Topic: Trade and Immigration

President Bush Answers Critics on Trade

President Bush has gone on the offensive this week, touting the generally solid performance of the U.S. economy and the danger posed to our market-driven prosperity by rising protectionist sentiments in Congress.

In a speech yesterday in the historic Federal Hall in New York City, the President sounded a clear trumpet in defense of free trade. In a rarity for politicians of any stripe, he not only extolled the virtues of exports but also of imports, and bluntly warned against “walling off America from world trade.”

Here are a few highlights from the speech:

“As we improve free trade, consumers get lower prices.” 

“Since World War II, the opening of global trade and investment has resulted in income gains of about $9,000 a year for the average American household.” 

“The Doha Round … is a great opportunity to lift millions of people out of poverty around the world.” 

“I know there’s going to be a vigorous debate on trade, and bashing trade can make for good sound bites on the evening news. But walling off America from world trade would be a disaster for our economy. Congress needs to reject protectionism, and to keep this economy open to the tremendous opportunities that the world has to offer.” 

Of course, the President will need to work with skeptical Democrats in Congress to pass pro-trade legislation and stop any anti-trade measures.

In the meantime, the President can put his pro-trade words into action unilaterally. A recent article in The Weekly Standard cites several good ideas from your favorite libertarian think tank on actions President Bush could take independently of Congress to expand the freedom of Americans to trade in the global economy.

Doha, TPA Extension, and the Farm Bill: the Axis of Frustration

President Bush went to Illinois yesterday, asking for Congressional renewal of his authority (called “Trade Promotion Authority”) to negotiate trade agreements and send them to Congress for an up-or-down vote without amendment. The present TPA expires at the end of June 2007. For those of us who have strong doubts about the ability of members of Congress to take the broad view when considering trade agreements, TPA is a necessary–but not sufficient–condition for the United States to pursue trade liberalization in partnership with other nations, including the ailing Doha round of world trade negotiations and other preferential trade agreements like those underway with South Korea and Malaysia. (This Washington Post article has a good overview of the stakes and politics behind the battle for TPA.)

(Side Note: it was surely no accident that President Bush chose to make his case at the headquarters of a successful exporter [a sterling company Caterpillar may be] rather than, as Grant Aldonas suggests in the Post article, a company that delivers cheap imports to consumers. Mercantalism is alive and well, in case there were any doubts.)

Basically, the bind is this: without TPA, Doha is dead. But many are suggesting that lawmakers will be reluctant to extend TPA if no Doha deal is imminent. Similarly, the new Farm Bill, due for enactment in September, may be an extension of the unsatisfactory 2002 Farm Bill if the Doha round does not exert significant pressure to reform, even though reform of U.S. agricultural policy would go a long way to helping the round succeed.

Don’t look to key members of Congress for their support in unraveling this knot, though. An article at the Delta Farm Press website contains some worrying statements from the new House Agriculture Committee Chair Colin Peterson. The money quote:

There’s pressure on us to change the farm bill because “that’s the only way we can get a trade deal,” said Peterson, a Minnesota Democrat. “Now, I’m sorry, but I’ve had enough of these trade deals. And unless we can get something good out of, I don’t give a darn if we get one.”

Something tells me that Chairman Peterson’s statement was not meant to be a be read as an endorsement of unilateral trade liberalization.

Visa Policies Costing U.S. Billions of Dollars

The United States is losing billions of dollars a year and the goodwill of millions of people by unnecessarily strict visa policies that discourage tourists, students and business travelers from coming to the United States.

The problem has become so critical that a broad coalition of American businesses, universities and other interest groups are planning to launch a campaign today for needed visa reform.

The U.S. government was obviously not doing enough before September 11, 2001, to keep dangerous people out of the country, but changes to U.S. visa policy since then have gone far beyond legitimate security needs. Tighter visa rules are keeping out potentially millions of visitors who pose no security threat to the United States.

As an article in this morning’s Financial Times reported:

The National Foreign Trade Council estimated that US businesses lost more than $30bn in the two years before mid-2004 because of the visa restrictions imposed after the 2001 terrorist attacks. That figure is likely to be much larger now.
“American businesses now routinely hold training seminars, conferences and sometimes even board meetings outside of the US,” said Bill Reinsch, head of the NFTC. “At the same time you see foreign universities attracting more students by advertising the fact that they don’t have a US-style visa regime.”

