AS PRESIDENT BUSH'S first term approaches its midpoint, the commentary about
American trade policy has shifted. The debate is now over how--not whether--the
United States is advancing free trade.
America has
stated its intentions plainly. We will promote free trade globally, regionally
and bilaterally, while rebuilding support at home. By moving forward on multiple
fronts, the United States can exert its leverage for openness, create a new
competition in liberalisation, target the needs of developing countries, and
create a fresh political dynamic by putting free trade on to the offensive.
America's trade policies are connected to our broader
economic, political, and security aims. This intellectual integration may
confound some trade scholars, but it follows in the footsteps of the architects
of reconstruction after 1945. In fact, its roots extend to the protesters who
dumped English tea in Boston harbour. To be sustainable at home, our trade
strategy needs to be aligned with America's values and aspirations--as well as
with our economic interests. And to be influential abroad, we seek to listen and
learn from our trading partners, large and small.
To
lead globally, President Bush recognised that he had to reverse the retreat on
trade policy at home. Any American president building support for trade must
overcome protectionists, special interests, antiglobalisation nihilists and
partisanship against the president. Nevertheless, the president was not diverted
by an economic slowdown or terrorism. He pressed Congress to enact the Trade Act
of 2002, which re-established the vital trade authority ("fast track") that had
lapsed for eight years. Republicans compromised with pro-trade Democrats on an
environmental and labour trade agenda, without overstepping concerns about
sovereignty and protectionism. The act included a large, immediate downpayment
on open trade for the neediest, cutting tariffs to zero for an estimated $20
billion in American imports from the developing world.
To rebuild a congressional coalition, the administration had to
demonstrate that the United States would use international rules to pursue its
interests. Since American trade-weighted tariffs average only about 1.6%,
congressional support for lower barriers depends on the executive's willingness
to use the same rules employed by other countries. One Republican leader in the
Senate told me that the administration's record of enforcing international rules
was the most persuasive argument for granting the president more negotiating
authority. By leading the fight at home for freer trade within a system of
enforceable international rules, President Bush has strengthened America's power
to promote free commerce abroad. The task at Doha
Coming to office as it did in the wake of the Seattle debacle for the
World Trade Organisation, the Bush administration recognised the importance of
launching a new global trade round. Working with the European Union and others,
and against long odds, we helped to launch the Doha Development Agenda (DDA).
The WTO itself has been strengthened by adding China and Taiwan as members, and
efforts are in train to add Russia before long.
The
United States is fully committed to completing the DDA by the agreed deadline of
2005. We have already tabled far-reaching proposals in agriculture, industrial
and consumer goods, and services, to highlight the primary goal of the WTO: to
open access to markets and to spur growth and development.
America's goal in the farm negotiations is to harmonise subsidies and
tariffs while slashing them to much lower levels, on a path towards elimination.
The last global trade negotiation--the Uruguay round--accepted high and
asymmetrical levels of subsidies and tariffs just to get them under some
control. For example, the United States accepted a cap for the European Union's
production-distorting subsidies that was three times the size of America's, even
though agriculture represents about the same proportion of our economies.
The farm bill--which authorised up to $123 billion in all
types of food-stamp, conservation and farm spending over six years, amounts
within WTO limits--made clear that America will not cut agricultural support
unilaterally. But America's farmers and Congress back our proposal that all
nations should cut together. The United States wants to eliminate the most
egregious and distorting agricultural payments, export subsidies. We would cut
global subsidies that distort domestic farm production by some $100 billion,
slashing our own limit almost in half. We would cut the global average farm
tariff from 60% to 15%, and the American average from 12% to 5%. The United
States also advocates agreeing on a date for the total elimination of
agricultural tariffs and distorting subsidies.
The
American proposal for manufactured goods would free the world of tariffs on
these products by 2015. This was the trade sector first targeted by the founders
of the GATT in 1947; after more than 50 years' work, about half the world's
trade in goods has been freed from tariffs. It is time to finish the job.
With zero tariffs, the manufacturing sectors of developing
countries could compete fairly. The proposal would eliminate the barriers
between developing countries, which pay 70% of their tariffs on manufactured
goods to one another. By eliminating barriers to the farm and manufactured-goods
trade, the income of the developing world could be boosted by over $500
billion.
