TCS Daily

John Kerry, Going Solo

By Alan Oxley - October 5, 2004 12:00 AM

John Kerry has made a big deal about the Bush Administration playing solo in international affairs and offending other countries. He is of course referring to Iraq, where the only countries really offended are France and Germany. Yet John Kerry has a trade policy that sets a solo strategy for the US. It won't be France and Germany who will be offended, just most of the rest of the world. In the process he will damage American national economic interests and the interests of poor countries.

Trade advisors to the Kerry camp have announced that labor and environment issues will be "front and centre" in Kerry Administration trade policy. This distinguishes it from Republican trade policy. A reasonable person would ask why a trade policy would not have trade "front and centre". Labor and environment would not be front and centre of homeland security policy. Why is trade policy different?

Trade policy faces big enough challenges. Ask any business executive how difficult it is to work in foreign markets. They face taxes on imports, illicit payoffs, piracy, counterfeiting and red tape. Trade policy works to make international law in trade agreements to curtail this. Everyone benefits when this is done correctly.

Trade agreements are win/win deals. The freer business is to trade and invest, the higher is growth and the more jobs are created. American business creates jobs for Americans and benefits for shareholders and developing countries gain investment and jobs. So growth is higher in Singapore and Chile (countries willing to negotiate trade agreements to provide legal freedoms to trade and investment) rather than in India and Argentina (which are not).

Democrat trade policy will work differently. The aim will not be to create opportunities for business, the aim will be to coerce developing countries to adopt US labor and environmental standards in return for gaining access to US markets. There are those who see an upside to this: why not put pressure on poor countries to pay for workers more?

It is misplaced philanthropy. Forty US dollars a month for a textile worker in Laos, one of the poorest countries in Asia, is very low by US standards, but nearly twice what most people earn in that country. Forcing companies in Laos to pay more in return for having the right to export to the US (that is what a Democrat Administration would want to use trade agreements for) would probably force businesses to leave Laos and go to countries where this does not apply. The result? Jobs well paid in local terms in Laos would be lost.

Why would a Democrat Administration do this when Democrats usually claim they care more about those less well off? Ask the AFL-CIO. It has campaigned for years to block imports from countries with low labor costs. It does not want to use trade policy to expand trade, it wants to use it to raise costs in developing countries. It talks about preventing a "race to the bottom". It wants a walk to oblivion.

The AFL-CIO does not represent most workers in the US. It represents the handful of industries where US companies are having trouble competing. Take the steel industry. Jobs are shrinking in there and the policies of organized labor are a major factor.

Democrat trade policy will not create opportunities for American business or jobs for American workers, but it will seek to impose on other countries the labor policies that have impeded growth in the US and resulted in loss of jobs. This is callous. Poor countries can't afford this.

What about environment policy? The environmental record in many developing countries is poor. True. But no one can improve the environment if they cannot pay for it. The World Bank has pointed out that as developing countries raise standards of living, they improve the environment.

US environmental groups aren't interested in this. They have allied with organized labor to press anti-growth policies on developing countries. They also want to lever the access to US markets provided by trade agreements to force developing countries to adopt US standards, in their case on the environment. This produces poor results for the environment. What works in the US is unlikely to work in a poor country.

Developing countries know this. They have made clear over and over again that they do not want the World Trade Organization promoting trade and environmental goals. So what is the Democrat strategy? Forget about the WTO, use the leverage available when the US negotiates bilateral or regional Free Trade Agreements with trading partners to require acquiescence in policies pushed by organized labor and environmental lobbyists. These groups have never had qualms about using US muscle to force other countries to toe the line on labor and environmental questions.

John Kerry's protests that in international affairs the Bush Administration is charging on regardless of what other countries think ring pretty hollow. Unfortunately, there is more to complain about Democrat trade policy than hypocrisy. There is nothing remarkable about that in politics. The effect of the policies is what matters. The trade policy declared by the Kerry team will restrict economic growth in the US and in the part of the world which can least afford it -- the poor countries. Free traders among the Democrats know this. There is nothing they can do about it.

Alan Oxley is a former Chairman of the GATT, the predecessor to the WTO and host of Techcentralstation's Asia Pacific page.


TCS Daily Archives