By Kevin D. Williamson
Wednesday, June 08, 2016
Free trade is, in 2016, a cause without a champion. The
two great populist currents of the moment — really a single current with two
faces, Donald Trump’s and Bernie Sanders’s — are resolutely opposed to free
trade. Mrs. Clinton, a sometime supporter of the Trans-Pacific Partnership
negotiated by the Obama administration during her service as secretary of
state, is walking sideways away from it.
Even among libertarian-leaning conservatives and
free-market liberals (there are a few left), trade pacts such as NAFTA and the
WTO are in bad odor. The ideal free-trade agreement is what I have nicknamed
the Goldberg Treaty, in honor of my friend Jonah Goldberg, who wrote that a
real free-trade pact would consist of a single sentence reading: “There shall
be free trade between . . . ”
But there is a problem with the Goldberg Treaty, which is
that most of the relevant barriers to trade are not, contra Trump et al.,
tariffs. Nor are they quotas or other explicitly trade-inhibiting policies,
though these do exist and so require liberalization. In truth, countries such
as China do not for the most part apply extraordinary tariffs to U.S. goods,
and such tariffs as they do apply have been reduced in recent years, not as the
result of any get-tough trade policy pursued by the United States but because
of the complaints of Chinese consumers, who may spend their lives immersed in
nationalist propaganda but who still do not enjoy paying artificially high
prices for household goods. Beijing recently cut the tariff on imported
cosmetics, proof again that the two most dangerous places to stand are between
a politician and a microphone or between a woman and her favorite lipstick.
More typical are the difficulties that U.S. automakers
have had in cracking the Japanese market. Japan has no import duties on
automobiles, but U.S. makers complain of other problems, particularly the
difficulty of establishing dealer networks to help them connect with potential
Japanese buyers. The relevant laws are complex, they are in Japanese, some
aspects of them (such as commercial zoning rules) vary from jurisdiction to
jurisdiction, etc. Dealing with that is a great deal of work, and it is very
expensive, though the Japanese domestic auto lobby does point out that while
the number of dealers selling U.S.-made cars has declined by 74 percent in the
past couple of decades, the number of dealerships selling European-made cars
has increased by almost the same proportion. European marques make cars that
are more like domestic Japanese cars (the Japan Automobile Manufacturers
Association reports that 93 percent of Japanese passenger cars have engines
smaller than two liters, while U.S.-made cars are mostly larger than that), and
European manufacturers have found it easier to comply with Japan’s safety and
emissions rules.
These are not issues that can be resolved by a
one-sentence free-trade pact.
Consider the question of military procurement: The United
States, like many other countries, prefers to buy its military hardware from
domestic sources when possible. There are some defensible and obvious reasons
for this, though they sometimes are overstated. That disadvantages European
armament-makers and aerospace firms. Many countries do not have those kinds of
rules, not because they have a stronger commitment to free trade but because
they do not have domestic industries capable of supplying their demands. (The
uniforms of the mighty Kuwaiti air force were made, for a time, by Georgio
Armani.) Other countries maintain preferential procurement policies to benefit
domestic farmers, who in many parts of the world, such as India, are
desperately poor. Some countries subsidize pharmaceuticals or put controls on
their prices, others have unusually stringent environmental or safety standards.
There are exactly two ways to sort out these issues, and
neither of them is a simple, one-page trade treaty, as attractive as that might
be in principle. The first option is that these differences, and the processes
for resolving them, are codified in big, complex trade accords such as NAFTA
and the TPP, which produces those 1,000-page documents that we all have come to
abhor and distrust.
(Speaking of which: I have been convinced that my own
earlier reservations about TPP, that certain parts of it could be used as a
backdoor method of imposing certain environmental standards sought by the Obama
administration, were in error. I thank K. William Watson and others for the
correction.)
The second possibility, the alternative to the 1,000-page
treaty, is the delegation of power to international trade arbitrators such as
the WTO. This has some appeal, inasmuch as the reality of fast-moving markets
and technological innovation means that many policy factors that might inhibit
trade are not foreseeable and cannot be effectively incorporated into treaties.
The tradeoff is that such delegation takes power out of the hands of national
authorities and puts it into the hands of international authorities, generally
transferring decision-making from the elected and the accountable to the
unelected and the unaccountable. This is often understood as a loss of
sovereignty, though that isn’t exactly right, since we have the power to
withdraw from such associations. But it is something like a ceding of
sovereignty.
That’s our choice: big documents or big arbitrators.
The reality of the WTO regime and the like is that we
generally get a bit of both, and that it works reasonably well. My own feeling
on the matter is that it is better to limit the politicians’ role to yes-or-no
votes and to exercising effective veto power via the right of exit and leave
the rest to arbitration and quasi-judicial processes. In the case of trade
relations between large economies with high volumes of trade (such as our own),
those processes have the virtue of requiring lots of steady, iterative, repeat
interaction over long periods of time, when generally encourages cooperative
behavior.
Brad DeLong of the Washington Center for Equitable Growth
estimates that even with very conservative assumptions, TPP would add something
like $3 trillion to the stock of world wealth. Peter Petri and Michael Plummer
of the Peterson Institute for International Economics estimate that TPP would
raise the real incomes of the participating nations (which mainly are rich
nations such as the United States, Canada, Australia, and Japan) by about 0.5
percent, which may sound trivial but is in fact significant when you consider
the size of the economic bloc in question and the effect of such additional
income over time.
Those are gains worth realizing. But the means of
realizing them will never be politically popular.
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