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May 3, 1993
"Trade Negotiations Need Not Blind Us"
San Jose Mercury News

By Timothy Taylor
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THE CLINTON administration seems ready to prove its toughness on trade with Old Testament ferocity: an eye for an eye, a tooth for a tooth, a trade barrier for a trade barrier.

Japan doesn't buy enough U.S. computers, semiconductors, automobiles, insurance? Retaliate with tariffs or quotas against similar Japanese products. Europe doesn't buy certain U.S. farm products? Shut out some European products from the American market.

The problem with "an eye for an eye" justice, it has been noted, is that the whole world ends up blind. If other nations reacted to existing U.S. trade barriers -- which cover goods like cars, steel, textiles, farm products and much else -- by setting up additional trade barriers of their own, and the U.S retaliates against those tariffs and import quotas with still more protectionism, the resulting vicious circle of contracting trade will make all nations worse off.

These days, at least, everyone knows that the arms race between the U.S. and the USSR didn't assure military security, but it did cost a lot of money and risk blowing up the world. Similarly, an escalating cycle of trade barriers doesn't buy economic security; it just costs consumers and businesses a lot of money, by preventing them from buying the imports they want, and risks blowing up the world economy.

You hit me, so I hit you back, a little bit harder. While this vision of kindergarten justice never loses its allure for some, adults should be able to find alternative ways to address their problems. Here are five ways for the United States to react to unfair foreign trade practices without resorting to our own versions of protectionism.

  • When involved in a trade dispute with Europe or Japan, America might exert pressure by withdrawing some of the U.S. military presence that is protecting the peace in that part of the world. After all, we can explain, fewer exports reduces the U.S. economic stake over there. And as part of cutting the defense budget, we should be planning to bring home some of those forces anyway.
  • The Clinton administration could react to unfair trade practices abroad by redoubling efforts to strengthen international trade treaties, like the North American Free Trade Agreement and the General Agreement on Tariffs and Trade. But under Clinton's lack of leadership, NAFTA and GATT have been moved from the front burner to the back burner to the countertop to somewhere in the corner of the refrigerator.
  • The U.S. "trade deficit" just means that America consumes more than it produces, and buys the extra products from abroad. Conversely, Japan's trade surplus just means that Japan is producing more than it is consuming, and selling the extra abroad. From this angle, the trade deficit will shrink if Japan consumes more and the U.S. consumes less. Japan appears ready to do its part, by enacting a $120 billion government stimulus package. The U.S. should do its part to cut consumption, and its trade deficit, by reducing the federal budget deficit.
  • A more self-confident and self-reliant America might respond to unfair foreign trade by redoubling its efforts to increase productivity, through greater support of research and development, investment, and job training. If American companies offer the best value for money in the world, other countries will be cutting their own throats if they don't buy.
  • Reducing the competition from an imported product, like semiconductors, allows producers of that product to collect more money by charging higher prices. But if it seems necessary to subsidize some American industry to meet its foreign competition, then at least deliver the subsidy directly and openly, with taxpayer money. If Americans aren't willing to pay for industrial subsidies as taxpayers, then they shouldn't be forced to do so through protectionist trade policy.

When over-enthusiastic cold warriors had trouble controlling their excitement during discussions of retaliatory missile strikes against the Soviet Union, one suspected (uncharitably, perhaps) that they were more enthusiastic about war than peace. When politicians in the Clinton administration and Congress seem to drool openly at the possibility of getting tough by shutting out Japanese and European imports, one suspects that they are more enthusiastic about protectionism than they are about free trade.

"The truth of our age is this -- and must be this: Open and competitive commerce will enrich us as a nation. It spurs us to innovate. It forces us to compete. It connects us with new customers. It promotes global growth, without which no rich country can hope to grow wealthier. It enables our producers, who are themselves consumers of services and raw materials, to prosper. And so, I say to you in the face of all the pressures to do the reverse, we must compete, not retreat."

Brave words, spoken by a fellow named Bill Clinton just two months ago. Let's hope his administration doesn't cripple free trade to uphold some misbegotten image of how to be a tough trade negotiator.

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