The American proposal on trade in services
would broaden opportunities for growth and development in a sector that is just
taking off in the international economy. Services represent about two-thirds of
the American economy and 80% of our employment, but account for only about 20%
of world trade. The World Bank has pointed out that eliminating services
barriers in developing countries alone would yield them a $900 billion gain.
The United States listens to the concerns of developing
countries striving towards free trade. This year, we devoted $638m to help such
countries build the capacity to take part in trade negotiations, implement the
rules and seize opportunities. We have acted in partnership with the
InterAmerican Development Bank to integrate trade and finance, and we are urging
the World Bank and the IMF to back their rhetoric on trade with resources.
We agreed at Doha that the flexibility in the global
intellectual-property rules could be used to allow poor countries to license
medicines compulsorily to deal with HIV/AIDS, tuberculosis, malaria and other
epidemics. We are also committed to helping those poor regions and states obtain
medicines produced abroad--if they cannot manufacture them locally--as long as
other countries with pharmaceutical industries do not carve these special terms
into loopholes to circumvent the intellectual-property protection that rewards
research on the medicines of the future.
The Doha
negotiations include customised treatment for developing countries. Yet flexible
transitions and special needs should not degenerate into perpetual
protectionism. "Good intentions" that cover up trade barriers raise prices for
the poorest people, profit cosseted interests, increase costs for competitive
businesses and block exports from productive firms and workers to other
developing countries. We are pleased that NGOs such as Oxfam now recognise the
benefits of trade for development, but they need to acknowledge that these
benefits flow from removing barriers to imports as well as from promoting
exports and competition at home. The WTO can foster export-driven growth for
developing countries without reviving the neo-colonialist trade patterns
promoted by an earlier generation. Europe as partner
As
one African minister told me recently, when the United States and the EU agree
on a course in the WTO, we cannot ensure success, but we make it much more
likely. Fortunately, I have no doubt that my respected and close colleague
Pascal Lamy, the EU trade commissioner, is just as committed to completing the
Doha negotiation on time.
The United States and the EU
share a common aim of trade liberalisation, but have pursued different
approaches. In the lexicon of the EU, the United States is pressing to "deepen"
the WTO by freeing trade across the core agenda of market access. The EU's
distinguishing agenda is to "widen" the WTO mandate by developing new rules to
cover more topics. As one Asian colleague observed, the EU sees the world
through the lens of recent European experience: it wants gradually to achieve a
supranational system of governance for globalisation. Yet many developing
countries have no wish to add new topics to the WTO, believing our priority
should be to spur more trade and investment. There is a risk that the EU will
trade off cuts in barriers in order to add rules and institutions.
At Doha, the United States helped bridge the gap between
"deepeners" and "wideners", because the EU needs progress on its broader agenda
to achieve movement on agriculture, which is critical for many developing
countries. The United States will continue to work to accommodate the EU's
objectives, as long as the EU is committed to liberalising trade in agriculture,
goods and services. We need to ensure that any new negotiating topics and rules
enhance free markets, strengthen transparency in the WTO and facilitate trade,
while respecting the prerogatives of sovereign states. Another European
perspective might also be borne in mind--Hayek's "spontaneous order", which
advises that rules should be forged first through markets, rather than through
government controls.
Even if America and Europe
co-operate, the Doha agenda will still be hard to achieve. (Sadly, Japan's
mercantilist, zerosum approach to trade is typified by its recent agriculture
proposal, which argued for cutting its quota on imported rice.) It is
encouraging to find a network of trade ministers, in both developing and
developed countries, working together.
Yet any decision
by the WTO requires a consensus among its 144 members. Any one country--for
whatever political or economic reason--can stop the Doha agenda in its tracks.
We will not passively accept a veto over America's drive to open markets. We
want to encourage reformers who favour free trade. If others do not want to move
forward, the United States will move ahead with those who do. It is time for
others to tell us when they are ready to open their markets, to table proposals
to liberalise and to match their criticism with commitment.
