By Sidney Weintraub
Center for Strategic and International Studies
As well as negotiating in the world trade talks, the United States has been pursuing a strategy of regional and bilateral free trade deals. But do these necessarily help the cause of free trade?
For those who believe that international trade increases world economic welfare, the best negotiating forum for reaching trade deals has to be the global one, the World Trade Organization (WTO).
President Bush spoke of free trade when he toured Africa
Its importance also explains why the WTO is
anathema to trade and globalisation sceptics.
There is considerable disagreement among analysts as to whether regional or individual trade agreements also stimulate total trade, but few
analysts contend that they can substitute for global negotiations.
Some argue, however that more comprehensive free-trade commitments can be negotiated in smaller negotiations.
For example, the North American Free Trade Agreement
(NAFTA) went much further in liberalising trade and investment between Mexico, Canada, and the United States than did the earlier phases of the Uruguay Round of trade talks, and some of these advances were later incorporated in the final Uruguay Round agreement.
The downside of these smaller free-trade agreements is that they
discriminate against countries not party to them.
TRADE AND GLOBALISATION
Key issues at the trade talks
They therefore negate the most important principle of the WTO, that
of most-favoured-nation (non-discriminatory) treatment.
US approach flawed
Robert Zoellick, the U.S. trade representative, has enunciated a
strategy that he calls competitive liberalisation, in which the United States will
negotiate reductions in trade barriers simultaneously in a
variety of forums: bilateral, multilateral, regional, and global.
The US has just completed bilateral free trade agreements (FTA) with Chile
and Singapore, while multilateral free trade negotiations are taking
place with the five countries of the Central American Common
Market, and regional negotiations are in progress to establish a free
trade area of the Americas (FTAA).
But it is by no means clear how the United States will chose its next
bilateral negotiating partners.
Sometimes the choice is based mainly on the open trade policy of the partner countries (like Chile and Singapore), sometimes
on hemispheric political grounds (as with Central America), sometimes on global strategy (as in the proposed negotiations
in the Middle East), and sometimes because of support for US foreign policy (so a deal with Australia but not New Zealand).
Keep in mind that the main justification for non-global negotiations is that more can be achieved in them than through the WTO.
Yet the current indication coming out of
Washington is that the Free Trade Area for the Americas will be slimmed down in substance to meet misgivings of other hemispheric countries, notably Brazil.
And it is becoming more clear daily that the Central American agreement is likely to be a watered down version of the Chile
and Singapore free trade agreements.
This leaves the uneasy feeling that reaching agreement takes priority over the
Another complaint about US trade policy is coming from the business community, namely, that the plethora of trade agreements recently negotiated and being contemplated do not
involve very much trade.
Chile and Singapore are important markets for the United States (U.S. exports to these countries in 2002 were $2.6bn and $16.2bn respectively), but they pale in comparison with Canada and Mexico ($160bn and $97.5bn last year).
US exports to Jordan ($404m in 2002), with which an FTA exists, are clearly
underwhelming, as are US shipments to Morocco ($565m 2002) and Bahrain ($419m last year), with which FTA negotiations are contemplated.
Business leaders prefer that trade agreements be used to promote trade rather than as political tools.
Politics of trade
There is always a political element in a trade negotiation,
especially because a free trade agreement (FTA) provides a preferential benefit not generally available to other countries.
The elder President Bush undoubtedly welcomed Mexico's request in the early 1990s to negotiate an FTA with the United States because it signalled a
positive shift in the relationship, but -and this must be
emphasized - it also held the potential for significant trade and
The proposal for Free Trade Area in the
Americas has a large political element in light of where the
United States is located, but the idea is not merely symbolic
because the trade and investment consequences can be substantial.
However, current US policy seems to put a more direct
emphasis on the political aspects of trade agreements.
The signing of the Chile deal was delayed briefly because of US unhappiness over Chile's opposition to the second United
Nations resolution on war with Iraq.
And some suspect that a deal with Egypt was delayed after Egypt refused to join in the US complaint against the EU over GM foods.
The sense that is now being conveyed around the world is that
US policy is to sign free trade agreements with other countries only if they
are prepared to adhere to US foreign policy positions.
An FTA, in other words, is not necessarily an agreement in which all parties benefit from trade expansion, but rather a favour to be
bestowed based on support of US foreign policy.
Professor Sidney Weintraub holds the William Simon chair in political economy at the Center for Strategic and International Studies in Washington, DC, an independent, non-partisan public policy research organization.