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Jewish World Review May 18, 2004 / 27 Iyar 5764

Amity Shlaes

Amity Shlaes
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Why trade matters in a time of war: Promising steps by U.S. and EU against protectionism | Finally, a breakthrough. A bold European commissioner backs the U.S. on an important policy matter even though he will be slammed as "unilateralist" by leaders of his own country, France. Then another commissioner joins him and the U.S., also turning his back on the status quo types at home. Suddenly it looks as though a joint European-American effort stands a chance of paying off. And suddenly it also appears that the world's nations may march forward together to vanquish a common enemy.

This is the sort of story line that forms the dreams of members of the National Security Council. It is the reality of the past week. The European commissioner who made the move was Pascal Lamy, the trade commissioner. The man joining him was Franz Fischler, his agricultural counterpart.

The proposal came after a sustained push by Robert Zoellick, the U.S. trade representative. The struggle is on the field of trade. And the common enemy is protectionism.

In the media, the trade story runs parallel to the foreign policy story — two lines that never touch. But the two are, of course, related. A review of U.S. trade diplomacy in recent years reminds us that even the smallest trade agreements can mean much at a time of war and terror.

Start with last week's news on agriculture. Lamy offered to eliminate farm export subsidies, a significant share of the subsidies available to European farmers. The step may mean nothing. It may just be one of the zigs in the tedious zigzag of trade politics. Still, the Lamy offer contains enormous potential for good, both on the diplomatic and the political fronts.

When the Doha talks collapsed so resoundingly last summer at Cancun, the damage went beyond trade. Hostility on the part of developing countries toward Europe, Japan and the U.S. seemed to reinforce whatever hostility many were already feeling. There has been, especially, the feeling that it is "the West versus the rest" — the rest often being Muslim.

U.S. farm protectionism is not as extensive as some developing countries imagine. The average U.S. tariff on farm imports is 12 percent, compared with a global average of more than 60 percent. But what protectionism there is as in Europe is significant, and has strengthened the West's reputation as an agriculture hypocrite.

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Western agriculture subsidy reduction is one of the main demands of developing countries. So this new offer represents a significant concession. It also demonstrates that the Europe-U.S. rift is not as large as advertised; it certainly shows that the U.S. is not quite the unilateralist it is made out to be.

Then there is the obvious economic and political potential of subsidy reduction. Farmers in developing nations can sell more. Their economic success generates forms of wealth that can compete with petro-wealth, always a good thing. Overall, the nations become more stable and friendlier.

Another positive U.S. step was Congress' post-Sept. 11, 2001, passage of a new version of the African Growth and Opportunity Act, allowing African countries to bypass tariffs. The AGOA contributed to a dramatic increase in exports to the U.S. from Lesotho, triple in two years. A free-trade agreement with Jordan resulted in 30,000 new trade-related jobs there. Egypt, Tunisia, Yemen, Kuwait, the United Arab Emirates and Qatar all have worked recently with the U.S. to improve trade relations.

Yet another bit of trade progress, though of a different kind, may come if Saudi Arabia joins the World Trade Organization. As Brink Lindsey, author of a study on trade and war, points out, pulling Saudi Arabia into the WTO club means that suddenly the Organization of Petroleum Exporting Countries will find it has a competitor for Saudi affections, itself a change that bodes well for global stability ("The Trade Front: Combating Terrorism with Open Markets," Cato Institute.

In the same way that freer trade helps, protectionism continues to hurt. The WTO recently issued a preliminary finding that the U.S. was violating international law with its outrageous cotton subsidies. The U.S. is appealing, although reduced cotton subsidies at home would benefit cotton farmers in countries the U.S. wants to see stable: Mali (population 90 percent Muslim), Chad (51 percent Muslim) or Burkina Faso (50 percent Muslim).

The reason for the appeal is obvious: The ideal of free trade remains one of the hardest policies to sell domestically in any country. It is especially hard to sell to farmers, who, whether in deepest France or deepest Iowa, tend to perceive the notion as mind-bendingly elitist. When Brazil went to the WTO on cotton, for example, Alan Guebert, of the Bloomington, Ill., Pantagraph offered a farmer's description of the move: "Brazil just kicked major U.S. farm butt." To some, freer trade is not a force for peace; it is cause for (trade) war.

Nonetheless, there are signs that U.S. farmers are increasingly ready to concede ground — more good news.

Freer trade and prosperity cannot do everything. They certainly cannot, all by themselves, stop terrorists. Indeed, trade has to be linked to a push for democracy; otherwise it can merely fund terror. Still, limited as trade diplomacy may be, it has value.

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JWR contributor Amity Shlaes is a columnist for Financial Times . Her latest book is The Greedy Hand: How Taxes Drive Americans Crazy and What to Do About It. Send your comments by clicking here.


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