Originally published on 08/04/2008
The failure of the Doha round talks last week is one sign among many that the conventional reciprocal concession approach to trade liberalization is becoming ineffectual. With so many issues on the agenda and so many countries involved, it may now be impossible to reach any meaningful agreement to substantially reduce trade barriers. Perhaps the time is ripe for a new approach.
If the American Presidential candidates are sincere about making a true break from the past and if they truly want America to shine as an example worthy of emulation then here is one idea worth considering.
American Unilateral Trade Liberalization
Rather than enduring the endless discussions of “we’ll give you a little , if you give us a little (i.e., liberalization)” perhaps it is time for America to lead by example. By announcing a plan for a gradual transition to complete free trade, over perhaps the next five years, the US could disengage from the entire negotiation process. We might immediately announce zero barriers on all goods coming from the least developed countries, (despite GSP and other trade concessions to the LDCs, we continue to maintain barriers on agricultural and textile products from many countries). These changes would induce substantial adjustment in some sectors and admittedly many businesses will disappear. But, as they do, new businesses will appear. And these new businesses will capture some of the new markets in this dynamic and ever changing world.
The one feature about the future that all should be able to accept is that it will be significantly different from the present. How it will differ no one knows. But for a country to be economically successful in this environment, it must get used to continual change and be prepared to adjust. Indeed the more we practice and endure economic adjustments, the better our businesses and workers will be at it.
But what about the unfair trade policies that US competitors will keep in place? What should we do about that? The answer; adjust to them. The US economy is the largest most innovative and dynamic economy in the world. If we want it to remain an economic superpower then we should respond to foreign economic practices with a “bring it on” kind of attitude. If foreign governments subsidize certain export products, then let’s buy up the cheaper goods and produce something else. If a country maintains a low valued exchange rate, then let businesses adjust to the prevailing prices and produce something else. If foreign countries repond and remove their own protections, then US firms should adjust to fill void. – Jack be nimble, Jack be quick. – If we establish an economy that thrives on adjustment, then the US will weather any economic storm, including the competitive pressures that will surely come from China, India and others.
Tony Blair, the former prime minister of Great Britain, once did an excellent job describing the appropriate worker and societal attitudes that are necessary to maintain a strong vibrant economy when he said,
“The character of this changing world is indifferent to tradition, unforgiving of frailty, no respecter of past reputations. It has no custom and practice. It is replete with opportunities, but they only go to those swift to adapt, slow to complain, open, willing and able to change. Unless we “own” the future, unless our values are matched by a completely honest understanding of the reality now upon us and the next about to hit us, we will fail. … in the era of rapid globalization, there is no mystery about what works — an open, liberal economy, prepared constantly to change to remain competitive.”
Blair’s, “slow to complain” remark is consistent with Phil Gramm’s concern that the US has become a nation of whiners. Complaining about foreign trade or wage or exchange rate practices, and forcing foreign countries into countless discussions about what they need to do to make us better off are not the actions of a strong leader. Rather they are the actions of a giant who feels threatened of being toppled.
But, to achieve anything as radical as a proposal to move to unilateral fee trade, requires a leader who is willing and able to present a vision of a future America that is based on strength, resilience, nimbleness and sacrifice. These are characteristics that are needed to make unilateral free trade a winning strategy. And these are the characteristics most Americans would be proud to rally around.
Now if we can only find a leader who can be so inspirational. I confess I haven’t seen it in this election.