One step toward a more rational U.S. visa policy would be to extend the visa waiver program to such economically developed allies as Poland, Hungary, the Czech Republic, Greece, and South Korea. The program allows tourists and business travelers to enter the United States for up to 90 days without a visa. Expanding the program to selected countries would boost tourism and goodwill toward the United States without compromising national security.

I write about the need to expand the program in a new Cato Free Trade Bulletin and talk about it in a new Cato podcast.

U.S. Posturing for a Fight at the WTO

Regarding the antidumping dispute concerning “zeroing,” which I’ve argued could shake the very foundations of the multilateral trading system, we have this development (see last item).  It is becoming evident that the United States will attempt to discredit the WTO Appellate Body’s logic in its latest rebuke of U.S. zeroing practices. 

It may take a year or more before we get there, but we appear to be headed for a confrontation with the dispute settlement system that could leave that institution weakened and U.S. credibility further damaged.  And that could invite consequences far worse than a stalled or derailed Doha Round.

More to come.

Trade Showdown Looks Inevitable

Yesterday I argued that Congress’s unflinching devotion to the antidumping law poses a real threat to the world trading system.  As the WTO dispute settlement mechanism renders more decisions against U.S. antidumping actions and procedures, Congress will grow more inclined to question the efficacy and legitimacy of the WTO in public.  And that is a slippery slope.

I wrote:

To Congress, trade remedy laws are not the problem.  Dumping and subsidization are.  And the latest Appellate Body decision against zeroing makes it that much harder to combat “unfair” trade.

Accordingly, Congress is highly unlikely to go quietly into the night after the WTO’s latest indictment of zeroing. Thus, confrontation–perhaps intractable confrontation–between the United States and the WTO dispute settlement system may be in the cards later this year.

Well, judging from this news release and letter, written by the two highest ranking legislators on trade issues, “later this year” is here.  Stay tuned.

Trade is Much Bigger Than the Doha Round

There have been whispers of late regarding prospects for a last minute resurrection of the WTO’s Doha Round of multilateral trade talks.  My colleague Sallie James does a great job discussing those prospects with polite skepticism in a recent Cato podcast.  Let me be a little more direct: Doha’s dead, yadda yadda yadda, now let’s move on!

Ok, that sounds a bit cavalier.  So please allow me to clarify.  To be more precise, Doha is not dead permanently; it is in a cryogenic state, available for resuscitation under different circumstances. 

Atop the many reasons to conclude that Doha’s time has passed for now is this: the Bush administration has neither the will nor the resources to engage in the type of horse trading necessary to produce an agreement that would be simultaneously acceptable to our trade partners and our Congress (and worthy of the negotiating efforts expended thus far).  As with every other policy initiative “championed” by the Bush administration (and trade was never really a priority), trade’s oxygen has been consumed by the Iraq inferno.

Judging from the commentaries I’ve read and conversations I’ve had, I am less inclined than most to view Doha’s deep freeze as some colossal economic setback.  Certainly it is a(nother) foreign policy setback for the United States, which will undoubtedly be accused of perpetuating poverty and misery the world over.  To the extent there is some small truth in that (some U.S. trade policies have acute, adverse impacts on people in developing countries), Doha’s failure carries real costs.  But by and large, there is no reason to assume that international trade and foreign investment will suddenly slow or reverse course.  In fact, trade and investment are likely to continue to grow handsomely and the world economy will continue to expand, as more and more people from more and more countries partake of the global economy.  And furthermore, I suspect that some, if not many, of the reforms and liberalizations proposed in the Doha Round will be adopted, ultimately, without need of agreement, by countries (including the U.S.) that recognize it is in their interest to reform regardless of what other countries do. 

What concerns me more than the failure to reach a new accord is the potential for marginalization of the old agreements and institutions.  The agreements that culminated in the creation of the World Trade Organization in 1995 and the quiet success of its dispute settlement system (which has “handled” 357 disputes) have a lot to do with trade’s contribution to world economic growth.  Long-standing rules and familiar processes have helped reduce and eliminate some of the uncertainties (and therefore, risks and costs) traditionally associated with trading and investing with foreigners.  If member countries were to begin questioning the efficacy of the system or the wisdom or propriety of its adjudication process when it becomes politically convenient to do so, calls to skirt the rules and ignore the verdicts might not be too far behind.  And that behavior could prove contagious, leading to new uncertainties, greater risks and costs, and ultimately, degradation and a potential collapse of the rules-based trading system.

