Two Cheers For GATT
Table of Contents
The Ultimate Goal: Unilateral Trade Disarmament
"Many foreign politicians are unilaterally dismantling their own trade barriers."
For too long, American policymakers have hoarded U.S. trade barriers like some philosopher's stone from which national wealth and international competitiveness might emerge. Instead, U.S. trade barriers are fool's gold with just enough glimmer to allow special interests to distract everyone else. Politicians have long spoken of trade barriers as if they were bargaining chips that could entice foreign governments to lower their trade barriers. Once the GATT is enacted, U.S. trade barriers will lose the value they may have had as bargaining chips and their economic irrationally will become much more stark.
After the GATT is enacted, the U.S. Congress can promptly repeal the U.S. dumping law, speed the phase-out of U.S. textile import quotas and abolish or speed up the phase-out of remaining U.S. tariffs.
While many American politicians still demand trade barriers, foreign politicians are unilaterally dismantling their barriers. In Mexico, between 1985 and 1987, the maximum tariff fell from 100 percent to 20 percent and the average tariff from 23 percent to 10 percent.51 In 1986, Kenya reduced many of its tariffs to 0.0.52 New Zealand announced a plan to slash its tariffs, most of which will be 10 percent or lower by l996.53 The International Monetary Fund recently noted, "Many Latin America countries had very restrictive tariff regimes in the 1980s but were able to modify their regimes rapidly in the late 1980s and early 1990s."54 Even Ethiopia is part of the tariff-slashing trend.
Some in the United States claim that unilateral reduction of tariffs is similar to unilateral disarmament. This analogy is misleading. U.S. missiles and the military have helped preserve our national independence; U.S. trade barriers have weakened our competitiveness and lowered our living standards. A better analogy would be to the unilateral defusing of old bombs scattered across our industrial landscape.
"The best way to fight foreign unfair trade practices is to maximize American productivity."
The best way to fight foreign unfair trade practices is to maximize American productivity. Senator John Taylor wrote in 1822, "The most efficacious mode of defeating foreign restrictions to which we can resort, would be to establish a really free commerce, which would enlist the merchants of all nations to evade and counteract them."55 In 1849, Sir Robert Peel declared, "The only way of fighting hostile tariffs is by free imports."56 There is not a single existing trade barrier that has done the U.S. economy more good than harm, raised the American standard of living or boosted American productivity.
Of course simultaneous liberalization by the U.S. and our trading partners would be most advantageous. But unilaterally adopting free trade now will benefit us far more than multilaterally adopting it 10, 20 or 30 years from now. It is illogical to say that imports of Japanese semiconductors are beneficial to American computer makers only if Japanese consumers buy more American rice. There is no metaphysical connection between the two. The construct exists only in the political imagination, and it holds our most dynamic industries hostage to our least competitive ones.
The case against unilateral free trade is simply the case against unilateral betterment. The simple act of ending trade welfare would stimulate the self-reliance of American corporations. Once they knew that they could no longer run to Washington for a border-closing bailout, productivity would increase. Former U.S. trade representative Clayton Yeutter commented in a 1986 speech to the Semiconductor Industry Association, "We joked in Washington that many of you were becoming permanent features at [our offices] during the innumerable days and nights of semiconductor talks with the Japanese."57 If U.S. semiconductor makers spent more time in Silicon Valley and less in Washington, we would have a stronger chip industry. And if all of our companies hired fewer lawyers and lobbyists and more engineers, scientists and designers, they could produce better products at lower prices.
Protectionists warn that adoption of unilateral free trade would devastate American employment. In reality, it would likely have less impact on employment than a major recession. Agriculture - the most protected U.S. industry - could employ more people if federal farm subsidies were abolished.58 And, as economists Leland Yeager and David Tuerck note, "The pains of adjustment would not be due to free trade, as such, but to having adopted protection in the first place."59
Every trade barrier seeks to redirect capital and labor from relatively more productive to relatively less productive uses. Early American protectionists realized this principle and justified it by insisting that protection would be only temporary. After 200 years of protection for sugar and textiles and over a century for steel, we should call time.
Protectionism is a form of economic censorship. Protectionism seeks to obscure the fact that certain sectors of the American economy are not competitive. As analyst Sheldon Richman observes, "Protectionism is an attack on the price system per se and its communications function, since the prices set by the market are overridden, distorted, falsified by bureaucrats with a political agenda."60