Still Looking For Even Trade

If only the United States were a little bit more accommodating in negotiations with European allies. If only the administration of President George W. Bush were less unilateralist, more internationalist, all would be well in the world. Or so the Democratic candidates for president have claimed in recent debates and on the campaign trail. Not only do these claims ignore the more than 80 nations that joined the United States by various means to help dethrone Saddam Hussein, they also overlook the broad and complex network of foreign relations that are in place to support U.S. national and economic security.

As trade and foreign ministers gathered in Cancun, Mexico, from Sept. 10-14 for the fifth ministerial meeting of the World Trade Organization (WTO), the United States was looked to as the chief negotiator between the developed nations of Europe and the developing nations. As the meeting kicked off, it was the U.S. representatives who were pursuing the ambitious agenda to open the world's markets, while its allies in the European Union (EU) stubbornly were adhering to their own unilateralist agendas.

Following the 1994 Uruguay Round of trade negotiations, developing nations agreed to a set of new rules pertaining to intellectual-property rights, health measures and service discipline. In return, developing nations were offered a pledge of more trade in their priority areas, particularly agriculture, textiles and apparel. A day into the talks, news emerged that the European Commission intended to renege on this deal. In the United Kingdom The Guardian newspaper reported an internal memo outlining commission plans to seek removal of language eliminating export subsidies from the WTO meeting's final declaration.

The commission's action comes on the heels of increased demands for the creation (and recognition by the WTO) of a special register of more than 600 "geographically defined products," such as Parma ham and Roquefort cheese. Opponents say the effort, being led by France, is nothing short of stealth subsidization.

In July, the United States became the first WTO member to propose a comprehensive agricultural trade-reform package seeking elimination of export subsidies, cuts of the annual $100 billion allowed for global trade-distorting domestic subsidies and the lowering of average allowed global tariffs from 62 percent to 15 percent. Agreement on these reforms remains the primary goal of the ongoing talks, which are more procedural than substantive, says Claude Barfield, a trade expert with the American Enterprise Institute (AEI).

In addition to reforming the farm-subsidy regime, lowering tariffs in nonagricultural industries and services is a priority for U.S. Trade Representative (USTR) Robert Zoellick. Barfield says Zoellick's position has been strengthened as a result of the success he and Agriculture Secretary Ann M. Veneman have had in getting domestic agriculture interests to accept U.S. demands for lowering tariffs. "I think that [agriculture interests] are willing to go along with agricultural reform, as long as it is substantial. Despite the fact we passed a highly protectionist subsidization bill for the agricultural community two years ago, they are willing to give him the leeway to do it," Barfield said at an AEI forum before the WTO meeting.

Zoellick's "ambitious agenda" called for WTO members to eliminate all tariffs at or below 5 percent by 2010 and to eliminate tariffs in select highly traded industry sectors sooner, but no later than 2010. According to the Organization for Economic Cooperation and Development, industrialized nations spend more than $300 billion annually on domestic farm subsidies, approximately six times more than they spend on aid to poor states.

According to the USTR, last year hidden import taxes cost American consumers $18 billion, and University of Michigan analysts argue a tariff-free trade regime could result in a $95 billion expansion of the U.S. economy, as well as an increase of U.S. exports by $83 billion annually.

The G-21, a coalition of developing countries led by WTO newcomer China, emerged as a spunkier, more-vocal participant, increasing pressure on EU and U.S. negotiators to reach some consensus on a framework leading to the 2005 conclusion of the round. The perception that they were mistreated and/or duped into agreeing to the 1994 Uruguay Round - a feeling confirmed by revelation of the EU draft memo - contributed to their harder line, says Barfield.

While the G-21 demanded reforms of other nations, they were unwilling to open their own agricultural markets, to the dismay of Sen. Charles Grassley (R-Iowa). "It can't be a one-way street whereby the United States agrees to eliminate subsidies but the rest of the word does nothing. ... I won't support such a result," said Grassley on Sept. 11.

Yet, developing countries have much to gain from a tariff-free world. The World Bank estimates a world income gain of $832 billion from free trade in all goods, of which $539 billion (65 percent) would flow to developing countries. So U.S. negotiators are demanding developing nations also lower their tariffs, noting that because 70 percent of the world's tariffs are between developing nations, they will experience few benefits if reciprocity is not adopted. Simply withdrawing from international trade agreements, as some Democratic presidential candidates have advocated, would be neither easy nor advantageous to a domestic economy that relies heavily on foreign export markets, particularly China.