That scenario, should it unfold, is a long way off.  But the seeds of discontent are sowing.  U.S. policymakers have from time-to-time expressed skepticism about WTO rulings.  That skepticism is memorialized in Section 2101(b)(3) of the legislation that gave President Bush trade promotion authority in 2002:

Support for continued trade expansion requires that dispute settlement procedures under international trade agreements not add to or diminish the rights and obligations provided in such agreements. Therefore-

(A) the recent pattern of decisions by dispute settlement panels of the WTO and the Appellate Body to impose obligations and restrictions on the use of antidumping, countervailing, and safeguard measures by WTO members under the Antidumping Agreement, the Agreement on Subsidies and Countervailing Measures, and the Agreement on Safeguards has raised concerns; and

(B) the Congress is concerned that dispute settlement panels of the WTO and the Appellate Body appropriately apply the standard of review contained in Article 17.6 of the Antidumping Agreement, to provide deference to a permissible interpretation by a WTO member of provisions of that Agreement, and to the evaluation by a WTO member of the facts where that evaluation is unbiased and objective and the establishment of the facts is proper.

Reactions in Congress to WTO dispute settlement decisions have been most acerbic when the subject has concerned U.S. application of its trade remedy laws.  As I reported last month, the WTO Appellate Body’s indictment of the U.S. antidumping calculation practice known as zeroing led to a rare change in practice at the Commerce Department.  However, some in Congress were not very pleased, suggesting the administrative actions circumvented congressional authority.Just last week, the Appellate Body ruled again on the issue of zeroing in the United States, but this time the ruling was even more encompassing, forbidding the practice under almost every conceivable comparison methodology.  Compliance with the ruling would be a landmark achievement in the realm of antidumping reform because the practice of zeroing is the single greatest systemic inflator of dumping margins.  And therein lies the problem.  In terms of the practical effect on the bottom line, banning zeroing entirely is akin to fairly ambitious antidumping reform, which Congresses past (and presumably present) have opposed.

When Congress granted President Bush trade promotion authority in 2002, it did so with strings attached. 

(14) TRADE REMEDY LAWS.-The principal negotiating objectives of the United States with respect to trade remedy laws are-

(A) to preserve the ability of the United States to enforce rigorously its trade laws, including the antidumping, countervailing duty, and safeguard laws, and avoid agreements that lessen the effectiveness of domestic and international disciplines on unfair trade, especially dumping and subsidies, or that lessen the effectiveness of domestic and international safeguard provisions, in order to ensure that United States workers, agricultural producers, and firms can compete fully on fair terms and enjoy the benefits of reciprocal trade concessions; and

(B) to address and remedy market distortions that lead to dumping and subsidization, including overcapacity, cartelization, and market-access barriers.

To Congress, trade remedy laws are not the problem.  Dumping and subsidization are.  And the latest Appellate Body decision against zeroing makes it that much harder to combat “unfair” trade.

Accordingly, Congress is highly unlikely to go quietly into the night after the WTO’s latest indictment of zeroing. Thus, confrontation–perhaps intractable confrontation–between the United States and the WTO dispute settlement system may be in the cards later this year.

Antidumping is not the only area where the United States is on the defensive in the WTO.  Without an ongoing negotiating round, new cases concerning agricultural subsidies are likely to be brought (Brazil and Canada have already done so). 

If the United States refuses to comply (or is seen dragging its feet for a long time), other WTO members might follow the example, and eventually the dispute settlement mechanism could become a dead letter. These are the risks to the multilateral trading system. 

The failure of Doha to bear fruit in the form of a new ambitious agreement is disappointing, but hardly catastrophic.  However, to the extent that the absence of an ongoing negotiating round (indeed, in the wake of the first failed multilateral negotiating round ever) might liberate politicians to call for unilateral actions that contravene trade agreements, it will be more important to be vigilant in the face of threats to global commerce.

Identity Crisis Book Forum Thursday at Cato

On Thursday, the Cato Institute is having a book forum on my book Identity Crisis: How Identification is Overused and Misunderstood.

Commenting on my presentation of the book will be James Lewis from the Center for Strategic and International Studies and Jay Stanley from the ACLU.

The REAL ID Act is under siege from state leaders who are bridling at this unfunded surveillance mandate, and legislation was introduced at the end of the 109th Congress to repeal REAL ID. But the immigration debate this year will surely fuel the push for a national ID with the demand for “internal enforcement” of immigration law. Identity Crisis lays the groundwork for all these discussions.

The event is streamed for those not in the area. To register, go here.