By ARTURO BOQUIREN
Recently, a number of officials and potential presidential candidates in the United States have expressed reservations on globalization, or the movement towards a freer world market. This can be surprising for some, because the U.S. economy is described as the freest market in the world. The country has a reputation of being the bastion of trade liberalization and the world’s leader in the creation of the world’s free markets through the process initiated by the World Trade Organization. Most often, the proof cited for the US track record of being the freest economy in the world is this: most imports enter the United States either duty-free or are subject to low tariffs.
News reports are saying that one presidential candidate, Senator Hillary Clinton, has voiced concerns on trade liberalization. Yet, if we are to analyze the expression of reservations vis-a-vis the US as well as this politician’s track record, the reservations are mere posturing vis-a-vis increasing public dissatisfaction with globalization and the US economy.
This is because the US has been consistently using trade liberalization as a cover for deepening its dominance on world while doing a double talk. Even if tariffs are low or zero, the US economy has been essentially protectionist. However, its economic protectionism is not done through tariffs but through what economists call as non-tariff trade barriers.
There are many types of non-tariff trade barriers. These include administrative, technical, health, and legal restrictions to trade.
For instance, the US can ban imports on the basis of health, packaging, or technical rules. However, among many economists, the US has the reputation of using voluntary export restraint (VER) instead, which works this way: the U.S. asks countries exporting goods into its territory to voluntary decrease their exports if they do not want to experience economic and non-economic sanctions.
Thus, the word “voluntary” in the VER simply refers to “voluntary” compliance to threats and pressure, otherwise the US will use less subtle force.
Thus, even if tariffs are zero or low for many goods in the US, the situation should not be interpreted as a triumph of the free market but as a triumph of the U.S. use of VER or diplomatic and trade blackmail.
The US nevertheless has a reason to be concerned with her trade relations with China, given a US trade deficit of US$26 billion. But most likely, the problem will be addressed by the US in the usual manner that it had handled its trade deficits in the past: through a combination of rhetoric, double-talk, force, and use of VER. Further, it must be mentioned that a US trade deficit with China does not necessarily imply a weaker US economy if much of the world’s wealth is created in the US anyway.
Another possible way that the U.S. will possibly address her concerns with China is to wrest from it as much concessions as possible. China may be required to share her benefits from trade (but this would be risking US firms to face the same situation in other countries).
As early as 1997, personalities identified with the Federal Reserve Bank of Chicago have expressed that even if trade liberalization create opportunities for many, there can be losers from the trade liberalization and society will only benefit from the process if winners are able to compensate losers.
This is a great departure from the usual description of trade liberalization by conventional economists. Unfortunately, our own country’s membership in the WTO was fundamentally obtained through this description of a win-win situation on the relationship between the Philippines and her trade partners. Nobody is supposed to lose.
It is not difficult to present from a standpoint of theory that the win-win game theory of trade liberalization is a fallacy. However, many conventional economists present trade liberalization as a win-win game and hoodwink a significant number in society: supposedly, everybody wins in the trade liberalization.
In contrast, protectionism or trade strategies that seek to protect local industries from international competition are usually described or ridiculed as development strategies that sees the world interaction as a zero-sum game, or A+B=0 (the gain of A is at the expense of B or vice versa). In other words, winners simply gain at the expense of losers or from the losses of losers.
There is a great need to discuss trade issues, but we can do the discussion in several occasions later. For next week, however, I intend to discuss the U.S. backtrack on climate change. For now, it may be sufficient to say that a better way to analyze trade issues is in terms of both opportunities and risks as well as political economy. Further, it is important to say that although the U.S. is backtracking on her jargon, it is not backtracking on any of her acts. #