially as a "concession." Thus, the rhetoric of trade talks is premised on the protectionist notion that imports are harmful and trade barriers are prized strategic assets.

This is not a mere quibble: Protectionist assumptions and attitudes color every aspect of how trade agreements are currently negotiated and evaluated. Trade negotiators, in the process of championing freer trade, demand "reciprocity" from our trade partners. They insist that a "bad deal" (i.e., one in which we liberalize more than other countries do) is worse than no deal at all. They oppose domestic reforms outside the context of negotiations on the ground that our own bad policies are "bargaining chips" that should be retained for their exchange value. More ominously, they refer to liberalization without reciprocity as "unilateral disarmament." And when an agreement has been reached, free traders focus on the benefits to exporters, not importers. They tout the benefits of reducing foreign trade barriers, but say little or nothing about the benefits of reducing our own.

These features of conventional trade negotiations are no accident: They are part and parcel of the old diversion-and-appeasement strategy. But if free traders are to break from that dead-end approach, if they are to mount a head-on challenge to globalphobia, they will have to reinvent trade negotiations so that they don't perpetuate protectionist fallacies.

In areas where the United States still retains protectionist policies, it could identify other countries with similar barriers--but which are committed to reform--and negotiate simultaneous liberalization in a kind of "coordinated unilateralism." Unlike in reciprocity-based negotiations, the goal wouldn't be to swap "concessions" or to "win" at the bargaining table by "getting" more than you "give." Rather, the express purpose of the negotiations would be for each country to gain by reforming its own policies, but to maximize that gain by linking reforms to liberalization abroad. Reforming one's own policies would be a central negotiating objective rather than the downside of the transaction, while coordination would strengthen the political case for free trade by adding the benefits of liberalization abroad to those of market opening at home. For coordinated unilateralism to work, though, all countries involved would have to be committed to real reform. Otherwise obstructionism and holding out by some parties would become excuses for other countries to cling to their misguided policies, and the whole enterprise would degenerate into reciprocity as usual.

The United States can continue to take a leading role in trade negotiations even when it has already eliminated its protectionist policies. In that regard, consider the 1997 World Trade Organization agreements on telecommunications and financial services. Both agreements represented important breakthroughs, and both were negotiated in the absence of U.S. fast track authority. How was this possible? Fast track was unnecessary because none of the U.S. commitments under either agreement required changes in legislation. The major U.S. "concession" was to agree to "lock in" current levels of openness. The United States would not commit to do so, however, until a critical mass of other countries agreed to exceed a minimum threshold of liberalization.

These agreements show how unilateral reform and trade negotiations can complement and reinforce each other. Even without trade barriers, the United States can still exert powerful leverage at the bargaining table--not only through offers to lock in existing liberalization, but also because U.S. participation lends legitimacy to any international agreement and increases other countries' confidence in each other's commitments. Using that leverage, the United States could define negotiating objectives --for example, rules on the treatment of foreign investment, market access for the cross-border provision of services, and so on--and offer to elevate its own unilaterally adopted free trade policies into binding international commitments. That offer would be contingent, though, on pledges by other countries of credible and significant liberalization.

The viability of such an approach is not hypothetical: It worked in the telecom and financial services talks. True, in those negotiations the United States couched its position in terms of demands for reciprocity. But it could easily drop such rhetoric and adopt instead the following line: We pursue free trade policies at the national level because we believe it is in the U.S. interest to do so, but we will not commit ourselves internationally to any agreement unless it reflects a sufficiently serious commitment to free trade principles.

It is thus possible for the United States to remain engaged in the process of negotiated liberalization without fostering misconceptions that undermine free trade in the long term. The United States can still wield significant bargaining power--most important, by refusing to participate in watered-down agreements--without clinging to wrongheaded policies simply because other countries have not yet gotten rid of theirs. In short, the United States can enjoy the best of both the unilateral and the multilateral worlds. Unilateral liberalization, far from undermining trade negotiations, can put them on a much sounder footing.

Many supporters of free trade will be reluctant to abandon a tried and true strategy, but a sober assessment demonstrates that the old diversion-and-appeasement approach has outlived its usefulness. It is contributing to popular anxieties about globalization. It is bending trade negotiations away from true liberalization and toward international bureaucratization. In short, it is creating more problems than it solves.

There is a better way. Free traders have it in their power to promote their cause, here and abroad, with much greater effectiveness than at present. They can seize the intellectual initiative. They can frame issues in ways that give them the natural political advantage. They can set an example for the rest of the world to follow. And best of all, they can achieve these things by standing up for what they know to be true.