The WTO talks in Cancun, Mexico, and their ultimate collapse were similar to what happened in Seattle in 1999, when President Bill Clinton, an avowed “free trader,” walked out when faced with demands even he could not stomach. Four years later, the United States again faced an intransigent coalition presenting unacceptable demands.
Liberal commentators have portrayed the breakdown as a clash between “rich” and “poor” nations, urging the United States to make more concessions to help the Third World. Yet the smaller “poor” countries would have had little leverage without such major states as China, Brazil, and India leading them. These rising continental powers are in the same position as the United States was a century and a half ago. They want to control their own destinies, which means concentrating on national development and the deepening of their own economic bases. Trade is useful only to the extent that it shifts the balance of power in their direction. And, as Japanese Prime Minister Junichiro Koizumi told reporters, “There are divisions even among developed nations.”
What is lacking among neoclassical trade theorists is the realization that commerce runs on the basis of competition, not harmony. The great error that has dogged classical liberalism is that peaceful trade can replace international strife. The “globalism” of the 1990’s that gave birth to the World Trade Organization was based on the notion that world integration was possible in the calm following the Cold War. Trade has always been a major component of strife, however. Statesmen know that where modern factories, research labs, good jobs, productive capital, and other resources are located is where wealth and power will also accumulate. As a society becomes stronger, it can better shape events to the benefit of its people. It is a game for the highest stakes in a world still beset with intense rivalries.
The struggle has become ever more bitter as the world economy has slowed down. The WTO Doha Round explicitly called for a global redistribution of wealth. According to its Ministerial Declaration, negotiations are to focus “on products of export interest to developing countries. . . . The negotiations shall take fully into account the special needs and interests of developing and least-developed country participants, including through less than full reciprocity in [tariff] reduction commitments.” The position of most countries, including China, was that they would take no new steps to open their markets. The purpose of Cancun was to support economic expansion in the Third World at the expense of the old “rich” industrialized countries who have been on top for too long.
The pattern of the late 19th century may be repeating. There had been a period of relative “free trade” in the mid-1800’s as the Industrial Revolution spread across Europe. Frustrated by slow growth and envious of England’s lead, rival nations started to shift back to protectionism in the 1870’s to support internal economic development. Economic growth increased on the European continent and reached its highest rate under the mature protectionist regimes in place by the turn of the century. Only England, which clung to its “free trade” policy, continued to lag, falling behind Germany by 1900 with momentous geopolitical consequences. The fierce competition growing from the spread of modern industry around the world is unleashing a similar dynamic today.
As a $500 billion trade deficit endangers U.S. finances and slows the country’s growth, there is rising anger over a manufacturing recession caused by the foreign outsourcing of American jobs, white collar as well as blue. The failure of the WTO should lead to a rethinking of the purpose and intent of U.S. trade policy. America must look for ways to bolster her own domestic strength if she is to maintain her security as well as her prosperity in a world of contending states.
The immediate reaction in the Bush administration to the collapse of “global” trade talks is to press ahead with bilateral “free trade agreements” with such countries as Australia, Bahrain, Kuwait, the United Arab Emirates, the Philippines, Poland, and whoever else is willing to back Washington in Iraq or in the “War on Terrorism.” Like the free-trade agreements with Singapore and Morocco, this is using trade to cement strategic alignments, not to revive the U.S. economy, which is the real foundation of American leadership. A strong American economy can afford trade concessions to allies, a weak America cannot. None of the nations being pursued on diplomatic grounds have economies large enough to give the United States a boost even if that were the intent.
The largest, most affluent, and most accessible market for American goods is the $1.2 trillion market within the United States, which has been lost to imports. An economic reconquista would boost U.S. jobs and wages in line with the increased output and productivity that such a policy would promote. The vigorous use of existing U.S. trade laws, which provide safeguards against the kind of import surges and dumping that have nearly tripled the trade deficit since the world financial crises of 1997, could give firms and workers the home-field advantage they deserve as worthy members of American society. Indeed, as global integration again proves to be an unhealthy fantasy, the reintegration of American society should become the focus of policy.