CIAO DATE: 12/07
Forging Closer Bonds and Promoting Mutual Prosperity Through Trade
Susan C. Schwab
Full Text
For nearly seven years, President Bush has presented a vision in which trade alleviates poverty, spurs economic development, promotes the rule of law, and encourages cooperation among nations. He has made the free and peaceful flow of commerce a key component of US foreign policy. On many fronts, he has succeeded in making his vision a reality. The United States has provided leadership in the World Trade Organization Doha Development Round, concluded state-of-the-art free trade agreements with countries around the world, and begun to forge a new bipartisan consensus on trade with members of the US Congress. In the coming months, Congress will have several important opportunities to help their constituents and reaffirm US leadership in the global marketplace by approving pending free trade agreements with Peru, Colombia, Panama and the Republic of Korea.
The post-World War II record on trade is clear and compelling. As the United States has opened its market, US families have enjoyed average annual income gains of roughly $9,000. Likewise, nations that adopted trade liberalizing strategies in the 1990s have grown three times the rate of those that liberalized less or not at all. Some 400 million people in China alone have moved out of poverty since that nation began to integrate into the global economy in the late 1970s.
The economic vitality of the United States—the most open major economy in the world—and the rising prosperity of nations that have adopted a pro-trade, market-oriented economic model demonstrate that trade is not a zero sum game. The more nations trade, the bigger the economic pie for all. Therefore, the policy of the United States is to open more trade flows and to extend the benefits of trade to more and more of the world’s people. The World Trade Organization Doha Development Round is the best way to do this.
The World Bank estimates that roughly half the benefits of global free trade in goods would flow to developing countries. This could liberate tens of millions of people from poverty. With a successful Doha Round, by 2015, there could be income gains of $259 billion for developing countries. Looking at just one part of the world, the Blair Commission on Africa concluded that increasing sub-Saharan Africa’s share of global trade just one percent—from two to three percent—could boost incomes in that region by $70 billion. That is roughly three times the amount of development aid donor countries currently provide.
Of course, in addition to achieving the development goals, a successful Doha Round would create tremendous opportunities US farmers, ranchers, manufacturers, service providers, workers and consumers in the United States and other developed countries. For these reasons, the United States provided leadership in launching the Round in 2001, worked hard to get it back on track when it faltered in 2003, breathed new life into it in 2005 with a major proposal on agriculture, and, in order to sustain it, engaged in dozens of bilateral and regional meetings over the past 18 months.
It has become clear that such a historic and significant undertaking will not be easy. The WTO is composed of 150 members at all stages of development and the term “developing country” is hard to define. The North-South divide of previous decades has given way to a more complex set of relationships. In this context, WTO members are struggling to define what a successful outcome means and how far they are willing to go to achieve success.
The United States continues to argue that a successful outcome must open new trade flows in agricultural goods, manufactured products, and services sufficient to achieve the growth and development objectives WTO members established in 2001. The only way this can happen is substantial new market access. The month of September provides new chances to review proposals in agriculture, Non-Agricultural Market Access (NAMA), and services. The United States remains committed to Doha and will work with all WTO members willing to stretch themselves politically to achieve success. The stakes are simply too high to abandon this effort.
As we strive hard on the multilateral front, the Bush administration is eager for Congress to debate and approve four free trade agreements it has concluded since the spring of 2006.
In our hemisphere, there are compelling economic and political reasons why the agreements with Peru, Colombia and Panama make so much sense for the people of the United States and each of these trade partners.
Upon implementation, Peru, Panama and Colombia will continue to benefit from the nearly duty-free access they have had to the US market. Members of Congress from both parties have long supported trade preference programs that have provided this access. However, the bilateral trade with each country will become more of a two-way street under these free trade agreements. The US economy stands to benefit by tapping into emerging markets with a combined population of 75 million people. It is hard to see how any lawmaker could oppose a level playing field for the businesses, workers and consumers in his/her district.
In recent years, the Peru, Colombia and Panama governments have undertaken economic and political reforms that have helped their people escape poverty and live more securely. In Peru alone, nearly half a million people were lifted out of poverty over the last six years. In Colombia, thanks in part to the Andean Trade Preferences Act, more people have been able to shift to viable alternatives from illegal activities associated with drug trafficking. This has contributed to a reduction in violence in that country. And in Panama, democracy has taken hold and that country is attracting more foreign investment than ever.
The leaders of these three countries have stated many times that deeper and stronger trade ties with the United States are crucial to their continued progress in establishing stable, transparent and rules-based economic and political institutions and creating more peaceful and prosperous lives for their people. The administration will work closely with Congress to ensure that the United States grasps the hand of partnership. In doing so, we can build a new alliance for hope in the Western Hemisphere.
The economic and security considerations for forging stronger trade and investment ties with Korea are also beyond question. The US-Korea Free Trade Agreement is our most commercially-significant agreement in over 15 years. As the 49 million people of Korea grow more prosperous every day, they are increasing their demand for the full range of quality US goods and services. Once the KORUS FTA goes into effect, the United States will be much better able to reach this dynamic, $1 trillion market and benefit from new bilateral trade and investment opportunities.
As is the case with our Latin American trade partners, strong trade ties track closely with strong political and strategic ties. Korea’s leaders have succeeded in many ways to bring their country into a new era of prosperity. By assisting them in these efforts with passage of the KORUS FTA, the United States hopes to cement a key relationship in a part of the world enjoying remarkable economic transformation.
Trade has become a highly-politicized and mischaracterized issue in recent years, but Congress must see the importance of approving these four free trade agreements. Fortunately, the Bush administration and Congressional leaders from both parties from the House and Senate came to an agreement last May designed to ensure all four free trade agreements would be taken up in Congress.
As a result of that bipartisan agreement, these four free trade agreements have the strongest protections for labor rights and environmental standards ever included in a free trade agreement. Our trading partners agreed to modify the agreements we had concluded with them to reflect our bipartisan deal with Congress and the legislatures of Peru and Panama have already approved the modified agreements. Fortunately, Congress is slated to act, beginning with the agreement with Peru, hopefully, this month.
A bipartisan approach to these free trade agreements should be the basis for action when it comes to the renewal of Trade Promotion Authority (TPA), under which the President is empowered to conclude free trade agreements—with frequent consultation with Congress and the myriad US stakeholders—and then bring the agreements back for an up or down vote. Every President since 1974 has had this authority. It has given our trading partners the confidence that the accord they agree to will stand. TPA also has benefited US workers and consumers. US exports to the 14 countries with which we had a free trade agreement in place by 2006 grew 60 percent faster than exports to the rest of world during the same period. If US lawmakers want to increase exports, the United States must open new markets, and free trade agreements concluded with TPA protection is the only way to accomplish this.
In conclusion, the United States has helped forge a global consensus around the economic benefits of open trade and investment. As the pace of globalization and the change that comes with it pick up, the consensus has become more fragile, both domestically and overseas. Just the same, the Bush administration, working with Congress, must move with resolve in signaling to other countries that the United States remains open for business and stands ready to compete, innovate and grow with other trading nations. In the process, we can improve the lives of millions of people.