Kick Me, I'm For Free Trade

With the WTO under siege, free-traders need a new strategy.


For those of you who didn't get your fill of World Trade Organization bashing from the demonstrators in Seattle, you can look forward to more of the same this spring–this time in the other Washington. In all likelihood Congress will soon be voting on whether the United States should remain a member of the trade body.

When the United States entered the WTO back in 1995 at the close of the Uruguay Round of trade talks, a time bomb was slipped into the implementing legislation. Section 125 of the Uruguay Round Agreements Act allows any member of Congress to propose a joint resolution this year to withdraw authorization for U.S. membership in the WTO. Such a resolution would then be considered under special, expedited procedures. While there's almost no chance that the measure could really be enacted into law, it's conceivable that the House of Representatives might pass it. For that to occur would deal another serious blow to the WTO's already battered prestige.

The sad fact is that, in this country at least, the WTO has become a giant, flashing "Kick Me" sign affixed to the free trade cause. In light of that fact, it's worth remembering why creating the WTO ever made sense. It wasn't because of any mercantilist nonsense about "fair trade." As any Economics 101 textbook will tell you, we benefit from opening our own markets regardless of what other countries do. And it certainly wasn't because of any woolly-headed notion that a world economy needs a world government. That's the last thing it needs.

No, the only good reason for having a body like the WTO is to make it politically easier for our own government, and for governments abroad, to reduce restrictions on trade and investment flows. International trade agreements facilitate liberalization by adding the sugar of improved market access abroad to the political medicine of increased exposure to foreign competition at home. As a result, exporting interests eager to penetrate foreign markets are induced to lobby for the free trade cause. And once barriers have fallen, it's harder to backtrack toward renewed protectionism when doing so violates an international obligation. To cite just one recent example, Congress last year voted down import quotas on foreign steel in large part because of an unwillingness to flout the WTO's ban on such restrictions.

But if the WTO is supposed to reduce and deflect protectionist pressures, it clearly isn't working. On the contrary, it is galvanizing what would otherwise be vague and unfocused anxiety about globalization into an energetic and potent political movement. While the protesters in Seattle may not represent mainstream American public opinion, any cause that can get tens of thousands of people into the streets can't be dismissed lightly. The fact is that the WTO has boomeranged on free-traders.

The fault does not lie with the WTO. In the five years of its existence, it has served as a forum for important new agreements on information technology, telecommunications, and financial services. And its dispute settlement mechanism has performed remarkably well; it has lent a credibility to market-opening rules that never existed in the old days of the toothless GATT.

But the WTO needs help. And the supporters of trade liberalization, in politics and in business, have failed to give it. They have failed to create the domestic political conditions that are necessary if the WTO is to operate effectively. In fact, they have actively contributed to a political culture in which the WTO is a natural whipping boy. Free-traders, through a botched political strategy, have turned what should be an asset into a serious liability.

Here's the nub of the problem. The pro-trade camp in this country has tried to sell free trade generally, and the WTO in particular, on the grounds that free trade in other countries is a good idea. When other countries drop their trade barriers, American companies export more, and consequently create more export-related jobs. All true enough, but what free-traders fail to talk about–and their silence is deafening–is that free trade here at home is a good idea. It's widely believed among free-traders that talking about open U.S. markets amounts to leading with your chin, and so the less said on that subject, the better. (See "Fast-Track Impasse," February 1999.)

But by defending free trade entirely on the basis of what other countries do, supporters of open markets set themselves up for a fall. The fact is that the United States is much more open than most countries around the world–which is a strength, not a weakness. If, however, the WTO is to be justified solely on the benefits of opening markets abroad, then it always looks like we've gotten the short end of the stick. When the benefits of our own open markets are ignored, the argument that we are giving up our rights to faceless bureaucrats in Geneva begins to look plausible.

Meanwhile, by remaining silent in the face of anti-trade claims about job losses and a "race to the bottom," free-traders allow misplaced fears about globalization to spread by default. Trumpeting the prospect of increased exports by U.S. multinationals simply isn't responsive to those fears; indeed, it actually plays to suspicions that the WTO is a front for big corporations that seek to profit at the expense of ordinary Americans.

Over the past couple of decades, the U.S. economy has experienced a sharp surge in the intensity of competition. Much of this surge has had nothing to do with globalization. Deregulation, disinflation, and the revolution in information and communications technologies have all contributed. But our increasing economic ties with the rest of the world have been a significant factor. And while the increase in competition–from both domestic and foreign quarters–has been highly beneficial, it has also raised a lot of people's blood pressure. As a result, Americans are highly susceptible to demagoguery pinning the blame for all the recent tumult on foreigners–and in particular, on an obscure little bureaucracy like the WTO.

If the WTO is to facilitate trade liberalization rather than complicate it, an overhaul in political strategy is needed. In addition to their existing arguments, free-traders will have to make abundantly clear that open markets here at home serve the American national economic interest, even when other countries pursue less enlightened policies. Along those lines, they will have to argue, forthrightly and unapologetically, that a major benefit of WTO membership is the assistance it lends to reducing and holding down U.S. trade barriers against foreign competition. And then U.S. trade policy makers will actually have to walk the walk–they'll have to put American protectionist policies on the negotiating table, not defend them as though antidumping laws and textile quotas and tariffs were the crown jewels (as the Clinton administration did in Seattle).

If this about-face is made, free-traders will be in a strong position to respond to the WTO bashers. The WTO is being lambasted for its inattention to human rights, labor conditions, and environmental standards in developing countries. But once it is clear that our primary reason for joining the WTO is to open our own markets and keep them open, why on earth would we want to invent new reasons for closing them? We shouldn't rob ourselves of the benefits of openness simply because other countries are poorer or more poorly governed than ours. And as to the argument that trade sanctions are needed to help people in poor countries, how exactly do we help them by crushing their livelihoods? Burning the village in order to save it went out of fashion in Vietnam.

If free-traders don't change course, though, the WTO's usefulness will be seriously undermined–and perhaps even extinguished. Trade negotiations, rather than a pragmatic tool for speeding up liberalization, will become a quagmire of proliferating excuses for retarding and reversing it. If that happens, free-traders will have only themselves to blame.


NEXT: Flash Fight

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  1. Funny, you act as if the WTO haters are mislead and misguided. However people like myself who are against the WTO and NAFTA, have looked at the data, something you’ve not referred to once in the article. I’ve looked at employment levels, they don’t support the idea that either creates jobs.

    The day after the US signed a bill allowing preferred trade status to China, allowing their entry to the WTO, the WSJ stated corporations pushed heavily for it in order to access cheap labor.

    In addition, we signed the PNTR agreement largely due to obligation as part of the WTO. We also expected this to help China along the way to better labor practices.

    It didn’t work. In turn there have been dozens of other countries without labor laws that have jumped into the pot.

    We cannot have bilateral free trade with countries where the labor is paid below the poverty level. It is impossible. There is not large enough of a consumer base for the US to trade any real amount of goods.

    You see, we’re not opposed to free trade. The WTO and NAFTA ended up making millions of US workers lose their jobs, while the CEO’s and major shareholders gained more wealth. Look at the numbers.

    Remember, the US revolution started when England supported the East India Trading Company over the colonists. Capitalism is what made the Colonies revolt against England.

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