Fair Trade Rhetoric

I want to pick up on Sheldon Richman's post on Bush and free trade. Bush has most definitely flip-flopped on free trade, but his recent movements have been positive in my view. Jagdish Bhagwati's in Foreign Affairs makes a pretty good case for this.

With President Bush strongly behind him, [U.S. Trade Representative Robert] Zoellick had cleverly exploited the tragedy of September 11, 2001, to get the new trade round launched at Doha. Nonetheless, the Bush administration then proceeded to harm the cause by taking a number of protectionist actions. For example, in March 2002 it succumbed to the steel industry's demands for protection and enacted steel tariffs, invoking the safeguards provisions of the WTO. Two months later, it also increased government support for American farmers under the U.S. farm bill. Washington claimed that both measures were compatible with WTO rules and within its rights. But even if they were (and the steel tariffs have since been declared illegal by the WTO), the symbolism was bad: one cannot start negotiations to reduce protection and then follow immediately by raising subsidies and trade barriers.

To give it credit, however, the Bush administration recognized that the hostile foreign reaction to its protectionist actions undermined its free trade credentials. Unless they were reestablished, the Doha Round would have been jeopardized. Had the United States persisted in asking for freer trade while taking protectionist measures, many countries would have retreated behind their own trade barriers rather than join an effort to dismantle them.

And thus, as this danger sank in, Washington turned its policy around in a remarkable fashion. The administration had not realized how badly its earlier missteps would be received elsewhere; once it did, Washington beat a rapid retreat on the most damaging of these measures -- specifically, those relating to agriculture. Together, Zoellick and U.S. Agriculture Secretary Ann Veneman secured political support for a substantial offer in June 2002 to reduce agricultural subsidies and trade protection, putting the ball in the EU's court. That summer, Zoellick also managed to get the president's fast-track negotiating authority renewed, something Clinton had failed to achieve in two attempts.

I suspect Bhagwati is overly generous in saying the"administration had not realized" that other countries would not be well received; there was plenty of opinion-page articles telling him precisely that even before he adopted the steel tariffs. But in a strategic game, the threat of defecting from the free-trade position needs to be credible to condition the behavior of other countries. I think it was calculating along those lines, as well as the fact that it protects industries in key battleground states for the 2004 elections.

The"free and fair" quote from Bush thus fits the overall pattern of trade negotiations as involving both carrots and sticks. FTAA does no good for the countries of Africa, but it could be used as a threat to induce those countries to reduce their tariffs, even for agricultural products (Bhagwati notes these are 112% for India compared to 12% in the USA).