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Truth on Trade

Mises Daily: Wednesday, February 17, 1999 by

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It seems everyone in D.C. claims to believe in "free trade," but the meaning of the phrase is being drained out through sheer political hypocrisy.

A true free trader is not a supporter of export subsidies and bailouts, foreign aid and mercantilist trade treaties, centralized executive power or global environmental regulations. Simply put, a free trader is a person who wants tariffs, quotas, and other barriers to trade repealed, beginning with those erected by one's own government.

But as the pseudonymously written article below explains, there are few if any free traders left in D.C., despite all the rhetoric. As this "senior diplomat" points out, the World Trade Organization has become, not a facilitator of true trade liberalization, but a setting for "a chain of legal wars."

What a sad commentary on the political culture that the person who reveals such truths publicly must do so without signing his real name.

The Journal of Commerce
February 17, 1999

Negotiating trade in a world without free traders
By Frank George Benoit

So, we're in 1999 and a new round of multilateral trade negotiations is supposed to be in the making. But the more papers we read and the more private talks we have with key decision-makers around the world, the more doubtful that supposition seems.

At this stage, there just does not seem to be a clear pattern of consistency between what trade diplomats are ready to say at World Trade Organization headquarters in Geneva and what is in the daily signals coming from most of their capitals.

Nobody is fool enough to deny the existence of WTO commitments to deepen the package of disciplines and concessions related to agriculture, services and some areas of intellectual property rights. Almost everyone is ready to say that closing markets would further complicate the uphill battle against financial crisis, economic recession and social unrest.

But the sense of global-phobia is there nonetheless.

The most active incidence of global-phobia is found among most of the membership of the Organization for Economic Cooperation and Development, but it also touches several key Asian, Latin America and African countries.

The signs of it are not directly reflected in public statements. They are mainly present in forms of self-explanatory body language that appear in most of the informal talks taking place around the planet.

The message is clear. Nobody will fail to participate in the WTO's mandatory rituals. But, at least for the time being, not many players can be counted among the real practitioners of the trade-liberalizing faith if that means signing on to additional or immediate trade surgery for sensitive sectors.

Blunt diplomacy allows players to declare a loud and ambitious "yes" to the general script while giving a flat "no" to actual progress by coming up with unattainable or absurd proposals at the critical moment. These days Geneva is covered with ambitious informal proposals and ideas, most of them deal-breakers that are not worth the paper on which they are printed.

The obvious example of the do-as-I-say-not-as-I-do recipe for paralysis is the United States.

From the beginning, President Clinton's administration has proved unable to define a clear trade policy. Meanwhile, it has passively watched the departure to the private sector of most of its experienced negotiators, thus paving the way for a possible skills shortage. You don't train a trustworthy, experienced trade negotiator in a few classes or in a partisan headquarters.

Moreover, by now it is widely believed that the administration cannot realistically expect to win fast-track negotiating authority from Congress for the rest of its tenure in office. Its team remains convinced that an eternal bullying pace will continue to serve well the U.S. trade interests.

The Clinton administration is proposing an "ambitious sectoral approach" for which it lacks a congressional mandate, and has no apparent goals other than putting on a public relations show. But it is uninterested in getting down to action.

In practice, the administration has an open mind for some clearly identified interests -- electronic commerce and information technology being among the chosen few -- and a "let me think" attitude for everything else.

It does not want an agenda in Geneva loaded with any issues that are sensitive at home. That means little room for the core traditional process, which relies on giving a piece of cake for every WTO appetite. Experience and common knowledge demonstrate that a global approach of the kind proposed by Sir Leon Brittan of the European Commission is the only option for winning the constructive involvement of all members of the organization.

On top of that, Washington's implementation of WTO commitments does not deserve high marks from its partners. The extensive use of the dispute-settlement system against the United States has not been organized by demoniac forces trying to upset Sen. Jesse Helms, R-N.C., and commentator Pat Buchanan, or because trade partners find it amusing and attractive to litigate with the big boys. A panel is expensive and, for normal people, a measure of last resort.

This may be attractive to lawyers everywhere as an implicit full-employment policy, but it was not the idea behind the multilateral trading system. People signed on to the Havana Charter and, more recently, the WTO to make deals and create a world setting for an expanded, transparent, predictable, open and fair trade -- not to develop a chain of legal wars.

What is happening is not exactly what world trade needs or expects from leading powers when faced with an important negotiation. Washington has a particular responsibility in sorting out this confusion.

If the Clinton administration continues to equate trade policy with a passionate representation of vested interests related to the consulting and lobbying belt -- which is not in itself a sin -- it solidifies a disappointing and counter-productive message to the international community.

The general perception already is that Washington has forgotten how to play its role and meet its responsibilities as one of the main locomotives of world trade, and that it has every potential to become instead the main braked wagon in that process.

How can the most influential WTO partners like the Quadrilateral members, the United States, the European Union, Japan and Canada say they want a variety of gains when their negotiators have nothing meaningful to offer as a trade-off to the developing countries and any real free traders left on earth?

How can they ask for so much -- zero tariffs for electronic commerce; transparency on government procurement; advanced information technology liberalization; more sectoral specific commitments on services; rules on competition, labor standards and environment; civil participation in the WTO -- when they offer so little?

How can the European Union, standing at the gates of the 21st century and suggesting a Millennium Round of trade negotiations, believe that the world will move to open cyberspace without turning thumbs down on the permanence of dirty and high protectionist measures and subsidies for agriculture and textiles?

Can any constituency be sold the idea that permanent adjustments are part of a fair and unavoidable process in the industrial sector, but totally out of the question when it comes to the agribusiness sector?

Is this kind of sectoral balance in the multilateral trading system a new avenue of real-politik?

Is the liberalizing process going to stop because French far mers are ill tempered and there is no political will to say to Premier Lionel Jospin and like-minded friends that enough is enough? What kind of multilateral trading system are we preparing to shape when some political leaders make every effort to export to Geneva their domestic conflicts?

Regardless of what people say or write in future months, no real progress is to be expected if WTO members attend the next WTO Ministerial Conference with these reflexes.

Old-timers may argue that before any important new negotiations the picture has been always the same: confusion, crazy ideas and unnecessary political foreplay. Perhaps.

But in the past, the equation of political will, political power and political leadership leaned most of the time toward trade liberalization.

Today, Pat Buchanan's positions are no longer just a part of the protectionists' rhetorical arsenal. President Clinton and others, willingly or not, have taken up his dangerous flag.

* * * * *
Frank George Benoit is the pen name for a senior diplomat writing in a personal capacity.

copyright 1999, The Journal of Commerce.