U.S. Trade Issues: A Reference Handbook 1598841998, 9781598841992, 9781598842005, 1598842005

Table of contents :
Title......Page 6
Copyright......Page 7
Contents......Page 10
List of Tables......Page 14
Preface......Page 16
1 Background and History......Page 20
Free Trade......Page 21
Protectionism and Fair Trade......Page 23
Trade Surpluses and Deficits......Page 25
Trade Patterns......Page 27
Trade Politics......Page 28
Historical Overview......Page 30
American System of High Tariffs......Page 31
Promoting Recovery and Reciprocal Trade......Page 32
Multilateral Trade Liberalization......Page 34
Kennedy Round......Page 36
Fast Track and the Tokyo Round......Page 37
Reagan's Free-Trade Initiatives......Page 38
North American Free Trade Agreement......Page 40
Uruguay Round—WTO......Page 43
The Battle of Seattle......Page 45
Admitting China to the WTO......Page 46
Regional and Bilateral Free Trade......Page 47
Summary......Page 50
References......Page 51
Background to the Debate......Page 56
Future Trade Priorities......Page 58
Free Trade Fault Line......Page 59
Future Trade Negotiations......Page 64
Pending Agreements......Page 67
U.S.–Colombia FTA......Page 68
U.S.–South Korea FTA......Page 69
WTO Negotiations......Page 71
Bilateral and Regional Trade Negotiations......Page 73
Debating the Gains and Losses from Trade......Page 75
Responding to China......Page 77
Cuban Trade......Page 81
Assisting Trade Dislocated Workers......Page 82
Trade and Human Rights......Page 83
Trade and Environment......Page 86
Trade and Sovereignty......Page 89
Trade and Safety......Page 90
Enforcing U.S. Trade Laws......Page 93
Trade and Economic Recovery......Page 96
Conclusion......Page 97
References......Page 98
Contemporary Trade Patterns......Page 110
European Union (EU)......Page 116
China......Page 118
Canada......Page 119
Mexico......Page 120
Russia......Page 121
Brazil......Page 122
Australia......Page 123
India......Page 124
South Africa......Page 125
World Trade Organization (WTO)......Page 126
Tokyo Round......Page 127
Uruguay Round—WTO......Page 128
WTO Leadership Transition......Page 131
Cairns Group......Page 132
Group of Thirty-Three......Page 133
WTO Dispute Settlement......Page 134
Alternative Trade Strategies—Bilateralism and Regionalism......Page 135
European Union (EU)......Page 136
Japan......Page 138
China......Page 139
Brazil......Page 140
Effects of RTAs......Page 141
References......Page 142
4 Chronology......Page 148
Max Baucus......Page 174
Kevin Brady......Page 175
Sherrod C. Brown......Page 176
Dave Camp......Page 177
Lou Dobbs......Page 178
Timothy Geithner......Page 179
Charles (Chuck) Grassley......Page 180
Alexander Hamilton......Page 181
Cordell Hull......Page 182
Ron Kirk......Page 183
Pascal Lamy......Page 184
Sander (Sandy) Levin......Page 185
Friedrich List......Page 186
Gary Locke......Page 188
William McKinley......Page 189
Justin Smith Morrill......Page 190
Henry (Hank) Paulson......Page 191
Nancy Pelosi......Page 192
Raul Prebisch......Page 194
Charles Rangel......Page 195
David Ricardo......Page 196
Susan Schwab......Page 197
Adam Smith......Page 198
Reed Smoot......Page 199
Robert S. Strauss......Page 200
Lori Wallach......Page 202
Sir Eric Wyndham White......Page 203
Robert Zoellick......Page 204
6 Data and Documents......Page 206
International Comparisons......Page 208
U.S. Trade Indicators......Page 219
National Labor Committee Testimony on "Sweatshop" Practices......Page 228
The U.S.–China Trade and Economic Relationship......Page 231
Conclusions......Page 232
Erosion of the Bipartisan Consensus Supporting Open Trade......Page 237
Making the Case for Trade......Page 238
Reducing Job Anxiety......Page 240
We Must Learn from History......Page 241
The Trade Agenda......Page 243
Procedures: "Comprehensive Rounds" and Fast-Track......Page 248
U.S. House of Representatives Joint Letter to President Obama......Page 249
President Obama's Trade Agenda......Page 254
President Obama's Policy Priorities......Page 256
References......Page 260
7 Directory of Organizations......Page 262
Books......Page 298
U.S. Government......Page 314
Other Governments......Page 316
Intergovernmental Agencies......Page 317
Periodicals, Journals, and Newsletters......Page 319
Films and Video Recordings......Page 322
Databases and Internet Resources......Page 323
Glossary......Page 346
B......Page 352
D......Page 353
G......Page 354
L......Page 355
P......Page 356
T......Page 357
U......Page 358
Z......Page 359
About the Author......Page 360

