No Deals
After GATT, let's give unilateralism a chance.
Both the Clinton administration and the world are possessed by trade agreement mania. Immediately before and after passing the GATT pact, Clinton attended international summit meetings and came out with the promise of future trade treaties analogous to last year's North American Free Trade Agreement.
First there was the meeting of the Asia-Pacific Economic Cooperation forum, where 18 countries agreed—vaguely—to end all trade barriers among them by 2020. Then came December's Summit of the Americas, which ended with Clinton and the leaders of 33 other Western Hemisphere countries vowing to create a Free Trade Agreement of the Americas, with negotiations scheduled to end in 2005. Chile looks to be enveloped by NAFTA before then. Meanwhile, the European Union is seeking to create a free-trade zone with the Mercosur nations of South America—Brazil, Uruguay, Paraguay, and Argentina.
For now, these are all merely agreements to agree. The details await various bureaucratic meetings that are scheduled to begin later this year but could stretch for years.
The experience with NAFTA and GATT, however, suggests that multilateralism is not the best way to achieve real free trade. Multilateral agreements tend to be larded with complications, half-measures, and escape clauses. They also create the potential for exporting onerous regulations in the name of "standardization." Those problems caused some free traders to decide that defeating those agreements would benefit the cause of free trade. But defeating them in their final stretch would have been counterproductive. The realities of GATT and NAFTA were complex and messy, but their passage indicated a growing friendliness toward freer trade on the part of both politicians and citizens in the United States.
Now more than 50 other nations also show a sudden willingness to sign on to regional free-trade regimes. Smaller free-trade agreements already abound among the countries of Latin America and Southeast Asia. The E.U.'s reach-out to the Mercosur nations shows that no one wants the Orwellian vision of three fortress-like political and economic blocs to become a reality. The newly dominant congressional party in the United States professes a strong belief in free trade, along with distaste for the complications of international agreements. This seems to be the most political propitious time imaginable to push for the proper way to knock down trade barriers: unilaterally.
Without expensive and complex negotiations, Congress can do what's right. Abolish anti-dumping laws; why should the government penalize foreign companies for selling goods at a price that Commerce Department bureaucrats decide is too low? End all tariffs; why should citizens spend millions in hidden taxes on imported goods to protect inefficient local industries from competition? End all quotas on imports; why should U.S. producers and consumers be denied the ability to buy as much as they want of legal goods from whomever they want? Abolish the Jones Act; why should consumers pay extra to ensure that only U.S. ships carry foreign commerce?
There are many other laws that restrict or make more expensive buying and selling goods across the U.S. border, and Congress could get rid of them all single-handedly. Doing so would be great for consumers, which means all of us. It would also be great for most producers—heavy manufacturing and the computer industry are two big examples—who depend on imports to get material they need for their production processes.
While trade agreements have the political benefit of appeasing the mercantilist mindset by forcing "concessions" out of other nations, they are not good enough. For one, they are never comprehensive—their major benefits are usually just tariff reductions—and they can lock into place bad policies. Much red tape survived NAFTA and continues to slow the movement of goods across the U.S.-Mexico border with non-tariff fees, certificates of origin, and health and labeling inspections. Spending years and millions negotiating treaties that guarantee such policies will continue is foolish.
Also, trade negotiations get bogged down in debates over who decides disputes under the agreements they produce. And they encourage attempts to "streamline" environmental or labor regulations—which, in most cases, means imposing them on poorer countries.
It isn't necessary to court further problems by embarking on the tortuous path toward more phonebook-sized trade treaties. Such deals may be better than nothing, but they aren't the best we can do. With the self-interest of many industries, a new congressional majority, and the ever-declining power of private-sector unions all converging, it has never been more possible to harness a powerful political alliance for free trade, uniting ideology and interest. While free trade allows changes that can cost jobs in the short run, in the long run allowing capital and labor to move freely where its owners want it to go is the key to generating prosperity for everyone.
The United States wisely eliminated trade barriers between states in the union, and we've all prospered for it. It's time to do the quickest, purest, and most effective thing we can to extend these benefits to our trade with the rest of the world. No complex negotiations are needed: End all tariffs and other policies that block the flow of goods immediately, and regardless of what other countries do. For the future of free economies the world over, there is no more important battle.