Global trade view is out

Agenda: The Bush administration, once an advocate for a free exchange of goods, has put protectionism and the November election in the forefront.

May 26, 2002|By John McKenzie | John McKenzie,SPECIAL TO THE SUN

GO GLOBAL, think local" is today's mantra, but it isn't working for free trade.

The Bush administration, supposed advocate of free trade, put tariffs of 30 percent on imported steel in March, America's single most protectionist measure in 20 years. It has also slapped tariffs on Canadian lumber, and conceded to congressional attempts to withdraw textile trade concessions granted recently to Caribbean countries. Two weeks ago, Bush signed a farm bill which will increase farm subsidies by 80 percent, reversing legislation from 1996 that aimed to phase out subsidies entirely.

Amid international outcry, Bush claims that he is still going global. The protectionist measures, he says, are concessions to persuade Congress to grant him trade negotiating authority in the next World Trade Organization round.

But the real explanation is electoral. Mr. Bush is not thinking global, he's going local. The farm bill can help him win the Senate election swing seats in November in the Midwest, just as steel tariffs can help him in the Rust Belt. The main victims of these measures will inevitably be the poor countries.

In November, shortly after declaration of the U.S. war against terrorism, 142 countries met in Doha, Qatar, to launch a round of trade negotiations. The mood was optimistic, and talks focused on the need for special commitment from the rich countries to help developing countries, particularly by removing trade barriers in agriculture and textiles. America insisted on putting liberalized farm trade and subsidy-free agriculture at the center of the Doha agenda.

Now the Doha round is threatened. The European Union, Japan and China have begun a counteroffensive against the U.S. steel tariffs. The Europeans threaten, pointedly, to impose countertariffs on $336 million worth of American goods originating from electorally sensitive states such as North Carolina and Florida. Another big trade dispute is brewing.

So what? There have been trans-Atlantic trade squabbles for years, and despite the noise and posturing, good sense has usually prevailed. This time, the main losers will be the developing countries that await their opportunity to trade openly with rich countries, unobstructed by the array of quotas, tariffs and price subsidies.

Previously, the United States was pushing the European Union and others to phase out agricultural subsidies, but the pressure is off. The new farm bill, which would cost $190 billion over 10 years, will add to the existing $350 billion that rich countries provide in farm subsidies each year. When rich countries pay their farmers to increase production, with the effect of pushing down crop prices, poor countries lose out.

The World Bank estimates that if the world price of cotton were not depressed by subsidy, the number of people living below the poverty line in the country of Burkina Faso in western Africa would fall by half within six years. Whereas the average U.S. cotton farmer earns $35,000 a year, a third of which is subsidy, the average cotton farmer in Burkina Faso gets by on less than $1 a day.

"This is for rural America," said Rep. Larry Combest, Texas Republican and chairman of the House Agriculture Committee, when the farm bill was voted in.

But the smaller, family-run farms will not be the main benefactors. Three-fourths of the new subsidies will be paid to the 10 percent of biggest farmers.

The issue of equity is important. After the attacks of Sept. 11, world leaders recognized the link between poverty and terrorism and pledged to increase development aid. Aid can help, but only trade can bring the foreign investment and modernization that developing countries need. But in all the rich countries, domestic interest groups are lobbying hard to prevent investment, earnings and jobs from moving elsewhere.

Take the Vietnam catfish war in which the Mekong challenged the Mississippi.

Vietnam began exporting frozen catfish filets to the United States in 1996, and by last year was supplying 20 percent of the market. Vietnamese catfish was as good as the local product, but 20 percent cheaper. The Catfish Farmers of America, with headquarters in Indianola, Miss., fought back, first accusing the Vietnamese of dumping and of farming in polluted water, none of which could be substantiated.

In October, the group succeeded in having Congress pass a bill banning the use of the word "catfish" on the Vietnamese product, because the Vietnamese catfish supposedly belonged to a different family from the American catfish.

Although scientists of the California Research Institute have confirmed that Vietnamese and American catfish belong to the same family, the ban prevails.

Vietnamese producers, now using the label "Basa fish," must reapproach the market.

"Protecting a domestic industry that had a revenue more than $590 million last year is vital to the South ... ," the Catfish Farmers of America said. "There are more than 190,000 acres of catfish ponds in the United States, with 110,000 of those acres in Mississippi."

Free trade is ultimately about the benefit of many vs. the interest of the few. The few are often powerful, so free-trade agendas need championing with vision and commitment. President Bush seems to have lost that commitment. For now, the global agenda appears to have been scrapped under the pressure of domestic interests.

John McKenzie lives in Vietnam, where he manages the Mekong Project Development Facility.

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