Citation preview

U.S. TRADE ISSUES

Selected Titles in ABC-CLIO’s CONTEMPORARY

WORLD ISSUES Series

American Families in Crisis, Jeffrey S. Turner Animal Rights, Clifford J. Sherry Campaign and Election Reform, Glenn H. Utter and Ruth Ann Strickland Climate Change, David L. Downie, Kate Brash, and Catherine Vaughan Corporate Crime, Richard D. Hartley DNA Technology, David E. Newton Domestic Violence, Margi Laird McCue Education in Crisis, Judith A. Gouwens Emergency Management, Jeffrey B. Bumgarner Energy Use Worldwide, Jaina L. Moan and Zachary A. Smith Environmental Justice, David E. Newton Food Safety, Nina E. Redman Gangs, Karen L. Kinnear Gay and Lesbian Rights, David E. Newton Globalization, Justin Ervin and Zachary A. Smith Lobbying in America, Ronald J. Hrebenar and Bryson B. Morgan Mainline Christians and U.S. Public Policy, Glenn H. Utter Modern Sports Ethics, Angela Lumpkin Nuclear Weapons and Nonproliferation, Sarah J. Diehl and James Clay Moltz Obesity, Judith Stern and Alexandra Kazaks Policing in America, Leonard A. Steverson Renewable and Alternative Energy Resources, Zachary A. Smith and Katrina D. Taylor Rich and Poor in America, Geoffrey Gilbert Sentencing, Dean John Champion U.S. National Security, Cynthia A. Watson U.S. Social Security, Steven G. Livingston Waste Management, Jacqueline Vaughn For a complete list of titles in this series, please visit www.abc-clio.com.

Books in the Contemporary World Issues series address vital issues in today’s society, such as genetic engineering, pollution, and biodiversity. Written by professional writers, scholars, and nonacademic experts, these books are authoritative, clearly written, up-to-date, and objective. They provide a good starting point for research by high school and college students, scholars, and general readers as well as by legislators, businesspeople, activists, and others. Each book, carefully organized and easy to use, contains an overview of the subject, a detailed chronology, biographical sketches, facts and data and/or documents and other primarysource material, a directory of organizations and agencies, annotated lists of print and nonprint resources, and an index. Readers of books in the Contemporary World Issues series will find the information they need to have a better understanding of the social, political, environmental, and economic issues facing the world today.

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U.S. TRADE ISSUES A Reference Handbook

Alfred E. Eckes, Jr.

CONTEMPORARY

WORLD ISSUES

Santa Barbara, California Denver, Colorado Oxford, England

Copyright 2009 by ABC-CLIO, LLC All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, except for the inclusion of brief quotations in a review, without prior permission in writing from the publisher. Library of Congress Cataloging-in-Publication Data Eckes, Alfred E., 1942– U.S. trade issues : a reference handbook / Alfred E. Eckes, Jr. p. cm. — (Contemporary world issues) Includes bibliographical references and index. ISBN 978-1-59884-199-2 (hard copy : alk. paper) — ISBN 978-1-59884-200-5 (ebook) 1. United States—Commercial policy—Handbooks, manuals, etc. 2. United States— Commerce—History—Handbooks, manuals, etc. I. Title. HF1455.E35 2009 382'.30973—dc22 2009020942 13

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This book is also available on the World Wide Web as an eBook. Visit www.abc-clio.com for details. ABC-CLIO, LLC 130 Cremona Drive, P.O. Box 1911 Santa Barbara, California 93116-1911 This book is printed on acid-free paper Manufactured in the United States of America

To my wife, Sylvia, Who introduced me to some of the most beautiful and soothing classical music— especially the work of Norwegian composer Edvard Grieg— as she practiced for forthcoming concerts and I worked on this trade-policy book.

