Commentary

A Six-Step Plan for U.S. Trade Policy

By Daniel Griswold
February 17, 2001
The Bush administration and its newly confirmed Trade Representative Robert Zoellick should pursue an aggressive trade agenda — one that emphasizes the benefits of open borders at home and abroad. This will bring tangible benefits to consumers and producers alike. For that to happen, there are six steps the administration and Congress should follow.

1) Give Americans a tariff-rate cut. A good place to start is sugar quotas, which gouge consumers and impose a nearly $1 billion drag on the U.S. economy for the sake of a small number of politically connected domestic producers. High barriers also remain on imported dairy products, clothing, textiles, softwood lumber and inter-coastal shipping services. Removing these barriers would put money in the pockets of American families, strike a populist blow against corporate welfare, and set a good example for our trading partners.

2) Seek detente with Europe on trade disputes. Retaliation is a lose-lose game. The $300 million in sanctions the U.S. government has imposed on the EU over beef and bananas hurt American distributors and consumers, and invite retaliation from Europe on other trade disputes. This pain comes with no gain. European consumers are hostile to U.S. beef from hormone-fed cattle; no amount of U.S. pressure will change that political reality. The administration should drop sanctions as an enforcement tool and pursue less harmful ways of encouraging compliance with WTO rulings. Meanwhile, Congress should repeal the “carousel” legislation enacted last year that threatens to target a wider swath of imports from the EU.

3) Open our market to the world’s poorest nations. Call this compassionate conservatism on a global scale. A recent World Bank study found that the United States and other advanced countries maintain higher barriers against those exports most important to the world’s poorest countries—such as clothing, textiles, and agricultural products—than we do against each other’s chief exports. The European Union recently announced an “everything but arms” proposal to eliminate barriers to all imports (except weapons) from the world’s poorest 48 countries. The United States should do likewise.

4) Launch a new WTO round with a narrow agenda. “Market access” should be the guiding principal of the new round, with the focus on rolling back barriers to trade in services, agricultural products and manufactured goods. Competition policy and other side issues should be shelved. A study by the Australian government estimated that cutting barriers in half would generate a global welfare gain of $90 billion from expanded agricultural trade and $250 billion from services trade. For U.S. exporters, the potential benefits from a new WTO round are greater than from a Free Trade Agreement of the Americas: about 98 percent of U.S. exports go to other WTO members (plus China and Taiwan), compared to 8 percent to the non-NAFTA countries in the Western Hemisphere.

5) Avoid the labor and environment thicket. Negotiators from less developed countries know that any effort to tie trade agreements to environmental and labor standards could be hijacked by protectionists to block their most competitive exports. Free trade is not in fundamental conflict with higher standards. In reality, by promoting economic development and a freer flow of ideas, technology, and people, sustained trade liberalization encourages democratization and higher environmental and labor standards. If the United States insists on labor and environmental language in future trade agreements, then regional and multilateral trade talks will go nowhere and the world’s less developed nations will face a steeper climb to higher standards.

6) Put antidumping rules on the negotiating table. One of the reasons the 1999 Seattle WTO ministerial ended in failure was U.S. intransigence on antidumping law reform. Antidumping laws serve no rational economic or national purpose. They unfairly punish foreign producers for engaging in commercial practices that are legal among domestic U.S. producers. Their purpose is to drive up domestic prices for steel and other protected markets at the expense of consumers and import-using industries. A bad law was made worse last year by the Byrd amendment, which hands the booty from antidumping duties to the industries that file for protection. It should be repealed along with the rest of our antidumping laws.

Taken together, those six steps will free American families and producers from the burden of our own trade barriers and lay the foundation for negotiating lower barriers abroad for our exports. They provide a plan for the new administration and Congress to deliver relief to the U.S. economy and break the impasse that has delayed a new round of talks in the WTO to lower barriers around the world.

Daniel T. Griswold is associate director of the Cato Institute’s Center for Trade Policy Studies and the author of the new Cato study, “America’s Record Trade Deficit: A Symbol of Economic Strength.