Skip to main content
Menu

Main navigation

  • About
    • Annual Reports
    • Leadership
    • Jobs
    • Student Programs
    • Media Information
    • Store
    • Contact
    LOADING...
  • Experts
    • Policy Scholars
    • Adjunct Scholars
    • Fellows
  • Events
    • Upcoming
    • Past
    • Event FAQs
    • Sphere Summit
    LOADING...
  • Publications
    • Studies
    • Commentary
    • Books
    • Reviews and Journals
    • Public Filings
    LOADING...
  • Blog
  • Donate
    • Sponsorship Benefits
    • Ways to Give
    • Planned Giving

Issues

  • Constitution and Law
    • Constitutional Law
    • Criminal Justice
    • Free Speech and Civil Liberties
  • Economics
    • Banking and Finance
    • Monetary Policy
    • Regulation
    • Tax and Budget Policy
  • Politics and Society
    • Education
    • Government and Politics
    • Health Care
    • Poverty and Social Welfare
    • Technology and Privacy
  • International
    • Defense and Foreign Policy
    • Global Freedom
    • Immigration
    • Trade Policy
Live Now

Cato at Liberty


  • Blog Home
  • RSS

Email Signup

Sign up to have blog posts delivered straight to your inbox!

Topics
  • Banking and Finance
  • Constitutional Law
  • Criminal Justice
  • Defense and Foreign Policy
  • Education
  • Free Speech and Civil Liberties
  • Global Freedom
  • Government and Politics
  • Health Care
  • Immigration
  • Monetary Policy
  • Poverty and Social Welfare
  • Regulation
  • Tax and Budget Policy
  • Technology and Privacy
  • Trade Policy
Archives
  • April 2021
  • March 2021
  • February 2021
  • January 2021
  • December 2020
  • November 2020
  • October 2020
  • September 2020
  • August 2020
  • July 2020
  • June 2020
  • May 2020
  • April 2020
  • March 2020
  • February 2020
  • January 2020
  • December 2019
  • November 2019
  • October 2019
  • September 2019
  • August 2019
  • July 2019
  • June 2019
  • May 2019
  • April 2019
  • March 2019
  • February 2019
  • January 2019
  • December 2018
  • November 2018
  • October 2018
  • September 2018
  • August 2018
  • July 2018
  • June 2018
  • May 2018
  • April 2018
  • March 2018
  • February 2018
  • January 2018
  • December 2017
  • November 2017
  • October 2017
  • September 2017
  • August 2017
  • July 2017
  • June 2017
  • May 2017
  • April 2017
  • March 2017
  • February 2017
  • January 2017
  • December 2016
  • November 2016
  • October 2016
  • September 2016
  • August 2016
  • July 2016
  • June 2016
  • May 2016
  • April 2016
  • March 2016
  • February 2016
  • January 2016
  • December 2015
  • November 2015
  • October 2015
  • September 2015
  • August 2015
  • July 2015
  • June 2015
  • May 2015
  • April 2015
  • March 2015
  • February 2015
  • January 2015
  • December 2014
  • November 2014
  • October 2014
  • September 2014
  • August 2014
  • July 2014
  • June 2014
  • May 2014
  • April 2014
  • March 2014
  • February 2014
  • January 2014
  • December 2013
  • November 2013
  • October 2013
  • September 2013
  • August 2013
  • July 2013
  • June 2013
  • May 2013
  • April 2013
  • March 2013
  • February 2013
  • January 2013
  • December 2012
  • November 2012
  • October 2012
  • September 2012
  • August 2012
  • July 2012
  • June 2012
  • May 2012
  • April 2012
  • March 2012
  • February 2012
  • January 2012
  • December 2011
  • November 2011
  • October 2011
  • September 2011
  • August 2011
  • July 2011
  • June 2011
  • May 2011
  • April 2011
  • March 2011
  • February 2011
  • January 2011
  • December 2010
  • November 2010
  • October 2010
  • September 2010
  • August 2010
  • July 2010
  • June 2010
  • May 2010
  • April 2010
  • March 2010
  • February 2010
  • January 2010
  • December 2009
  • November 2009
  • October 2009
  • September 2009
  • August 2009
  • July 2009
  • June 2009
  • May 2009
  • April 2009
  • March 2009
  • February 2009
  • January 2009
  • December 2008
  • November 2008
  • October 2008
  • September 2008
  • August 2008
  • July 2008
  • June 2008
  • May 2008
  • April 2008
  • March 2008
  • February 2008
  • January 2008
  • December 2007
  • November 2007
  • October 2007
  • September 2007
  • August 2007
  • July 2007
  • June 2007
  • May 2007
  • April 2007
  • March 2007
  • February 2007
  • January 2007
  • December 2006
  • November 2006
  • October 2006
  • September 2006
  • August 2006
  • July 2006
  • June 2006
  • May 2006
  • April 2006
  • Show More
October 1, 2012 5:11PM