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Contents

List of Tables, xiii Preface, xv 1

Background and History, 1 Factors Shaping the Trade Debate, 2 Free Trade, 2 Protectionism and Fair Trade, 4 Trade Surpluses and Deficits, 6 Trade Patterns, 8 Trade Politics, 9 Historical Overview, 11 American System of High Tariffs, 12 Promoting Recovery and Reciprocal Trade, 13 Multilateral Trade Liberalization, 15 Kennedy Round, 17 Fast Track and the Tokyo Round, 18 Reagan’s Free-Trade Initiatives, 19 North American Free Trade Agreement, 21 Uruguay Round—WTO, 24 The Battle of Seattle, 26 Admitting China to the WTO, 27 Regional and Bilateral Free Trade, 28 Summary, 31 References, 32

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Problems, Controversies, and Solutions, 37 Background to the Debate, 37 Future Trade Priorities, 39 Free Trade Fault Line, 40 Future Trade Negotiations, 45

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Contents

Pending Agreements, 48 U.S.–Colombia FTA, 49 U.S.–Panama FTA, 50 U.S.–South Korea FTA, 50 WTO Negotiations, 52 Bilateral and Regional Trade Negotiations, 54 Debating the Gains and Losses from Trade, 56 Responding to China, 58 Cuban Trade, 62 Assisting Trade Dislocated Workers, 63 Trade and Human Rights, 64 Trade and Environment, 67 Trade and Sovereignty, 70 Trade and Safety, 71 Enforcing U.S. Trade Laws, 74 Trade and Economic Recovery, 77 Conclusion, 78 References, 79 3

Worldwide Perspective, 91 Contemporary Trade Patterns, 91 Leading Trading Partners and Strategies, 97 European Union (EU), 97 China, 99 Japan, 100 Canada, 100 Mexico, 101 Russia, 102 Brazil, 103 Australia, 104 India, 105 South Africa, 106 World Trade Organization (WTO), 107 Tokyo Round, 108 Uruguay Round—WTO, 109 WTO Leadership Transition, 112 Cairns Group, 113 Group of Twenty, 114 Group of Thirty-Three, 114 WTO Dispute Settlement, 115 Alternative Trade Strategies—Bilateralism and Regionalism, 116

Contents

European Union (EU), 117 Japan, 119 Canada, 120 China, 120 India, 121 Brazil, 121 Effects of RTAs, 122 Conclusion, 123 References, 123 4

Chronology, 129

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Biographical Sketches, 155 Max Baucus, 155 Kevin Brady, 156 Sherrod C. Brown, 157 Dave Camp, 158 Lou Dobbs, 159 Timothy Geithner, 160 Charles (Chuck) Grassley, 161 Alexander Hamilton, 162 Cordell Hull, 163 Ron Kirk, 164 Pascal Lamy, 165 Sander (Sandy) Levin, 166 Friedrich List, 167 Gary Locke, 169 William McKinley, 170 Justin Smith Morrill, 171 Henry (Hank) Paulson, 172 Nancy Pelosi, 173 Raul Prebisch, 175 Charles Rangel, 176 David Ricardo, 177 Susan Schwab, 178 Adam Smith, 179 Reed Smoot, 180 Robert S. Strauss, 181 Lori Wallach, 183 Sir Eric Wyndham White, 184 Robert Zoellick, 185

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Contents

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Data and Documents, 187 International Comparisons, 189 U.S. Trade Indicators, 200 National Labor Committee Testimony on “Sweatshop” Practices, 209 U.S.– China Economic and Security Review Commission Report, 212 The U.S.–China Trade and Economic Relationship, 212 Conclusions, 213 Ambassador Carla Hills on the Future of U.S. Trade Policy, 218 Erosion of the Bipartisan Consensus Supporting Open Trade, 218 Making the Case for Trade, 219 Reducing Job Anxiety, 221 We Must Learn from History, 222 Ambassador Charlene Barshefsky on the Future of U.S. Trade Policy, 224 The Trade Agenda, 224 Procedures: “Comprehensive Rounds” and Fast-Track, 229 U.S. House of Representatives Joint Letter to President Obama, 230 President Obama’s Trade Agenda, 235 President Obama’s Policy Priorities, 237 Conclusion, 241 References, 241

