Seattle will recover from the WTO meeting. The larger question is whether the cause of trade liberalization will do likewise.
Pessimism abounds. The ugly protests cast a pall over the sessions and delegates. Moreover, the meetings themselves exposed deep rifts among the parties, culminating in a failure to agree on an agenda for future negotiations.
Nonetheless, the next president can jumpstart the talks—and prevent a possible backsliding toward protectionism—if he and Congress are willing to make some key compromises, just as the United States has done in eight previous trade rounds.
For example, we want better access for our agricultural products in Japan and Europe. But Japan wants us to relax our antidumping rules, while Europe wants rules on competition policy.
Japan and other countries are right about antidumping, which punishes foreigners for pricing behavior that is perfectly lawful for our own firms selling within this country. Eliminating the antidumping law, however, is a political non-starter. Our government also fears that international negotiations might lead to weak antitrust rules.
There may yet be a way to address both the Japanese and European concerns. Why not apply less stringent (and more sensible) antidumping rules where exporters can show their domestic markets are free from cartels and other anti-competitive practices that allow them to sell high at home and low abroad? Such a policy would encourage other countries to adopt and more effectively enforce their antitrust laws (without the need for harmonized antitrust rules), while moving antidumping policy in a more pro-consumer direction.
Less-developed countries, meanwhile, fear that trade sanctions to enforce labor standards with which they may not agree—which the president proposed in Seattle—will keep them from growing. They rightly point to the economic history of rich countries, which shows that as average incomes rise, people demand and governments adopt higher labor and environmental standards on their own. If consumers in rich countries are still offended by other countries’ labor practices, they don’t have to buy their products. The International Labor Organization will soon be giving consumers more information on country labor practices to help them make those decisions.
These compromises cannot be reached, however, until the next president has the normal negotiating authority that other presidents have had. But he shouldn’t request it until he addresses three key issues.
First, we must quit trying to sell freer trade by saying it’s a way to create jobs, which isn’t true (the Fed governs that through its control over monetary policy). The pitch to make to voters is that lower trade barriers are equivalent to cutting taxes because they lead to lower prices. Indeed, the president’s own 1998 economic report documents that expanded trade has given each American more than $1,000 in added purchasing power since 1960.
Second, we must do more to help nervous workers—especially those with lower incomes most fearful of trade—who lose their jobs for any reason (but who incorrectly blame globalization, when changes in technology, shifts in consumer tastes and deregulation are behind the lion’s share of layoffs). Here are two ideas. Expand the federal college loan programs so that workers have an account on which to draw for retraining throughout their working lives. Introduce a system of wage insurance (or have the federal government help support a private system) that cushions the drop in income many workers suffer when they are displaced.
Third, we must add to the meager budget of the WTO so that it has the resources to implement the one idea from Seattle on which the protesters were right and which the United States should continue to press: opening up the WTO’s dispute-resolution procedures to filings from nongovernmental organizations and other private parties.
Finally, the next president should realize that however well- intentioned many of the protesters might be, they are fundamentally on the wrong side of the facts and of world history. Trade between countries is fundamentally no different than trade within countries. If you’re for competition at home—as Americans are—no reasonable case can be made for restraining it abroad. The protesters may want to turn the clock back to less comfortable times, but a main job of the next president is to remind the rest of Americans that they don’t.
[On the ongoing trade negotiations] If we’re serious about resolving the core issues that the U.S. has with China, then this is going to be a way station that’s going to require a lot more continued focus by the administration for a number of months if not years.