A New Trade Policy for America

♠ Posted by Emmanuel in , at 4/06/2007 09:57:00 PM
For the record, here is a summary of the US House Ways and Means Committee's "A New Trade Policy for America." While the emphasis on "meeting basic international labor standards" and "enforc[ing] common Multilateral Environmental Agreements" appears to be uncontroversial at first glance, these labor and environmental standards may be used in less benign ways as cover for protectionism, red in tooth and claw. Once you go down that slippery slope, there is no telling how far you will go. After all, the United States--the world's largest emitter of carbon dioxide--decided to nonchalantly dismiss the Kyoto Protocol, the mother of all multilateral environmental agreements. Thus, it would be sheer hypocrisy for it to go after other countries on environmental grounds. In any event, take note of this policy for it is the Democrat's take on what President Bush ought to do should he wish to get his fast-track authority extended when it expires at midyear.

Also, take note of parts calling for a "US Trade Enforcer" to prepare WTO cases (gee, I guess the USTR should start looking for employment elsewhere) and a "US Trade Prosecutor" to file them. That China is a currency manipulator I do agree with; however, lumping Japan with China is a little unfair as it has not actively intervened since March of 2004. It has been carry trade speculation, not Japanese intervention, that has kept the yen weak.

To avoid future confusion, let me give my take on this matter for China and the US. Yes, China still uses mercantilist strategies that are not wholly in accordance with WTO stipulations. We can debate whether the WTO unfairly circumscribes the ability of nations to use export-oriented development strategies all day, but there is little doubt that China has been extraordinarily successful already in promoting exports as evidenced by its large and growing trade and current account surpluses. Accordingly, China should wind down these mercantilist policies as the objective of export success has been largely achieved. It should now concentrate on promoting more even growth in the country by developing domestic demand and industries geared for filling it--especially services. The government can go a long way towards building the social infrastructure for a consumer-driven society by bolstering its provision of health care, education, and pensions. Really, there is little point in flooding the world market with more stuff while inequality and environmental destruction rise at home. Take care of your own folks first.

As for the US, my fear is that while many of the measures being brought against China on the grounds of it failing to meet WTO stipulations are justifiable since China did sign up to the WTO, Congress may use the cover of "labor" and "environmental" standards as code words for outright protectionism in the future. It would be better to call a protectionist spade a spade, but that is not likely to happen. True, the Democrats manning the Ways Means Committee like Chairman Charles Rangel (D-NY) and Trade Subcommittee Chairman Sander Levin (D-MI) got their posts because of rising anti-free trade sentiment Stateside. However, leveling the playing field is a whole 'nother ballgame from tilting the playing field in favor of certain interests. I hope they are wise enough to know the difference.