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Directory of Organizations, 243

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Resources, 279 Books, 279 Government Documents, 295 U.S. Government, 295 Other Governments, 297 Intergovernmental Agencies, 298 Periodicals, Journals, and Newsletters, 300 Films and Video Recordings, 303 Book, 303 Films and Video Recordings, 303 Databases and Internet Resources, 304

Glossary, 327 Index, 333 About the Author, 341

List of Tables

6.1 6.2 6.3 6.4 6.5 6.6 6.7 6.8 6.9 6.10 6.11 6.12 6.13 6.14 6.15 6.16 6.17 6.18 6.19

The 20 Most Populous Countries Compared, 190 Shares of World Exports of Merchandise (%), 191 Shares of World Imports of Merchandise (%), 192 Shares of World Foreign Direct Investment Outward FDI Stock (in %), 193 Shares of World Foreign Direct Investment Inward FDI Stock, 193 Reserves of Foreign Exchange and Gold, 195 Current Account Deficits and Surpluses (in U.S. Dollars), 196 Country Comparisons: External Debt, 197 World Oil Consumption (Barrels per Day), 198 World Oil Proved Reserves, 198 World Oil Production (Barrels per Day), 199 Hourly Compensation Costs for Production Workers: In U.S. Dollars, 199 U.S. International Trade in Goods and Services (in Billions of U.S. Dollars), 200 U.S. Trade in Services by Major Category (in Billions of U.S. Dollars), 201 Top 15 Trading Partners of U.S., 2008 in Billions of U.S. Dollars (Goods), 202 Top 10 Countries with Which the U.S. Had a Trade Surplus in Goods, 2008, 203 Top 10 Countries with Which the U.S. Had a Trade Deficit in Goods, 2008, 203 U.S. Crude Oil and Petroleum Products Net Imports (Thousands of Barrels per Day), 204 U.S. Crude Oil and Petroleum Products Imports by Leading Suppliers (Thousands of Barrels per Day), 204

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List of Tables

6.20

Petroleum as a Share of Merchandise Trade Deficit (in Millions of U.S. Dollars), 205 U.S. Exports and Imports on a Principal End-Use Basis (in Billions of U.S. Dollars) (Not Seasonally Adjusted), 206 State Merchandise Exports to the World, 2008 (in Millions of U.S. Dollars), 207 Weekly Earnings of Production Workers, 1945–2008, 208 Employment and Earnings in U.S., 209

6.21 6.22 6.23 6.24

Preface

A

s this book goes to press, the global economy is in the worst slump since the Great Depression of the 1930s. The Asian Development Bank says the world may have lost over $50 trillion in financial assets during the last year, equivalent to one year’s worth of world economic output (Asian 2009). The World Bank predicts that in 2009 global gross domestic product will decline for the first time since World War II. World trade is expected to record its greatest decline in 80 years (World Bank 2009). The collapse of world trade has severely impacted nations everywhere. Developing countries, like China and India, which export manufactures and services to North America and Western Europe, have lost millions of jobs. In the United States and other high-income countries, the economic and financial crisis has had profound repercussions. Joblessness is mounting toward doubledigit levels, and the discontented are demanding greater government regulation of the domestic and international economies. There is also growing pressure for governments to protect domestic jobs with trade barriers, subsidies, and other procurement requirements. In the United States the economic crisis is giving new life to an ongoing debate over trade policy. Critics of the current system claim U.S. trade policy has given priority to the interests of multinational corporations, and slighted the concerns of families, workers, and ordinary citizens. They advocate a new trade-policy model that gives greater weight to labor, environmental, and safety issues, and makes the country less dependent on foreign goods and foreign money to purchase those imports. Battling against this tide are proponents of the present rules-based world trading system. They seek to rally supporters of free trade and to sustain the market-opening efforts of the post-World War II period.