And China's current behavior illustrates that manufacturing a simple solution in a debate setting is easy, but dynamics can be complicated and even dangerous. Currency relationships may not be part of the WTO's purview, yet a bipartisan group of U.S. senators and congressmen (not unintentionally) chose Sept. 9 to introduce legislation calling for the imposition of tariffs on Chinese imports if Beijing's manipulation of the Chinese currency, the yuan, is not addressed.

In the Senate, Democratic Sen. Charles Schumer of New York joined with GOP Sens. Elizabeth Dole of North Carolina and Lindsey Graham of South Carolina to sponsor S 1586, while in the House, Reps. Phil English (R-Pa.), Cass Ballenger (R-N.C.) and Mark Green (R-Wis.) introduced the Currency Harmonization Initiative through Neutralizing Action (CHINA) Act of 2003, which would impose tariffs on Chinese imports if the Treasury Department finds illegal currency-manipulation activity by Beijing.

Support for the protectionist trade rhetoric espoused by the Democratic candidates, however, did not show up in a survey released Sept. 5 by the Pew Center's Global Attitudes Project. It found large majorities in 38 of 44 countries polled in the summer of 2002 thought global trade and business ties were good for their country. Additionally, in 33 of the 44 countries, foreign companies were viewed as having a "generally positive influence." Despite a majority in 34 nations holding the belief that the availability of well-paid jobs had declined, most did not place the blame at the feet of globalization. And the nation with the highest percentage (25 percent) of those blaming global trade? France.

The distorted trade policies practiced by China may contribute to the trials of the U.S. manufacturing industry, but it is not the only cause. In a Sept. 9 hearing before the House Small Business Committee, National Association of Manufacturers President Jerry Jasinowski said a "listless and uninspiring" economy and an assortment of rapidly rising business costs, including regulatory burdens, health-care costs and cheaper foreign labor markets, have hindered industrial recovery. Ancillary costs have forced companies to "either lay off employees or outsource work to foreign countries," Jasinowski said. One of the primary burdens is health-care costs, as exhibited by a Sept. 9 Kaiser Family Foundation study that found health-insurance premiums increased 13.9 percent in 2003 and were expected to continue to rise.

Another factor affecting the sector is the unsettled state of asbestos-litigation reform, which has stalled in the Senate and may fall prey to election-year politics. In a recent speech before the U.S. Chamber of Commerce, Sen. Tom Carper (D-Del.) stated his belief that there was a greater likelihood of passing asbestos reform than general reform of class-action litigation.

The importance of reaching some settlement was underscored during a meeting with international labor unions, Carper said. "It was intended to focus on trade matters, but the meeting quickly turned to asbestos reform and the problems resulting from business's uncertainty. People [with urgent problems] are not getting paid. But those who might develop problems [associated with long-term exposure to asbestos] are - and that is draining the resources which should be going to those who are already sick," Carper observed in calling for some balance between business and trial lawyers. To date, more than 60 companies have been forced into bankruptcy by these lawsuits, and 38 of the nation's top 100 defense contractors now are asbestos defendants.

Nor are the industry's woes new. In Sept. 10 testimony before the House Small Business Committee, Kathryn Kobe, chief economist of Joel Popkin & Co., noted the manufacturing crisis is not a new development. Manufacturing's share of the gross domestic product has seen sharp declines since 1995. "The sector lost over a half-million jobs between 1998 [the peak of the economic expansion] and early 2001," according to Kobe.

Jennifer G. Hickey is a writer for Insight.
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"The distorted trade policies practiced by China may contribute to the trials of the U.S. manufacturing industry, but it is not the only cause. In a Sept. 9 hearing before the House Small Business Committee, National Association of Manufacturers President Jerry Jasinowski said a "listless and uninspiring" economy and an assortment of rapidly rising business costs, including regulatory burdens, health-care costs and cheaper foreign labor markets, have hindered industrial recovery. Ancillary costs have forced companies to "either lay off employees or outsource work to foreign countries," Jasinowski said. One of the primary burdens is health-care costs, as exhibited by a Sept. 9 Kaiser Family Foundation study that found health-insurance premiums increased 13.9 percent in 2003 and were expected to continue to rise.

Excuses, excuses. But Not for long when the economy finally collapses from the Economic Vampirism that is blithely being enabled with taxpayer-subsidies. Note how the author is missing the primary causes of the 'listless' economy: Indian and Chinese trade barriers to U.S. manufactures...while simultaneously exporting up a storm at us. And she fails to note it is these same countries who are the Number 1 culprits of 'low-wage' markets designed to suck the oxygen out of the U.S. industrial investment climate.

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