-Caveat Lector-
Discrimination disguised as free trade
A democratic victory in the general election would bring disturbing
consequences for liberalisation, argues Jagdish Bhagwati
By Andre Meyer, Senior Fellow in International Economics at the
Council on Foreign Relations, New York.
Published: October 31 2000 20:15GMT
Many card-carrying Democrats among America's trade experts are
unable to make up their minds as the day approaches when they
must cast their vote for George W Bush or Al Gore.
When they think of social issues, the Supreme Court vacancies to
be filled and spending on liberal programmes, they turn to Mr
Gore. But when they think of the Clinton-Gore administration's
record on trade policy and of what Mr Gore promises to do, they
sit up and shudder.
The unpleasant reality is that the outcome of the election has
huge implications - disturbing under Mr Gore and comforting under
Mr Bush - for trade liberalisation and the trading system.
Start with the current administration's record. True, the White
House saw through both the Uruguay round of trade talks and the
North American Free Trade Agreement. But while the administration
fought hard and well - as indeed a Republican administration
would have done - both were Republican initiatives that the
present administration inherited when they were already at an
advanced stage. Furthermore, the real heroes who delivered the
majority votes were Republicans.
The Democratic administration's only home-grown success has been
with Permanent Normal Trade Relations for China. But the deal was
entirely one-sided, with China giving the US everything on market
access and the US giving China nothing but entry into the World
Trade Organisation.
The Democratic team passed off these deals as a great victory for
the US and for free trade. But no amount of spin can hide the
ineptitude that led to the first ever failure in 1997 by a US
administration to get fast-track authority renewed by Congress:
Bill Clinton managed to bring only a fifth of House Democrats on
board to vote for renewal.
Nor can one forget or forgive the debacle in Seattle last year
when a deadly mix of mismanagement and calculated cynicism -
pandering to the labour unions with an eye to the elections -
dashed hopes of launching a new round of multilateral trade
negotiations and brought the WTO into unmerited disrepute.
Underlying these failures, and prospective problems under a Gore
presidency, are two legacies of this administration: surrender to
the notion that free trade requires "fair trade"; and a
capitulation to labour unions that fair trade requires market
access to be conditional on a social clause at the WTO on
fulfilment of labour standards, now tactically defined as
"workers' rights".
The rise of fair trade owes much to the first Clinton-Gore
administration's fixation with Japan. Bent on branding Japan as
an "unfair trader" and going for high-profile but fruitless
confrontations such as the car dispute, the administration made
"unfair trade" a favoured tactic in the political domain.
The labour lobbies have been smart enough to adapt their demands
accordingly. For decades they have worried about foreign
competition and outflow of investment, especially in
labour-intensive goods such as apparel and shoes. Now, they have
a great new argument: unless labour standards elsewhere are
similar to those in the US, trade is unfair and must be stopped.
This way, you get on to higher moral ground. You also do so in
the battle over markets. If poor countries accept the demands,
their costs should rise and the competition will be reduced. By
contrast, if they do not their exports will be cut off. This is a
cynical game where governments that badly need support from the
labour unions even as they turn to the "third way" see domestic
political gain in caving in to these demands. The Clinton-Gore
team - unlike Tony Blair's British government - is no stranger to
this tactic. Last week's announcement of a free trade agreement
with Jordan - with labour and environmental standards stipulated
in the text - left John Sweeney of the AFL-CIO trade union
jubilant and fired up for the election. Charlene Barshefsky, the
US trade representative, has called it a "template" for all trade
treaties by the US.
Only a significant power would have the hubris or the chutzpah to
present a trade agreement with a monarchy, essentially dependent
on the US, with a minuscule trade volume, as a model for the rest
of the world to emulate.
But that Al Gore thinks so is certain. Indeed, his policy
statements and the Democratic platform are unambiguous: no trade
liberalisation without such preconditions. If so, we can forget
the WTO where nothing but a big north-south divide will follow,
as it did in Seattle largely as a result of this issue.
And so, under Mr Gore, Washington will contemplate more templates
with inconsequential performers, multilateral trade
liberalisation will languish, and the WTO will atrophy as the
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