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U.S. Trade Issues seeks to introduce a wide range of readers in high schools, colleges, and libraries to the key elements of the ongoing trade-policy debate. Government officials may find it a helpful one-volume synthesis. As a reference handbook, readers will learn how to access the latest data and information about policy controversies from online sources—government and international agencies, lobbying and advocacy groups, and scholarly resources. Twenty years ago, when the author served on the U.S. International Trade Commission, the trade debate seemed relatively uncomplicated. There were free traders, and protectionists, and others somewhere in between. Today, as a result of the globalization of production and communications, there are many more shades of opinion on trade issues. In preparing this text, the author has made a deliberate effort to expose readers to as many sides of the contemporary debates as possible. Attention is given to the views of free traders and protectionists, and to Republicans and Democrats. But we also seek to give attention to business, consumers, environmentalists, labor, and others concerned with health and safety issues. The volume has eight separate but interrelated chapters. Chapter 1 offers readers an introduction to the theories that underlie trade policy and a historical overview of U.S. policy debates from the 18th century to the present. It emphasizes how contemporary trade conflicts, involving China, the World Trade Organization (WTO), and the North American Free Trade Agreement (NAFTA) have deep roots in American and international history. From the 18th century origins of the U.S. government, policymakers in the executive branch and Congress, and other interested parties, have competed to shape U.S. trade policy. At times, those seeking to control access to the American market (“protectionists”) have prevailed, while in recent decades those eager to open the American market and gain access to foreign markets (“free traders”) have carried the day. Chapter 2 examines the broad-ranging public debate over U.S. trade policy. It focuses on the leading controversies— imbalances with China and East Asia, the future of multilateral negotiations in the WTO, and disputes over bilateral and regional free-trade agreements. It also considers emerging trade-related issues, involving health and safety, labor standards, environmental protection, and efforts to make trade policy more beneficial to ordinary citizens. The chapter also considers the leading interest

Preface

xvii

groups seeking to influence the trade-policy process, among them lobbyists for multinational corporations, domestic businesses, organized labor, and consumer and environmental groups. In Chapter 3, we provide a worldwide perspective on the trade policy debate, examining trade patterns among major nations and regions, and the strategies of key governments. The multilateral WTO trading system—its accomplishments and shortcomings— also receives attention, as does the recent trend to negotiate bilateral and regional trading agreements. The next five chapters provide important supplementary information. In Chapter 4, readers can find a concise chronology of significant events in trade history. Chapter 5 provides short biographical sketches of some of the most important individuals in the trade-policy debate. They include key decision makers in the executive branch and Congress, and with international institutions. Chapter 6 offers an introduction to selected trade-related data obtained from domestic and international sources. It also provides several documents, selected to illustrate the different points of view in the ongoing debate, as well as the perspective of the incumbent Obama administration. In Chapter 7, we present a directory of government and private organizations with an interest in U.S. trade policy. Included are some of the most important lobbying groups, as well as government agencies in the United States, and selected foreign international organizations. Readers eager to follow the latest developments have only to access the Web sites of these organizations. Finally, Chapter 8 provides various print and nonprint resources, including visual materials. This listing includes lobbying groups and governmental organizations (including foreign governments and international organizations) that provide information and perspectives on trade-policy issues. This handbook also contains a glossary of key trade terms intended to introduce readers to some of the technical terminology of trade, tariffs, and negotiations.

References Asian Development Bank. 2009, March 9. “Global Financial Market Losses Reach $50 Trillion, Says Study.” Accessed March 2009 at http://www.adb. org/Media/Articles/2009/12818-global-financial-crisis/default.asp.

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Preface

World Bank. 2009, March 8. Swimming Against the Tide: How Developing Countries Are Coping with the Global Crisis, 1. Accessed March 2009 at http://siteresources.worldbank.org/NEWS/Resources/ swimmingagainstthetide-march2009.pdf.

1 Background and History

C

ontemporary trade-policy controversies, involving China, the North American Free Trade Agreement (NAFTA), and the World Trade Organization (WTO), have deep roots in American and international history. Since the first days of the American Republic, the legislative and executive branches of the U.S. government have struggled to control trade policy and the trade-policy process. At times, these conflicts reflected divergent sectional and partisan, economic interests. In the 19th century, for example, southern Democrats favored low tariffs on imports so that foreign markets would remain open for its agricultural exports. But northern Republicans wanted high tariffs on imports to protect incipient domestic manufacturing from European competition. In more recent decades, the struggles to shape U.S. trade policy have frequently become more complex—involving more economic sectors and a wider variety of interest groups. Companies actively involved in international business have sought to open world markets and lower U.S. trade restrictions. But firms threatened by imports, such as textile producers and labor unions, have attempted to limit access to the American market. Pressure for U.S. import restrictions tends to rise sharply during world economic recessions when other governments often subsidize exports in efforts to prop up employment. In recent years, consumer and environmental interests joined the debate, calling attention to environmental, labor, and safety aspects of trade policy. On many occasions in the past, ideals and national security interests have also impacted trade policy. Government officials and the public attempted to use trade levers to achieve noneconomic objectives. They sought to assist Cold War

