Dems: Get The Message On Trade

Deborah James and Todd Tucker
January 30, 2007



Deborah James and Todd Tucker are, respectively, World Trade Organization program director and research director of Public Citizen’s Global Trade Watch.

In the 2006 U.S. midterm elections, candidates across the country won their elections on the basis of vocal opposition to the NAFTA-WTO model of trade and in favor of fair trade policies that uplift the middle class and safeguard the environment. And Latin America, to name just one region with significant popular opposition to more-of-the-same trade policy, has held over a dozen elections in recent years in which critics of the current trade and globalization model have commanded wide margins in presidential and legislative elections. Indeed, any attempt to push more-of-the-same, failed trade policy is widely seen as political non-starter in nearly every country around the world.

This isn’t to say that no one is trying. The Bush administration recently rejected Democratic efforts to include binding labor and environmental provisions in the core text of the NAFTA-style trade agreements signed with Peru and Colombia. Clinton administration treasury secretary Robert Rubin recently urged Democratic members of Congress to stay the course on trade. (He was passionately rebuked on policy and political grounds, with the freshmen representatives leading the attack.) These stay-the-course messages are no different than what we hear from the Chamber of Commerce or The CATO Institute.

This is why a recent intervention in this vein from the Democrat-aligned Center for American Progress is all the more troubling. In a recent CAP publication, author Daniel K. Tarullo—a Clinton administration official who had previously advised the Mexican government on NAFTA—has tried to make “The Case for Reviving the Doha Trade Round” of the WTO. CAP has produced top notch work on a wide range of domestic economic policies, as well as reports critical of CAFTA and the U.S. trade deficit. But the group seems out of step with the majority of the Democrats' base and progressive thinking worldwide on the WTO, with a 2005 report even calling WTO escalation “critical to our future prosperity and security .”

If the current failed WTO model was actually delivering increased prosperity at home and abroad, there would be little opposition. Yet, in fact, in the era during which the developing countries have adopted the policy package the Doha Round would intensify, per capita growth rates have declined—except in the countries that have remained largely outside the system like China and Vietnam. Plus, economists agree that current trade policies have played a major role in contributing to retrograde income redistribution and the 30-year stagnation of U.S. wages. It is highly doubtful that an escalation of the same pro-corporate managed trade policies will remedy the plight of the eroding U.S. middle class. If improvement in U.S. living standards is the primary goal, we would be better served pursuing many of the thoughtful domestic policy proposals proposed by CAP and others, instead of proposing more race-to-the-bottom, failed international trade policy.

Moreover, as studies from the pro-WTO World Bank have shown, WTO escalation would actively harm development in poor countries. Analysis of the Bank’s numbers from Tufts University has shown that projections of developing-country gains are highly unequal and shrinking over time, and even a net negative for the majority of poor countries. These meager and even negative growth projections of the likely Doha Round outcome come on the heels of a slowdown in poor-country growth rates during the NAFTA-WTO era that is unprecedented in modern history, proving that recent increases in trade have not led to more growth.

Implementation of WTO-style policies has already severely harmed rural economies around the world. After NAFTA and the WTO, 1.3 million Mexican farmers were displaced, many of whom have risked the dangerous U.S. border crossing in desperate search for work. India has seen tens of thousands of farmers commit suicide annually because WTO-style trade policies have driven them to bankruptcy. As U.S. foreign policy-makers know, such economic and social dislocations—abhorrent by themselves—also have a way of becoming immigration and security issues.

Furthermore, a widely-cited Carnegie Endowment report estimated that subsistence farmers would see tiny gains or net losses if the WTO were escalated in the way envisioned under the Doha Round, and that the temporary protections used by developing countries to ensure that imports do not rapidly overwhelm rural populations would be prohibited. Promoting development in U.S. trade policy is a laudable goal, but the facts on the ground of the negotiations have led some developing-country negotiators to call Doha the “Everything But Development” round.

But Tarullo does not review actual or projected impacts of the negotiations. Instead, he is calling for India and other poor countries to “improve their market access offers” in agriculture so as to garner U.S. support, and for the U.S. to “express leadership” by jump-starting the talks. Carnegie’s Sandra Polaski recently explained why such a position is bad for both development and U.S. policy:

Current U.S. demands for maximum access to developing country agricultural markets, even at the risk of displacing desperately poor farmers, are not only unseemly from a foreign policy perspective but they are also likely to backfire in the real world, as depressed incomes for the large portion of households dependent on farming force them to buy less, not more U.S. goods.

And as we know from other foreign policy misadventures, real leadership doesn’t mean imposing the escalation of a failed policy that has hurt people in the U.S. and around the globe.

There certainly is a strong need for the United States to become a fair player in the global economy. But the new Democratic Congress is far more likely to help achieve that goal—as well as the goal of its own re-election—if it calls on the administration to not escalate WTO talks that are likely to lead to worsening income distribution at home and economic and social instability abroad. And that means opening itself up to the majority-backed position that trade needs to be harnessed for all, and not just ridden for the benefit of the few.