That Free Trade thing

While the administrations stance is both a turn around and welcomed, I still have a bad taste in my mouth. Missing from Zoellicks’ argument is the longer we play the trade game, which is extensive, the greater the probablility and incentive of one player to screw the other(s). The trick of the administration is setting the aggrements up so this is as difficult as possible – the Doha talks certainly don’t lead by example.

WSJ 8-25-04

Push for Free Trade
In These Times?
Bush Answers Yes
August 25, 2004; Page A4

These are the times that try a free-trader’s soul.

It is an election year, and the trade deficit is way up. The U.S. imported $55.8 billion more in goods and services than it exported in June. Loss of jobs has become the economic issue, and the outsourcing of jobs abroad the metaphor for it.

Amidst all of that, Robert Zoellick is doing something intriguing, almost shocking: He is pushing free trade as hard as ever. More interesting, his boss, President Bush, who is busy running for re-election, is backing him all the way.

Mr. Zoellick is the Bush administration’s trade representative, and his continued pursuit of free trade amid all the political pressure to move in the opposite direction is one of the more surprising and little-noticed stories of the election year. Mr. Zoellick says the administration is “confounding conventional wisdom,” and he is right.

In recent weeks, the administration has signed a deal to add the Dominican Republic to five Central American nations already part of a free-trade agreement, signed a separate free-trade deal with Australia, pushed a trade agreement with Morocco through Congress and revived moribund talks on a new global deal to lower trade barriers. In fact, the administration has finished free-trade agreements with nine countries in the last eight months.

Far from buckling to populist protectionist impulses in the campaign season, the administration actually seems to be getting more committed to free trade as the re-election test approaches. This is a matter of core beliefs — but it also may be the result of the administration’s own somewhat painful experiences.

The Bush team dallied with protectionism early on, when it imposed temporary tariffs on imported steel. That was a fairly obvious attempt to please the steel industry and the politically important swing states of Pennsylvania and West Virginia, as well as a bid to buy political support for trade-liberalization in other areas. While the tariffs did win some time for the domestic steel industry to regroup and reorganize, manufacturers in other politically sensitive swing states saw the cost of their steel go up, and they weren’t happy.

Now Mr. Bush seems to have moved past that experience, and he delivers a hearty defense of free trade. On one trip to Ohio — the ultimate swing state — he lauded the way open trade has brought more than 900 foreign facilities to the state, and more than 16,000 jobs building Hondas alone.

“When politicians in Washington attack trade for political reasons, they don’t mention these workers, or the 6.4 million other Americans who draw their paychecks from foreign companies,” he declared. “Across America, from Marysville, Ohio, to Seattle, Washington, workers are better off — better off — because this country is an optimistic, successful trading nation.”

For his part, Mr. Zoellick also sounds like a man itching to make the case for free trade as a political winner, even in a climate of trembling over jobs lost abroad. He rattles off statistics to back his case: More than 12 million Americans with jobs supported by exports, with pay that runs perhaps 18% above average. One in five manufacturing jobs dependent on exports. One in three acres of crops planted for exports. A quarter of economic growth in the 1990s from exports.

Offsetting those numbers, of course, is the uncomfortable reality that, despite the free-trade leanings of this administration and the Clinton one before it, the country has lost 1.1 million jobs since 2001. If trade creates jobs, why are the job numbers going down?

Mr. Zoellick has a ready answer for that as well. The big reason the U.S. is running a manufacturing trade deficit, he argues, isn’t that it is buying more from abroad, but that it isn’t exporting enough goods overseas. That problem is rooted in the fact that barriers to trade abroad tend to be much higher than U.S. barriers.

So free-trade agreements, by definition, should benefit the U.S. more than the other guys: The other side eliminates barriers that are higher to start with, while the U.S. eliminates barriers that are lower. The bigger bang should go to American exports. “The benefit of a free-trade negotiation is that we’re leveling the playing field — to zero,” says Mr. Zoellick.

So in theory, at least, free trade is a win-win for the U.S. — provided, the other side lives up to its deal. Which the administration, of course, pledges it will ensure. That is at least a coherent economic message at a time when the Bush team is straining for one, and has the added benefit of being one the president firmly believes. Expect to hear more of it next week at the Republican national convention, and beyond.

Write to Gerald F. Seib at

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