This week, the Senate is expected to take up CAFTA, the Central American Free Trade Agreement. The White House is putting heavy pressure on Congress to support this agreement, which it should. But one cannot help feeling that its own missteps on trade are what have gotten this administration to the point where it must pull out all the stops to gain passage of a very modest trade agreement that probably won't have much impact one way or another. In previous administrations, this sort of agreement would have been a routine matter, not requiring extraordinary effort to get passed.
The problem for many free traders like myself is that the Bush administration has played politics with trade since day one, which has done serious damage to the fragile alliance that still supports free trade. It imposed utterly unjustified tariffs on steel, torpedoed the Doha Round of multilateral trade talks by supporting a huge increase in agriculture subsidies, and has never missed an opportunity to demagogue China for all our trade woes.
Having destroyed the prospects for a multilateral trade agreement, which was supposed to be primarily about eliminating agriculture subsidies, the Bush administration has tried to salvage some semblance of a free trade agenda by pursuing bilateral trade agreements. Such agreements have been concluded with Australia, Chile, Jordan and Singapore. Talks are underway with Bahrain, Morocco, Panama, and groups of countries in Africa and South America.
While the amount of activity is impressive, the results are not very great in terms of opening trade. Moreover, the heavy reliance on bilateral trade agreements may create future problems. Economist Anne Krueger, now the No. 2 official at the International Monetary Fund, summarized the case against preferential trade agreements in a 1999 article in the Journal of Economic Perspectives:
-- Once countries are inside a trading bloc such as NAFTA or the European Union, they have an incentive to support protection against countries outside the bloc.
-- Protectionists will use bilateral trade agreements to avoid multilateral agreements, which all economists believe are far preferable. Those who benefit from bilateral agreements will henceforth tend to oppose new multilateral deals. Once a trader has gained access to the market he is most interested in, he will not want to share those benefits with other countries.
-- Finally, the resources of organizations like the U.S. Trade Representative's Office are limited. If they are busy with bilateral agreements, they have no time or political capital left to pursue multilateral agreements.
Bruce Bartlett is a former senior fellow with the National Center for Policy Analysis of Dallas, Texas. Bartlett is a prolific author, having published over 900 articles in national publications, and prominent magazines and published four books, including Reaganomics: Supply-Side Economics in Action.
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