NCPA - National Center for Policy Analysis

Open Economies Could Lead the Way to Free Trade

February 27, 2003

The Bush administration links trade to security. Consequently, new trade initiatives being advanced by U.S. Trade Representative Robert Zoellick can advance the president's goal of extending peace through economic prosperity, says Gerald P. O'Driscoll, Jr., a senior fellow at the Cato Institute.

Zoellick has proposed admitting 65 percent of all consumer and industrial imports from Latin America duty-free upon implementation of a hemispheric free-trade agreement. Meanwhile, the Bush administration is committed to signing such an agreement before 2005.

  • In response, the World Trade Organization (WTO) has proposed ending all export subsidies to farmers over a nine-year period.
  • The WTO has also called for a reduction of tariffs on all agricultural products.

According to O'Driscoll, consumers of the world would benefit from these actions and efficient farmers, many of them Americans, would prosper.

In addition, O'Driscoll says Zoellick can pursue an even bolder agenda, one with a coalition of willing trade partners -- countries already open to trade and investment.

Such a grouping, he says, would enable negotiation to start from a higher threshold and would permit the Bush administration to "raise the bar" on other trade negotiations, including within the WTO.

  • Countries with open economies, united in a global grouping, could set a new, aggressive trade agenda, with U.S. leadership providing the catalyst.
  • Such a grouping surely would include Chile and Singapore -- two very open economies -- as well as Australia.
  • Other likely candidates include New Zealand, one of the most open economies in the world, and Hong Kong (which would bring interesting geopolitical benefits atop the obvious economic ones).

Other countries could join by first liberalizing to the threshold already established by the association, O'Driscoll says.

Source: Gerald P. O'Driscoll, Jr., "Is a Global Free-Trade Deal the Best Way to Keep the United States Safe?" Investor's Business Daily, February 21, 2003.


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