Briefing: How Free Shall Our Free Trade Be?
The Optimum Strategy
The vote to pursue the current trend toward open trade under multi-country regulations has been viewed by many commentators as a vote to stay in NAFTA (the North American Free Trade Agreement) and to continue our participation in GATT (the General Agreement on Tariffs and Trade) and the newly-formed World Trade Organization (WTO), which was created in the last round of GATT talks in Uruguay.
Both NAFTA and GATT have been incorporated into U.S. law in the past five years, over the strident objections of people who feared the famous “giant sucking sound” as corporations moved millions of U.S. jobs to Mexico and Asia. In fact, however, the wholesale migration of jobs has not come to pass. Many individual instances can be cited, but it is clear that U.S. industry as a whole has not packed up and crossed the border, or the ocean.
However, not all proponents of international agreements believe that regional alliances such as NAFTA and the proposed Trans-Atlantic and Trans-Pacific groups are the right approach. Such alliances have the potential to turn into their own protectionist units (much as the European Union is doing) and to work against free trade between alliance and alliance, while they help foster free trade within a given alliance.
Economists and other interested parties who want to see the world move as close to a pure free-trade policy as politically feasible recommend minimizing or ditching regional alliances and giving more and more power to the WTO to oversee genuine worldwide trade, rather than region-by-region agreements. This allows some regulations to protect the environment, the quality of the workplace, etc., without reforming the current set of nations into a smaller and more powerful set of trading partners, working generally in the interest of their richest and most powerful member nations.
Proponents of the overall world model fear, for example, that NAFTA can become an “extended U.S.A.” when trading with the European Union, so that the United States will use the added economic clout of Canada and Mexico as a club to beat the Europeans. (And, in fact, the ability of the European Union to do precisely the same thing in reverse was one of the major factors which convinced the United States to accept NAFTA.)
Nationalists, on the other hand, frequently prefer the benefits of managed alliances, feeling that their own country is more likely to have global interests in common with its neighbors or specific trading partners than with a truly worldwide system. Also, pulling out of a worldwide system in case of local war, shift in national policy, or for any other reason, is much harder than pulling out of one, or even a group, of regional alliances–another reason for people who put “my country’s interest” first to be inclined toward the regional alliance route.
Which Areas to Cover
When most Americans think about international trade, they think about stereos, cars, computers, VCRs, packaged foods, liquor, jewelry–the things you can buy in a duty-free shop in an airport, or an import store in this country–and these things are all covered by the current free trade agreements.
But so are many other things.
Provisions of GATT, some of them involving all signatories and some of them “plurilateral agreements” involving some signatories, cover the following controversial areas:
· Intellectual property, such as books, movies, and computer software
· Agriculture and dairy products, including whether it’s legal to ban imports of beef where the cattle have been fed hormones or vegetables that have been dusted with DDT
· Civil aircraft, an industry often considered crucial to military preparedness
· Government procurement, an area where many feel that nationalism is particularly appropriate
· Timber and other non- (or too-slowly) renewable resources, which can be depleted by low prices abroad and become insufficient to meet local needs
Intellectual property is, in some senses, the least threatened of these areas, because language and culture are such dominating factors in terms of what intellectual property customers want to buy. Given Americans’ traditional resistance to foreign films and translated books, we are at no threat of having our citizens prefer foreign intellectual property to the home-grown variety, though of course there is little, except perhaps for the language barrier, to stop the Hollywood movie studios (one of the country’s two largest export industries) from moving over the border to Mexico and running the film industry from there, hiring Mexican workers for all, or most, off-screen jobs.
Software, another area where the U.S. exports far more than it imports, is once again subject to linguistic and cultural pressures. While it’s hard to imagine foreign software taking significant share away from Quicken or Microsoft, it is easier to believe that a foreign company could displace Netscape or America Online (which is both an intellectual property company and a service company).
The agriculture and dairy products controversy touches primarily on the question of food safety versus efficiency. How much should a country be allowed to set its own food safety standards? Both of these issues have already been hugely affected by NAFTA and GATT.
Despite the complaints of many environmentalists that our laws are not strong enough, the United States probably has the strongest pesticide and chemical restrictions for food and food products in the world. Under existing world trade treaties, other countries cannot be prevented from bringing in their produce and meat, which can freely contain substances banned in this country as carcinogens (such as the pesticide DDT, or bovine growth hormone, or BGH, in beef and milk). If it is legal to sell these products in the United States, how can we continue to tell our own farmers and ranchers that they may not use them? And isn?t it the government?s job to protect Americans from ingesting them?
Presumably, DDT-free or BGH-free products can be labeled as such–although if such labeling carries a connotation of “American-and-therefore-better,” it would probably not be acceptable under the WTO guidelines. Of course, many consumers will buy the cheaper or nicer-looking choice at the supermarket, regardless of what’s on the label. While some would call this unacceptable danger to the public, others would call it a simple free choice between two kinds of products.
The argument for protecting the civil aviation industry stems from the fact that, above all, this is the industry most readily convertible to military purposes in time of war. If it is not protected, the chance always remains that it could move out of the country, leaving us without retoolable industries available if and when hostilities recur. In the United States, civil aviation is also one of our two largest exports (along with Hollywood movies) and contributes significantly to our gross national product.
The concept of the federal government being forced to accept bids from foreign companies for everything from toilet paper to major construction products is alien to many Americans, who have grown up in a period of protectionism. When auto workers can change their vote because a politician drives a foreign-made car, elected officials and government functionaries at all levels have spent the last several decades extremely conscious of “buy American” attitudes. An open government procurement process will inevitably bring foreign products into all levels of our government–similarly, of course, it will allow us to offer “American know-how” to governments around the globe.
The U.S. timber industry has changed phenomenally in the past 15 years, largely because Japan doesn?t have enough of its own trees to meet its demand for paper. The cheapest way for the Japanese to meet their paper needs has been to import raw logs from America, a trade which ended in the 1980s because there simply was not enough timber to supply Japan and satisfy domestic U.S. needs. Free trade, of course, demands that traders sell to the customer who offers the highest price; they cannot be required to fill the needs of one market at the expense of another. Should Americans sell to Japan at higher prices even if it means domestic shortages, or is it appropriate to say, “These are our trees, hands off”?
The arguments that apply to protecting timber can also be easily applied to other natural resources, such as coal or copper. On the other hand, free trade agreements work to the benefit of the United States in terms of resources where we cannot fill our own needs, such as oil or gold.
Although each of these arenas has its own specific issues, in each case the essential question boils down to: “Is this important enough to our country that we should protect ourselves against the inroads of foreign traders, thereby cutting ourselves off from the benefits of free trade?”