Federal Triangle: Glass Houses and Sins
Last month we examined the disconnect between U.S. trade deficits and domestic employment, as flavored by the philosophic dispositions of House and Senate Members regarding free trade juxtaposed the twin evils of industrial protectionism and subsidies. This month it is appropriate to evaluate the corollary problem of how the U.S. economy fits into the regime of World Trade Organization, its rules and regulations to which the last two Administrations subscribe, and relate to U.S. trade policies covering protection and subsidy. It seems nobody's view of WTO portends a bright future, and the reasons are quite simple. Regardless of country, industry and government connive to favor their own and all are blatantly dishonest about adherence to rules of the game. Unfortunately, our American team is one of the most egregious violators of rules, their spirit and actuality.
A new round of trade talks began in January 2003, called the Doha Round due to its location in Qatar. According to Razeen Sally of the London School of Economics and Political Science, the look ahead could follow three probable scenarios. The first is a return to principles of GATT (General Agreement on Tariff and Trade) that enhanced trade processes over the past several decades. This trend is led by globalizers, about two dozen nations, such as Hong Kong, Singapore, Chile and New Zealand, that have grown and whose survival depends on trade; they require the progressive reduction of barriers, often spurred by unilateral liberalizations. A cross current lies in the trend to create regional trade agreements (RTAs) that have proliferated since the early 1980s; 170 are now in force and 250 are expected by 2005. NAFTA is an example, and while there is no evidence that RTAs retard trade or distort foreign investment, the worry is that if they coalesce into defensive blocs, they could bring harmful effects to developing national economies.
A second scenario is the Euro-model, whose proponents are attempting to convert the WTO into a regulatory agency, something that the developing world cannot afford and is antipathy to sovereign nations. Particularly, WTO is suffering now from standards harmonization, a complex, regulatory agenda to coerce developing country standards into proscriptive compliance with the developed world. As example, WTO is forcing uniformity under the Agreement on Trade Related Intellectual Property Rights (TRIPS) to harmonize legal standards on patents, trademarks and copyrights regardless of levels of development in WTO member states, forcing developing countries to adhere to first world norms. This brings regulatory overload but more importantly, disgrundlement within the developing world and decreased willingness to compromise. China is now the biggest force in this category of WTO members; if it flouts rules others will follow with the result of collapse and devastating consequences to the international trading system.
The third scenario is the UN-style future wherein distrust and frustration among the poorest members of WTO heightens demands for relief from agreements they cannot implement, seeking blanket exemptions and differential treatment and continuing in their failed approaches to find prosperity. It is the developing nations that retain the highest tariffs and barriers to market access that if removed, could lift 320 million people from poverty and bring $1.5 trillion to them for their domestic growth and enrichment over the next decade. The word "dilemma" was invented to cover this condition the world faces.
During the Doha Round there will be strong political support among the 142 member nations to improve "antidumping" objectives. In this regard, where the Congress passed (410 to 4) a resolution to "preserve the ability of the United States to enforce rigorously its trade laws, including the antidumping, countervailing duty and safeguard laws"¿blah, blah, blah, the U.S. must change its ways. The intent of fair trade practice laws and assuring adherence to a stable system of conformity is not at question; world-trading partners need it. But remember the adage about stones and glass houses. Or was it the one about casting stones while being without sin? Both apply.
The abuses of antidumping laws and the methods used by the U.S. to investigate and determine violations of unfair trade practices are shameful. The processes to assess anticompetitive conduct are oblique, arcane, dishonest and protectionist, made this way in part to shield them from scrutiny. There is no space here to provide details but if you spent an hour to understand a bit of them (19USC 1673-1677n and 19CFR 351), you would be embarrassed.