A Divide and Conquer Trade Policy

By Simon Lester

SHARE

California Rep. Devin Nunes has proposed what seems like a neo‐​con approach to trade policy: Trade with our allies, not with our perceived enemies. His goal is to make trade policy part of our general foreign policy, which, in his view, should focus on making alliances with our friends and isolating our enemies.


This is a bad idea, for many reasons. I’ll explain the details of his plan a bit more, then I’ll go over all of the problems I see with it.


As he explains over at NRO, Rep. Nunes would like to create “an alliance of free‐​trading nations.” He supports the Trans Pacific Partnerhship (TPP) negotiations, and would also like to see U.S.-EU and U.S.-Brazil free trade agreements. He then talks about “distinguishing friend from foe,” and singles out Venezuela, the Gaza Strip, Russia and Egypt as countries who are “hostile” to the United States.


In support of his approach to trade/​foreign policy, he has introduced in Congress the Economic Freedom Alliance Act, which is made up of several specific pieces of legislation to accomplish the various elements of his plan.


It would be easy to ignore this proposal. It’s just some legislation introduced by one Congressman. However, note the similarities with part of Mitt Romney’s economic plan:

… there is an opportunity to pursue a game‐​changing multilateral agreement among like‐​minded nations genuinely committed to the principles of open markets. As president, Mitt Romney will pursue the formation of a “Reagan Economic Zone.” …


Such a partnership would be extraordinarily attractive to most developed nations, and to those developing nations that have embraced free enterprise and open markets. With membership open to any nation willing to abide by the rules, two primary U.S. objectives would be fulfilled. First, as the most open and innovative economies came together, the dynamism of the resulting economic zone would serve as a powerful magnet, drawing in an expanding circle of countries willing to abide by the rules in exchange for greater access to one another’s markets. At the same time, it would also serve as a mechanism for confronting nations that violated trade rules while free‐​riding on the international system. Creating a large open market, and excluding countries that failed to respect the rule of law, would prevent cheaters from prospering and provide a major incentive for them to reform.

I think the trade part of this approach can be summed as follows: “We” are more open and free than “they” are, and so we should set up a system that is just for “us,” and if “they” change to be more like “us,” “they” can be part of “our” system. Romney focuses on trade more than Nunes does; Nunes goes further in tying this plan to foreign policy.


As I said, I think this is a bad approach. Here are all the things that are wrong with it.


At the outset, if we’re being honest, an “alliance of free‐​trading nations” would not have many members. Certainly the U.S. wouldn’t be part of it. With our tariffs in traditionally protected industries, excessive use of trade remedies, massive subsidies, and discriminatory government procurement, we are hardly a model of free trade virtue.


But just for the sake of argument, I’ll stipulate to the assumption Rep. Nunes makes, that we are relatively more free trade oriented than many countries. Even under this assumption, this proposal is still a bad idea.


First, it builds discrimination into the world trading system. The idea is to strengthen “alliances.” But the converse of making an ally is making an enemy out of those not in the alliance. Singling countries out as not part of your alliance is likely to generate a good deal of antipathy. Nunes mentions Russia, and presumably he has China in mind to some extent. But will putting them formally outside of our “free trade alliance” cause them to want to be more like us? That seems unlikely. As Exhibit A on this issue, look at Cuba. I’m not sure we even need an Exhibit B, but let me also mention China. There is a lot of hand‐​wringing about China these days. But compare China today with China in 1990. Isn’t it pretty clear that the world economy is better off with China having opened itself to international trade and investment to a great degree, and bound itself to WTO rules? Despite what you often hear in the media, we sell a lot of stuff to China. Also despite what you may hear, all that stuff we buy from China is actually a benefit to us.


