A positive step against protectionism

Finally, a breakthrough. A bold European commissioner backs the US 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 US, 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 storyline that forms the dreams of members of the National Security Council. In fact, 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 US trade representative, who is working for a similar concession at home. 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 US 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 this week's news on agriculture: Mr Lamy offered to eliminate farm export subsidies. The step may just be one of the zigs in the tedious zig-zag of trade politics. Still, it contains enormous potential for good, both on the diplomatic and the political fronts.

When the Doha talks collapsed so resoundingly last summer at Cancún, the damage went beyond trade. Hostility on the part of developing countries towards Europe, Japan and the US 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.

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

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 overall Europe-US rift is not as large as advertised. (Bob Zoellick and Condoleezza Rice have known each other a long time; sometimes one gets the feeling they are playing "good cop, bad cop".)

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 US step was Congress's post-September 11 passage of a new version of the African Growth and Opportunity Act, allowing African countries to bypass tariffs. The new version contributed to a dramatic increase in exports to the US from Lesotho. A free-trade agreement with Jordan led to 30,000 new trade-related jobs there. Egypt, Tunisia, Yemen, Kuwait, the United Arab Emirates and Qatar: all have worked recently with the US to improve trade relations.

Yet another bit of trade progress, though of a different kind, may come if Saudi Arabia joins the World Trade Organisation. As Brink Lindsey, author of a study on trade and war, points out, pulling Saudi Arabia into the WTO club means that suddenly the Organisation of Petroleum Exporting Countries will find it has a competitor for Saudi affections, itself a change that bodes well for global stability.*

In the same way that freer trade helps, protectionism continues to hurt. The WTO recently issued a preliminary finding that the US was violating international law with its outrageous cotton subsidies. The US is appealing, although reduced cotton subsidies at home would benefit cotton farmers in countries the US wants to see stable: Mali (population 90 per cent Muslim), Chad (51 per cent Muslim) or Burkina Faso (50 per cent 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, Illinois, Pantagraph offered a farmer's description of the move: "Brazil just kicked major US farm butt." To some, freer trade is not a force for peace; it is cause for (trade) war.

Nonetheless, there are signs that US 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.

* The Trade Front: Combating Terrorism with Open Markets, Cato Institute. www.freetrade.org

© Copyright 2004 Financial Times

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