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Background and History

allies, and to promote human rights and opportunities for disadvantaged peoples. This chapter revisits some of the most significant trade disputes in more than two centuries of government, including American efforts to shape the international trading system for the benefit of its national security and commercial interests. It begins by introducing readers to factors that shape American trade debates. These include free trade and protectionism, trade deficits and currency rates, trade patterns with other countries, and politics. The last factor involves the complex interplay of interest groups, political parties, public opinion, and relations between Congress and the executive branch. Finally, the chapter offers a chronological overview of major developments. It considers the rise and decline of the American system of protection, reciprocal trade, the multilateral trading system, and the new emphasis on using bilateral and regional free-trade initiatives to structure the global economy.

Factors Shaping the Trade Debate Free Trade A good place to begin is with the economist’s case for unrestricted, or free, trade. To an economist, free trade means the international exchange of goods without barriers like tariffs and quotas. The term originated as a reaction to 18th-century mercantilism. European leaders of that era sought to use monopolies, subsidies, and government regulations to control trade for the purpose of enhancing national wealth and power. But in 1776, Scottish philosopher Adam Smith challenged the case for mercantilism. In The Wealth of Nations, he argued for removing barriers to expand trade. Smith’s theory of absolute advantage involved an international division of labor. Nations specialized in producing different products, improved their productivity through larger scale operations, and exchanged their surpluses. In 1817, David Ricardo, an English stockbroker, expanded on this theory to show how a country could benefit from imports. In his theory of comparative advantage, Ricardo explained why nations should specialize in items in which they have cost advantages, thus enhancing global wealth and consumer gains. Ricardo presented his important insights with a simple static model—one

Factors Shaping the Trade Debate

3

with only two countries and two products. Using arithmetic, he easily explained how if Great Britain specialized in the production of cloth and Portugal in wine, the two countries could engage in mutually beneficial exchange. Total production would be greater than if each country sought to produce both products. The case for free trade holds up even when one country is more efficient in the production of both products. It also applies when more countries and products are added to the model. Free traders such as the late Nobel laureate Milton Friedman have insisted that free trade is advantageous even if practiced unilaterally (Friedman 1962, 73). Consumers gain, and enhance their own prosperity, when they spend their earnings as they like (Boudreaux 2007). Critics of Ricardo’s free-trade model note that the economic case rests on certain unrealistic assumptions. Among them is the assumption that only goods cross national borders, while capital and people do not. In the global economy of the 21st century, money moves instantaneously, at the click of a computer key. With jet travel, corporations move work and professionals around the world where they are needed. Even low-skilled workers, such as agricultural workers and maids, go abroad in search of jobs. Often they remit substantial portions of their earnings to family members at home. It is arguable that if factors of production (labor and capital) move internationally, countries that have the greatest absolute advantage will obtain the benefits and others will lose (Roberts 2003). Ricardo’s economic model also assumes that within countries the factors of production shift easily and swiftly from one use to another. Thus, the wine and textile workers of Great Britain and Portugal moved from one line of production to another as each country specialized in exporting products in which it had a comparative advantage. In practice, workers are sometimes reluctant, or unable, to leave home to take advantage of economic opportunities. Basic free trade models have several other shortcomings. In the models, governments do not twist comparative advantages with subsidies, currency manipulation, or other interventions. They assume no chronic imbalances, resulting from one country buying more from another country than it sells for an extended period of time. These assumptions differ from actual circumstances of trade where governments routinely aid politically powerful constituencies. In the United States and Western Europe, for

