Let’s Kill the Bilateral Agreement
Fran, you make a very good point. The big problem, as many of us at CEI have discussed, has been our nation’s approach and our focus on bilateral trade agreements. Although tempting at first because they gave quick wins, the bilateral agreements have opened up great opportunities for the anti-trade forces to do all kinds of mischief. Meanwhile, we get caught fighting for agreements that are trivial in every possible way and a Doha round that’s obviously going nowhere.
When I was working on the Hill, we tried to calculate the benefits of the Central American Free Trade Agreement (CAFTA). Free traders loved it and the Left-Right anti-trade/anti-freedom coalition hated it; we all acted like it was a big deal. But we all hid a secret: CAFTA didn’t matter.
In my boss’ home state of Tennessee, the benefits came to less than $10 per month with a significant margin of error. The other side had similar numbers that showed a household income loss of about the same magnitude and a decline in payrolls less than the margin of error. In other words, whichever side you believe, it’s unlikely that anybody will notice CAFTA. Except perhaps for Miami-based financial services firms, there simply weren’t any big benefits at all when it came to implementing CAFTA. So why did we bend on anything?
I don’t see why the United States should ever invest significant energy in bilateral agreements. In a way, we’ve done all we can with bilateral agreements. We have a pretty good trade agreement in place with Canada and Mexico. Ditto for our two closest political allies, Australia and Israel. And even CAFTA isn’t bad. E.U. policy, of course, makes it impossible for us to conclude agreements with the U.K., Ireland, Poland, or the Nordic countries. (I think that France and Germany are lost causes anyway.) China and Japan won’t play ball. India probably would, but domestic politics here make a U.S.-India free trade agreement impossible in the near term. So what’s left? South Africa? New Zealand? Not worth fighting over and certainly not worth letting the Left extend the regulatory state even further.
One could say that the WTO provides an answer but, of course, with the collapse of Doha, it seems unlikely that we’ll see much coming from there either.
So what’s left? What about unilateral action? With cuts in income and payroll taxes likely off the board for the foreseeable future, it strikes me that there might be some value in agitating for unilateral reductions in our own tariffs and other trade barriers. I realize that they’ve already fallen a good deal but every time we reduce them, it improves consumer welfare. Explained the right way, tariff reductions may have more popularity than income tax cuts: since so many families no longer pay net federal income taxes, but every consumer pays for trade barriers/quotas etc, they actually have a broader constituency.