|
The United States has always been the champion of free trade. In the 1950s and ’60s, it led round after round of negotiations to lower import duties worldwide. And in the 1980s and ’90s, it fought to establish the World Trade Organization (WTO), which forces countries to open their markets and eliminate discriminatory trade barriers.
It is ironic, then, that the Bush administration’s current trade agenda, which focuses on negotiating bilateral free-trade agreements, threatens the future of the WTO and global free trade.
The president’s trade-agreement strategy threatens free trade because its genesis had nothing to do with furthering free trade. The strategy grew out of the ashes of Sept. 11. The administration saw agreements as a tool of foreign policy — a way to encourage moderate Muslim countries to support the United States (Oman, Bahrain, Morocco) and to reward friends that support U.S. foreign policy (Australia, Chile, Singapore).
It also began negotiating agreements in response to growing frustration within Congress and the administration over a series of defeats at the WTO, which held that a number of U.S. laws are inconsistent with its international obligations. The WTO has authorized billions of dollars in trade sanctions against the United States until its laws are WTO-consistent.
With the United States and the WTO failing to see eye to eye, the United States is going around the WTO by creating its own free-trade spheres. Countries are lining up to negotiate agreements with the United States because FTAs provide them with preferential access to the U.S. market. And, since the United States always dominates the economic relationship with these countries, it can negotiate on its own terms.
Proliferation of free-trade agreements, however, will seriously harm the global trading system.
Initially, it makes trade much more complicated. The United States has signed or is negotiating dozens of agreements. Each has its own set of rules that run parallel to — and are often inconsistent with — current WTO rules.
Further, this strategy has encouraged other countries to do the same. The European Union is negotiating a number of its own agreements, including significant ones with Brazil and Argentina. China recently completed an FTA with the Association of Southeast Asian Nations, a group of 10 countries. All of those agreements divide the world into a patchwork quilt of free-trade areas, each with its own rules and each separated by discriminatory trade barriers.
More significantly, each agreement that the president sends to Congress makes it less likely that Congress will endorse more far-reaching trade measures currently being negotiated through the WTO.
Congress has always been fickle about free trade, and there are signs that future agreements will face significant hurdles. The Central American agreement, signed by the United States and five Central American countries last year, faces significant opposition in Congress. Congress has yet to take up the agreement, and it would fail if a vote were held today. Unless the president invests a significant amount of political capital into its passage, the agreement will fail.
And that is the ultimate risk in the president’s strategy. Every time he sends another agreement to Congress, he will have to invest political capital for it to pass. Yet the benefits to the United States from any one agreement pale in comparison to the market-access measures that could be won through WTO negotiations.
Those negotiations are ongoing and will be completed within two years. If the president uses all his political capital on agreements with Oman, Brazil and Thailand, he will have none left to fight for a WTO agreement. Even worse, if Congress votes any of the agreements down, it would doom passage of more far-reaching trade measures negotiated through the WTO.
The administration should look past its recent frustration with the WTO and limit its use of free-trade agreements as a tool of foreign policy. Reducing global barriers to trade and establishing a single set of rules through the WTO will do more to further U.S. interests abroad than any single free-trade deal.
Mintzer is an associate with the law firm of Miller & Chevalier who focuses his practice on international trade issues and disputes. |