4

Background and History

example, many farmers receive substantial subsidies. This gives rich-country farmers a significant advantage when competing for export sales with farmers from poorer countries. Also, some governments intervene in currency markets to manipulate exchange rates (e.g., China and Japan reportedly hold down the value of their currencies to promote exports). And, large multinational corporations move money, production, and jobs around the world to take advantage of cheaper production costs. In recent years, a number of prominent economists have sought to update the free-trade argument, and to address some of the shortcomings. Ralph Gomory and William Baumol take into account major changes in the world economy—particularly the rapidly evolving world of technology and costly, large-scale manufacturing. They note that comparative advantages can be acquired, and that beneficial outcomes for one nation can be harmful for trading partners. Thus, while Smith and Ricardo assumed positive outcomes from trade, Gomory and Baumol conclude that there are inherent conflicts. One country’s gain may not be advantageous to another (Gomory and Baumol 2000). Nobel-prize winning economist Paul Samuelson has revisited the subject and concluded that free trade is not always a win-win situation (Samuelson 2004). Paul Krugman, another Nobel laureate columnist for the New York Times, has expressed doubts about the distribution of the gains from trade between high-income and third-world countries with extraordinarily low wage rates. He asserts that the trade losers probably greatly outnumber well-educated workers who gain from expanding trade with developing economies (Krugman 2007).

Protectionism and Fair Trade Those who criticize free trade are often described in the media as protectionists. In 19th-century America, when protectionism was a badge of honor, protectionists favored high tariffs to shelter emerging domestic industries from well-established foreign competitors. In contemporary times, officials in developing countries often use similar arguments to justify protecting infant industries from big transnational corporations. In high-income countries, such as the United States, import-sensitive industries—such as textiles and apparel—and labor unions often voice protectionist arguments. They seek to limit imports, and thus protect domestic producers and jobs.

Factors Shaping the Trade Debate

5

Many contemporary critics of NAFTA, the WTO, and freetrade agreements prefer to rally behind the fair-trade banner. Proponents of fair trade favor a more equitable trade policy, sensitive to environmental, health, labor, and consumer concerns. Many labor leaders and activists associate fair trade with worker rights and the willingness of employers to pay workers a fair wage in a local context. So long as countries manipulate currencies and allow their workers to labor long hours in unsafe and unsanitary conditions, they say free trade is a myth perpetrated by the rich and powerful (Lighthizer 2007; Mazur 2000). Some internationaltrade lawyers use this fair-trade terminology differently. They argue that fair trade is trade that conforms to internationally agreed rules administered by the WTO. Among academic economists, free trade has wide support. However, economists who focus on economic development issues sometimes dissent. They question the relevance of orthodox free-trade theory for developing countries. Among the first was Friederich List, a German economist who migrated to the United States in the 1820s and helped inspire the American system of high-tariff protection. List argued that Great Britain, the leading economic power of that era, used infant industry protections to develop export competitive industry. Then it preached the virtues of free trade to late-comer nations. In pushing free trade, Great Britain effectively kicked “away the ladder” to deprive potential competitors of the means to develop manufacturing industries. Gunnar Myrdal, the Swedish economist who won the Nobel prize for economics in 1974, was also critical of traditional freetrade theory. He offered a dynamic theory of comparative advantage that assigned import restrictions an important place in development (Ho 2008). Cambridge University economist Ha-joon Chang, a South Korean, makes a similar point. He claims that all of the world’s now-developed countries—in Western Europe, North America, Japan, and Australia—went through a protectionist phase when they used tariffs and quotas to shelter their emerging industries from foreign competition (Chang 2002, 4 – 5, 65). However, enthusiastic free-traders like Anne Krueger, a former deputy managing director of the International Monetary Fund, respond that no country has sustained high rates of economic growth without opening its economy to international trade (Krueger 2003). She insists that rapid growth is associated with free trade and open economies. In short, supporters and critics of orthodox trade theory offer quite different interpretations

6

Background and History

of the rise of Asia, and China, and of the significance of free trade.

