Commentary

Trashy Trade Talk Heralds Election Season in the U.S.

A struggle is occurring within the Bush administration over its policy on trade and globalization. The protagonists include members of the administration, an increasingly divided Republican base, and divergent business interests. The outcome of the struggle will shape America’s relationship with Asia for this century.

Heretofore, the administration has rhetorically supported free trade while promoting protectionism in practice. From steel tariffs to agricultural subsidies, with one exception the administration’s big decisions on trade have been protectionist. U.S. President George W. Bush did deftly wrestle trade promotion authority from the U.S. Congress, but appears increasingly unlikely to utilize that authority strategically. Gaining that authority was used to justify the protectionist choices.

Now even the rhetoric has turned protectionist. U.S. Commerce Secretary Don Evans leads the protectionist chorus. Stopping short of threatening to send gunboats to Shanghai, Mr. Evans sent a stark warning that the U.S. market might be closed to China. He defended the steel tariffs by appealing to the rule of law. Yet he threatens to violate international law by, in effect, demanding that China renegotiate its World Trade Organization accession agreement.

Meanwhile Treasury Secretary John Snow is hectoring China on its exchange rate. When the U.S. secretaries of commerce and treasury sing the same song, the world takes note.

China has replaced Japan as the whipping boy of America’s protectionist chorus. That chorus is lead by uncompetitive U.S. businesses wanting to secure benefits for themselves at the expense of American consumers, who have benefited from the availability of Chinese imports.

A growing segment of political conservatives, the base of the Republican Party, have merged animosity toward China with suspicion of globalization into a policy of China bashing. Never mind that the long-term strategic interests of the United States and China are more complementary than conflicting. Trade more than anything else would ensure a convergence of interests.

With an election year approaching, some of the trashy trade talk could be attributed to domestic politics. One of the time-honored duties of a U.S. commerce secretary is to gather business campaign contributions in copious quantities. Certainly his tough comments can be partly attributable to playing that role. But the record on steel tariffs suggests sincerity on his part when threatening protectionism.

Former U.S. President Lyndon Johnson famously observed that a little bit of protectionism is like a being a little bit pregnant. The benefits of the Bush tax cuts will be consumed by higher tariffs if the protectionist lobby gets its way. How then will the voters respond in 2004 to Ronald Reagan’s famous question: Are you better off now than you were four years ago?

President Bush’s performance on his recent Asian trip has been widely criticized, more so for what was not said than what was. The economic focus of the Asia-Pacific Economic Cooperation summit in Bangkok was blurred. The U.S. president chose to focus on terrorism and security issues. There need not have been a disconnect. He could have articulated his very own broad vision of how trade promotes both prosperity and security.

In Sept. 2002, the White House issued a document titled “The National Security Strategy of the United States of America.” It outlined a vision of the strong linkages between trade and economic freedom on the one hand, and defense and security on the other hand. In his own letter of introduction to that document, President Bush noted that democracy and economic openness are “the best foundation for domestic stability and international order.”

The national security document describes how a “strong world economy enhances our national security by advancing prosperity and freedom in the rest of the world.” Trade is the vehicle through which prosperity is spread around the world. Prosperous nations are more peaceful, too. By contrast, the Middle East and sub-Saharan Africa are home to 70% of the conflicts in the world. They are also home to many closed and repressed economies, of which Iraq was a paradigmatic case.

President Bush was off-message in Asia, as he has been off-message in America. He needs to regain his own expansive vision of a world of peaceful trading nations. He should begin by dispelling the dark forces of protectionism within his own administration that cloud that vision.

Mr. O’Driscoll, Jr. is a senior fellow at the Cato Institute.