Third Way Route Jams Trade: Kemp Op-Ed in Financial Times

Third Way Route Jams Trade: Kemp Op-Ed in Financial Times

August 02, 1999

There is an international movement hard at work to concentrate power over economic decision-making--public, private, and across national boundaries--in a "global elite" that is unaccountable to the popular will of any nation. This "third way movement" is trying to create a centralised New Economic Order while hiding behind the facade of pro-labour and pro-environment rhetoric. We cannot let them succeed. Trade policy is high on the third way agenda, and the movement is focusing on the World Trade Organisation's ministerial summit in Seattle in November. Interest groups are mobilising to use the meeting to dramatise their protectionist and "big government environmentalism" agenda.

Public Citizen and Global Trade Watch, two US lobby groups, tell their ardent followers that "international environmental NGOs [non-governmental organisations] are planning to get accredited and then find seats near the table to speak truth to power." Unfortunately, power is already speaking many of the "truths" that these more radical elements in the environmental movement are trying to foist on the world trading system.

Unless policymakers, including the WTO, hold their ground in favour of free trade, our global trading system will be captured by third way forces that will regulate the life out of the world economy.

The evidence for this is all around us. Earlier this year, the WTO opened the door for countries to build trade barriers based on their own domestic environmental policies.

In the so-called "shrimp-turtle case," the US sought to bar imports of shrimp harvested in a way that it did not like, but that was acceptable to the country of origin (Thailand). The US government's opinion was that the harvesting practices posed a small threat of ensnaring sea turtles.

Obviously nations can disagree on how to conserve and protect wildlife, but it is not normal practice to use trade barriers to impose one country's priorities on other nations.

In the shrimp-turtle case, the WTO ruled against the US on procedural grounds, but left the door wide open to allow these kinds of "conservation measures" to interfere with trade. That is a slippery slope we should not be starting down.

The environmental NGOs--well-funded, aggressive advocacy groups--are always eager to push a "green" version of managed trade. That is, free trade is fine so long as its rules can be deployed to advance global green restrictions on growth. That makes trade just another powerful regulatory device, rather than the engine of worldwide growth.

Other green barriers to free trade are popping up all over the place. Japan is proposing a differential tax on vehicles based on their fuel efficiency, which will put US vehicles at a disadvantage. The European Commission may freeze out US-produced, genetically modified maize, based on very preliminary evidence that its pollen may indirectly harm butterflies. And hormone-treated beef has been the subject of endless controversy between the US and Europe.

Why does all this matter? First, any interference with free trade and open markets is anti-environment to begin with. Economic progress and wealth creation are what clean up the environment and minimise pollution, as any comparison of first world and developing country ecosystems demonstrates.

On a more fundamental level, entangling the rules of free trade with each nation's individual vision of what constitutes green regulatory and tax policy is asking for trouble. Trade among sovereign nations creates enough controversy on its own, linked as it is to domestic issues of labour, investment and economic development. We cannot burden the trading system with so much regulatory freight that it will collapse in on itself.

Finally, trying to use the WTO, or any other global forum affecting trade, to impose extreme forms of green regulation on the world is harmful to the environmental movement itself. Just as the US system of federalism allows states to experiment with novel approaches to governance, regulation, and social policy, so should our institutions of global co-operation encourage diverse and innovative approaches to economic development and regulatory policy.

That means, at a minimum, letting each country learn from its mistakes before exporting them, untested, to the rest of the globe. Competition in ideas is as important as competition in goods and services, and it would be ironic indeed if the apparatus of free trade were used to throttle that kind of competition before it had a chance to begin.

The WTO needs to stick to its basic mission. So far, its pronouncements have been consistent with its need to remain focused on trade and the rules of trade. The WTO has resisted the integration of a multitude of freestanding bilateral and multilateral environmental accords with its own trade charter. Yet it is also showing signs of drifting toward the green trade agenda. The shrimp-turtle case is a bad sign that the WTO may be moving further in that direction.

The business community also needs to stand up and be counted, because turning trade into an instrument of global economic regulation will destroy jobs and stifle innovation.

We cannot afford to let the trading system become like the US tax code, which is overwhelmingly used for social and industrial policy rather than for the core purpose of raising revenue. We need to stop the corruption of the trading system before it is too late.

If sovereign nations let the WTO, or any other body entrusted with global regulation, dictate their internal tax, environmental or agricultural policies, they will be heading towards world government--not democracy, and certainly not capitalism.

In trade, as in taxation, regulation and every other policy area affecting day-to-day economic decisions, there is no third way. There is only a right way, which values freedom and opportunity, and a wrong way, which encourages statism and bureaucracy. The author is a fellow of the Competitive Enterprise Institute and a former legislator in the US House of Representatives