September 30, 2003

PAGING MR. SMOOT?:

Who Killed Free Trade? (Irwin Stelzer, September 21, 2003, London’s Sunday Times)

Supachai Panitchpadki, director-general of the WTO, claims that “the losers will be the poor and weaker nations,” and that renewed efforts to hammer out an agreement are crucial to world economic prosperity. No surprise: the head of a large bureaucracy that is in the process of being marginalized cannot be expected to think that such a development is a good idea. Indeed, with this defeat the WTO joins the United Nations and, after Sweden’s robust rejection, the euro, among the international concoctions that just ain’t what they used to be.

Then there are the economists who believe that free trade, by permitting the international specialization of labor, increases efficiency and the material well-being of all the participants in trade. Economists at the World Bank estimate that a global deal would raise worldwide incomes by $520 billion by 2015 and lift 144 million people out of poverty. They may be right, but George Bush can hardly be expected to follow the lead of Senator Henry Clay, who in 1839 grandly announced, “I would rather be right than be president.”

The dirty little secret is that the collapse of the Cancun meeting is rather good news for the White House. Of course, the U.S. delegation could hardly join the developing countries in popping the champagne corks when the conference collapsed. Those countries made no secret of their pleasure at the fact that they had finally united to make it clear that there would be no more worldwide agreements until their legitimate demands for freer trade in agricultural products are met.

But the White House is hardly mourning the death at Cancun. With a presidential election now right around the corner, as politicians reckon these things, free trade is hardly the rallying cry that Bush’s advisers will select as his campaign theme. America has lost millions of manufacturing jobs since the Bushes moved into the White House, most of them in states the president must win if he is to avoid his father’s fate. Voters tend to forget the cheap sneakers, cars, T-shirts, and other products that are made for them in Asia, and remember the factories, call centers, and other job-giving enterprises that have pulled stakes and moved to China, India, Mexico, and other low-wage countries. The last thing the administration needs is some agreement that can be made to seem to increase pressure on the U.S. manufacturing sector.

And farmers, who voted for Bush in overwhelming numbers in 2000, would hardly have rewarded the president a second time with their votes had he opened them to competition from African, Caribbean, South American, and other growers, even if the concession had been made in return for an agreement by the poorer countries to open their markets to American manufacturers and providers of financial and other services.

So any tears shed by the White House at the Cancun funeral are of the crocodile variety. Zoellick, although probably more annoyed at the conference’s failure than the White House politicos, can take solace from the fact that he can still pursue his alternative strategy of negotiating bilateral trade agreements with countries who find it to their advantage to do so.


Trade is a near perfect example of the kind of sensible reform that democracy makes almost impossible.

Posted by Orrin Judd at September 30, 2003 6:17 PM
Comments

But the real point here is not what a democratically elected administration can do with trade, but that the elites may have gotten it wrong in placing all their bets on MULTI-LATERAL trade deals which can be highjacked by tin pot, undemocratic governments even after the democracies pushed (even if not far) the envelope within their own constituents. Going back to the drawing board on bilateral agendas is not that bad a consolation price, and it is hardly a sign of lack of commitment to free trade.

Posted by: MG at September 30, 2003 8:25 PM

In 1993, Clinton was told that his re-election chances were in the hands of ****ing bond traders. So he changed the way the Treasury primarily financed the debt, raised taxes, and went ahead and signed NAFTA.

The little secret for the left is that none of the 'upper-tier' Democrats in the race this time would do any differently. No matter how much they rail against it now, none of them would want to be remembered the way Herbert Hoover is, and any Democrat who started acting like Smoot or Hawley would start a world-wide panic. It would take about 1 week before every stock exchange and every Central Bank would be face down in the mud, and even Dick Gephardt would renounce his past heresy.

Trade is not impossible to reform, but it has to be done counter-intuitively (which it much too sophisticated for the press and most of the public). Perhaps that is what the post is all about.

Posted by: jim hamlen at September 30, 2003 10:11 PM

I'd say the problem is not democracy but representative government. Representatives yield to special interest groups on issues that are important to the groups, even if the majority of their constituents are somewhat opposed, because for the majority the issue is not high priority.

So most people would probably like to reduce agricultural subsidies and tariffs, but the issue won't affect how they vote much. Not so for the farmers. The problem is exacerbated by special interest campaign donations.

By contrast, in a true Athenian-style democracy it'd be easier for the will of the majority to prevail over interest groups in cases like this.

Posted by: Peter Caress at September 30, 2003 10:57 PM

Peter:

The provblem is that it's not your money or mine that pays the farmers, so we don't care much. The farmers though care greatly, so they're highly motivated to maintain the subsidies. The upper classes who pay taxes just end up outnumbered.

Posted by: oj at September 30, 2003 11:02 PM

I am a devout Republican and will never support a Democrat, and I feel Clinton was as despicable as most Republicans think he was, but he did do one right thing( and showed political courage) when he signed NAFTA.

I can't believe I said that!

Maybe it was because he didn't understand what was happening?
Maybe some cute Republican operative made him an offer he couldn't refuse in the Oval Office?
Maybe its true that a blind Hog occasionally finds an acorn accidently?

I'm humiliated, please forgive me.

Posted by: h-man at October 1, 2003 7:31 AM

h-man:

Two words: Robert Rubin

Recall too that NAFTA and GATT were only passed on Clinton's watch because the GOP passed them and they were Reagan initiatives.

Posted by: oj at October 1, 2003 9:01 AM
« GO, SPEED RACER! (via brian boys): | Main | "HORROR AND DISGUST": »