Thursday, November 25, 2004

Free Trade Is Bad!

Or at least bilateral free trade agreements.

Continuing our Milken Institute posts, Greg Rushford has a convincing article about Free Trade Agreements: that bilateral ones are bad because they distort trade flows and too easily become political footballs. This makes initutive sense: when trade agreements are bilateral rather than some form of universality as is a WTO agreement, you a) move trade flows toward that country and b) offer another opportunity for "special interests" to intervene in the process -- especially because the U.S. is such a dominant partner so it can push a lot of unpleasant provisos into an agreement with a country.

I had not realized that pre-Bush administration the U.S. only had three bilateral free trade agreements. And that the Bush administration has pushed through agreements with another 12 countries and has negotiations for agreements with another 45. The article argues, and it seems rightly so, that the administration is using these agreements partially as a way of putting pressure on countries involved in the Doha Round at the WTO -- if you don't agree to this broader, multilateral agreement, we'll just sign it with other countries, and leave you out. But it is also clearly a way of emphasizing American power and American interests rather than Western power and Western, liberal, interests. Whatever objections you may have to the WTO, at least that is a slightly less corrupt and slightly more transparent process than these bilateral agreements.

But it would be unfair to the Bush administration to lay it entirely at its feet. The negotiations for many of these agreements were started under Clinton -- and would have continued under a Kerry administration. Perhaps to a lesser degree and with less egregious problems, but they still would have happened. This offers confirmation for Gilpin's claim in Global Political Economy that one possible form of globalization is regionalism rather than true globalization. That is, countries will form smaller coalitions rather than having a truly open international system. From an economists' viewpoint, this is sup-optimal -- free trade good! limited trade bad! But the political dynamics are very appealing; and politicians make policy, not economists. Maybe we'll look back on this moment as having been determinate in pushing the world away from an ideal of all open borders and towards regionalism.


Post a Comment

<< Home