Federal Triangle: Playing By the Rules
Industrialists and politicians all agree: free trade is "good" and "fair" if our team wins. That is the crux of this piece, along with honesty to discuss what is "good" or "fair" in the context of national interest to renew membership in the World Trade Organization (WTO). I come down (uncomfortably) on the side of extending U.S. membership in WTO but with misgivings that national outcomes and sovereignty are jeopardized. Questions of sovereignty are only real due to our federal Legislative branch being overwhelmingly populated by vain men and women more interested in themselves than the public's interest.
On 27 June 1994, the House of Representatives agreed by a 288 to 146 vote that America would join the WTO. This successor to GATT (General Agreements on Tariffs and Trade) began operation on 1 January 1995 in Geneva and today has 148 member nations that collectively account for over 90% of global trade, employs 600, has a $133 M budget to which the U.S. contributes $26 M and offers a negotiating forum to settle disputes that is stronger than predecessors because it has enforcement capabilities, a feature the U.S. insisted be incorporated in the structure. Every five years, membership is reaffirmed, so in 2000, the House of Representatives voted 363 to 56 to stay the course. A renewal option will certainly pass again this year despite Congressional mistrust of any trade agreement that can cede regulatory powers to an international body, especially because WTO is now led since 1 June by a French Socialist, Pascal Lamay. But on balance, the WTO and predecessors have been a solid foundation for beneficial, economic governance in the trade domain. As recently retired U.S. Trade Representative Robert Zoellick said, "without WTO other countries could impose higher duties on American exports," and the U.S. "would not have the leverage to address trade barriers including tax policies, customs procedures, subsidies, dumping, and weak intellectual property protections." Yes, the WTO is the "Supreme Court of trade," according to Pat Buchannan, and therefore, we get both pleasing and unpleasing decisions from the WTO.
Politicians on left and right claim worries that WTO membership allows a transfer of power that is transformational to U.S. sovereignty and can impose regulations and taxes detrimental to American interests. Some conservatives claim the Constitution does not allow Congress to relinquish controls over benefits of free trade, a foolish notion if "free" is "controlled." But history shows that there have been no trade wars for fifty years and adherence to WTO settlements is voluntary, carrying penalties for failure to submit to rulings but nonetheless, voluntary. What politicians complain about really is uncertainty of outcome, such as occurred last year when WTO ruled that the U.S. "Byrd Amendment" and "FISC" sales organizations were illegal trade subsidies under agreed WTO rules, and they obviously were. The dispute settlement mechanism has been remarkably effective in enforcement. The penalty was to U.S. industry that has an unhealthy relationship with politicians but U.S. citizens as taxpayers are the real loser. Here are examples. Industry lobbyists (steel, agriculture, aircraft) talk about "free trade" but endorse regulations on labor and environmental standards that assure meeting needs of domestic industry but impose disadvantanges to competitors, a form of corporate welfare. During WTOs first five years, the U.S. filed 45 complaints but between 2000 and 2005, the U.S. was a defendant in 26 cases while launching 32 antidumping cases against China alone. For U.S. aircraft makers, sales contract payments are often guaranteed by U.S. Export-Import Bank; when Pakistan Airlines bought $1.5 B of Boeing airliners, the U.S. government canceled $495 million in debt to "close" the deal and "restructured" $1B of Pakistan non-payments. Boeing got full payment and John Q paid the bill. The Business Roundtable, composed of 150 American industry scions, repeatedly urges the Congress to support International Monetary Fund, which then will bail-out floundering economies (such as happened in 1998 for Asian governments costing $18 B paid by U.S. taxpayers) but keeping those nations as buyers instead of deadbeats. The concept of market forces correcting poor management practices is conveniently forgotten, cannot be trusted because the outcome is not known, which must be painless, and the U.S. taxpayer always pays the bill.
The WTO is not responsible for U.S. trade deficits or job off-shoring as many claim. Trade sanctions, such as a 27.5% across-the-board tariff on all imports recently proposed in Congress against China for failure to revalue its currency, are bad ideas put forth by trade protectionists, and America has more than enough share of them. Honesty requires that American industry recognize what is fair and good for the country and play by the mutually agreed rules. WTO is a pro-complaint forum but is better than no venue and is still the best forum for instilling "transparency in government," the term used by cookie pushers for freedom from corruption.
For more and varied comments on this subject, see the following web sites: www.ustr.gov, www.wto.org, www.americaneconomicalert.org.