Second, the specific proposed free trade agreements he mentions have fairly dim prospects. The TPP has progressed a bit already, but with more countries being added, and lots of contentious issues, it would come as no surprise if the negotiations dragged on and on, and never concluded. As for a U.S.-EU free trade agreement, if the two of them can work out a way to cut their massive farm subsidies, I will be greatly pleased. But I’m not holding my breath. And the U.S. and Brazil are currently arguing about Brazil’s proposed tariff increases and U.S. monetary policy.


So what should we do instead? Let me offer the following suggestions.


The first thing we should do is commit ourselves to pushing for free trade in our domestic policy. Many Americans are under the impression that we are the free traders, and Rep. Nunes seems to have assumed this. But the rest of the word doesn’t see things that way, for good reason. Let’s take Brazil, one of Rep. Nunes’ potential free trade partners, as an example. A few years ago, Brazil brought a WTO complaint challenging U.S. subsidies to cotton producers. The WTO found the U.S. to be in violation of free trade rules. Did the U.S. respond by removing the subsidies, which would have been the obvious free trade position to take? No. Instead, the U.S. bought off Brazil by offering additional subsidies to Brazilian cotton producers, so that it could maintain the subsidies to U.S. producers. Does anyone think Brazil sees U.S. policy as one based on free trade?


The second thing we should do is keep trade policy about economics. Underlying the Nunes plan is that it is not really about trade policy. It is about foreign policy. He says: “America’s foreign policy is incoherent and adrift, lacking clear criteria even for distinguishing friend from foe.” Maybe, maybe not. But even if true, this is not a trade policy issue. He is using trade policy to pursue foreign policy goals. This is not likely to lead to an economically sensible trade policy.


And finally, one of the biggest problems I see with current U.S. trade policy is that it often gets distracted from core trade issues. Intellectual property, labor, and environmental rules in trade agreements are some good examples. But Rep. Nunes provides another. In a blog post related to his proposal, he refers to the Agriculture Trade Facilitation Act as one part of his proposal. An older version of this bill set out one of its negotiating objectives for food safety and health measures as follows: “To strengthen the requirement that the application of measures is based on scientific evidence by requiring parties to the agreement to make available their risk assessments and provide a science‐​based justification for regulations, in particular in cases in which measures are more restrictive than international standards.” Now, I’m all for science‐​based regulation. If we are going to regulate on health issues, science should guide the process. But making science‐​based regulation a binding international law rule is another matter. (To be clear, it already is part of WTO rules; Rep. Nunes wants to make the international rules tougher.) To me, this is one of the issues that is distracting us from core free‐​trade principles.


So, to sum up: Free trade only with our allies is bad foreign policy and it distracts from good trade policy. U.S. foreign policy already has enough problems with creating new enemies. Let’s not bring trade into the mix, making both foreign policy and trade policy worse as a result.

Related Tags
Trade Policy, Herbert A. Stiefel Center for Trade Policy Studies

Stay Connected to Cato

Sign up for the newsletter to receive periodic updates on Cato research, events, and publications.

View All Newsletters

1000 Massachusetts Ave. NW
Washington, DC 20001-5403
202-842-0200
Contact Us
Privacy

Footer 1

  • About
    • Annual Reports
    • Leadership
    • Jobs
    • Student Programs
    • Media Information
    • Store
    • Contact
  • Podcasts

Footer 2

  • Experts
    • Policy Scholars
    • Adjunct Scholars
    • Fellows
  • Events
    • Upcoming
    • Past
    • Event FAQs
    • Sphere Summit

Footer 3

  • Publications
    • Books
    • Cato Journal
    • Regulation
    • Cato Policy Report
    • Cato Supreme Court Review
    • Cato’s Letter
    • Human Freedom Index
    • Economic Freedom of the World
    • Cato Handbook for Policymakers

Footer 4

  • Blog
  • Donate
    • Sponsorship Benefits
    • Ways to Give
    • Planned Giving
Also from Cato Institute:
Libertarianism.org
|
Humanprogress.org
|
Downsizinggovernment.org