Some trade specialists cavil about America's use of leverage to push
for greater openness. I urge them to broaden their perspective. We want to
strengthen the hand of the coalition pressing for freer trade. It would be fatal
to give the initiative to naysayers abroad and protectionists at home. As we
have seen in the League of Nations, the UN, the IMF and the World Bank,
international organisations need leaders to prod them into action. NAFTA and its
imitators
To multiply the likelihood of success, the
United States is also invigorating a drive for regional and bilateral free-trade
agreements (FTAs). These agreements can foster powerful links among commerce,
economic reform, development, investment, security and free societies. The North
American Free-Trade Agreement (NAFTA) not only almost tripled American trade
with Mexico and nearly doubled its trade with Canada, but also made all three
members more competitive internationally. NAFTA proved definitively that both
developed and developing countries gain from free-trade partnerships. It enabled
Mexico to bounce back quickly from its 1994 financial crisis, launched the
country on the path of becoming a global economic competitor, and supported its
transformation to an open democratic society.
Ironically, a number of European publications that have criticised
America's "competitive liberalisation" through regional and bilateral free-trade
negotiations were noticeably silent when the EU negotiated 30 such pacts; the
United States only has three, but we are hard at work.
In the 100 days since Congress granted the president fast-track
authority, the United States has completed the substance of an FTA with
Singapore and started talks for FTAs with the five nations of the Central
American Economic Community, the five countries of the Southern African Customs
Union, Morocco and Australia. We have almost completed an FTA with Chile. Last
month, we helped push forward the negotiations among 34 democracies for a
Free-Trade Area of the Americas. We will co-chair this effort, with Brazil,
until it is successfully concluded.
Our free-trade
agenda conveys signals. We are open to free trade with all regions--Latin
America, sub-Saharan Africa, Asia-Pacific, the Arab world--and with both
developing and developed economies. We want to expand commercial links with
these countries. Equally important, all our free-trade partners, though varying
greatly in size and development, are showing political courage at home by making
the case for open markets and connecting those ideas to economic reforms. These
are governments we want to help.
One Europe-based
publication recently claimed that the United States "has little to offer other
countries", because America's barriers are relatively low already. But the
"market test" is proving such commentaries mistaken, as countries are lining up
to negotiate FTAs. Countries recognise that assured access to the huge, dynamic
American market is a valuable economic asset. Because American FTAs are
comprehensive, with high standards, our FTA partners stand out as good places to
invest, as strong links in a global sourcing chain, or simply as promising
markets in which to do business.
We will work with our
FTA partners--through USAID and with the multilateral development banks--to link
liberalisation to sectoral reforms. For example, we have been discussing with
Morocco how to support its shift, backed by the World Bank, from the production
of cereals to fruits and vegetables for export. For Southern Africa and Central
America, our FTAs can encourage regional integration, the reduction of local
barriers to regional competitiveness, the development of a larger market for
investment, and greater political cooperation. Many other countries are working
with us on market and trade reforms simply to prepare for an FTA.
As our FTA negotiation with Singapore showed, our
agreements can also serve as models by breaking new ground and setting higher
standards. The United StatesSingapore FTA will help advance areas such as
e-commerce, intellectual property, labour and environmental standards, and the
burgeoning services trade. As we work more intensively with nations on FTAs, the
United States is learning about the perspectives of good trading partners. Our
FTA partners are the vanguard of a new global coalition for open markets.
These partners are also helping us to expand support for
free trade at home. Each set of talks enables legislators and the public to see
the practical benefits of more open trade, often with societies of special
interest for reasons of history, geography, security, or other ties. There is an
old adage in American politics: "You can't beat something with nothing." We want
the American debate to be focused on our agenda of opening markets, not on the
protectionists' defensive dogma of closing them.
Whether the cause is democracy, security, economic integration or free
trade, advocates of reform often need to move towards a broad goal step by
step--working with willing partners, building coalitions, and gradually
expanding the circle of cooperation. Just as modern business markets rely on the
integration of networks, we need a web of mutually reinforcing trade agreements
to meet diverse commercial, economic, developmental and political challenges.
The United States is combining this building-block approach to free trade with a
clear commitment to reducing global barriers to trade through the WTO. By using
the leverage of the American economy's size and attractiveness to stimulate
competition for openness, we will move the world closer towards the goal of
comprehensive free trade.
Robert Zoellick is the United
States Trade Representative and a member of President Bush's cabinet. He handled
the NAFTA talks and the Uruguay round at the State Department from 1989-92.
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