Trade Surpluses and Deficits To better understand the current debate over the effectiveness of U.S. trade policy, one needs some basic information about the way governments account for trade—that is, surpluses and deficits. Unless governments manage trade, as the Nazis and Soviets tried to do, imbalances will develop in the marketplace between what a country buys (imports) and sells (exports). If a country exports more goods than it imports, it experiences a merchandise trade surplus. However, if it imports more goods than it exports, the country will have a merchandise trade deficit. Since 1994, the United States has had a chronic, cumulative trade deficit with the world—amounting to $6.6 trillion dollars. In 2008, the United States had a deficit with each of its top 10 trading partners. The deficit with China alone was $266.3 billion, or 32 percent of the trade-in-goods deficit (U.S. Bureau of the Census 2009). China also runs a large merchandise trade surplus with the European Union. By the end of 2008, it had $2 trillion in foreign exchange reserves, and owned $652 billion in U.S. Treasury debt (Landler 2008). A broader measure of a nation’s international competitiveness is the balance on current account. It considers not only merchandise trade but also trade in services (such as legal and professional services, shipping, tourism, and finance), unilateral transfers (such as the remittances of foreign workers and military expenditures), and earnings on overseas investments. Since 1982, the United States has experienced a cumulative current-account deficit of $7.4 trillion, of which nearly $5 trillion occurred in the last eight years (McMillion 2009). Do these trade deficits matter? On this point economists differ. Some see deficits as a sign of good times. They bring lower prices for consumers and help business finance new investments (Griswold 1999). Other economists see chronic deficits as a sign of weakness. The trade deficits must be financed with borrowing, and this imposes a burden on later generations. For an enlightening discussion of these issues, see the report of the U.S. Trade Deficit Review Commission. At the end of 2007, the net international investment position of the United States had risen to a −$2.4 trillion, and amounted

Factors Shaping the Trade Debate

7

to 17.7 percent of gross domestic product (Nguyen 2008). Most economists agree that a persistent current-account deficit of present magnitude is unsustainable over the long term. It becomes increasingly difficult to service as it grows. Smaller countries with persistent deficits, such as Argentina and Thailand, have experienced financial crises, and sought financial assistance from the International Monetary Fund. As a condition for aid, they have been obliged to accept tough austerity plans that encroached on domestic sovereignty. So far, the United States has escaped such international discipline and oversight. Because the U.S. dollar is the most widely used national currency, America’s creditors have generally wanted to hold dollars, which governments in the Middle East, China, and Japan then reinvest back into U.S. government securities. In late 2008, the largest holders of U.S. Treasury securities were China ($681.9 billion), Japan ($577.1 billion), the United Kingdom ($360 billion), Caribbean banking centers ($220.8 billion), and oilexporting nations ($198 billion) (U.S. Treasury 2009). In effect, they have loaned money to the United States, so that American consumers could continue to buy their exports of oil and manufactured goods. But in 2007, some of America’s creditors began to diversify their foreign exchange holdings away from the dollar. The dollar’s share of total foreign currency reserves slipped from 73 percent in 2001 to 64 percent in 2007. The euro gained share from 18 to 25 percent (Goodman 2008). In such circumstances, it is not surprising that the U.S. dollar fell sharply in value against the euro and other major currencies. This depreciation of the dollar increased the price of U.S. imports (especially oil that is sold in dollars) but made U.S. exports more competitive. Concerned about maintaining confidence in the dollar as well as restraining inflationary forces, the Federal Reserve pushed interest rates upward in early 2007. But dire economic circumstances— unstable financial markets and a global recession—soon forced monetary authorities to shift policy priorities. A banking liquidity crisis, resulting from bad loans to poorly-qualified borrowers, destabilized the world financial system and depressed trade flows. This, coupled with a slowdown in the U.S. economy, prompted Washington to take a variety of emergency measures. Officials reduced interest rates, sent rebate checks to taxpayers, bailed out banks and auto companies, and initiated job-generating public works programs. Currencies gyrated as the crisis spread globally.

8

Background and History

The dollar recovered in late 2008 as world investors sought safety in U.S. Treasury bonds, and then fell again as the Federal Reserve sliced interest rates to bargain-basement levels.

Trade Patterns In the 21st century, the United States is one of the largest stakeholders in the global economy. Despite the unification of Europe, the emergence of several large developing economies, and the global recession, it remains one of the world’s largest exporters of manufactures, agricultural products, and services, as well as a major source of investment capital. According to the WTO, the United States is both the world’s second leading exporter and importer of commercial services. With respect to merchandise, it is the world’s leading importer and the third leading exporter (behind the European Union and China). But, trade in goods and services amounts to only 27.2 percent of gross domestic product, considerably less trade dependence than most high-income countries. For Germany, the comparable figure is 83.3 percent; Canada, 71.4 percent; the United Kingdom, 57.6 percent; and Japan, 31.5 percent (WTO 2008). Nonetheless, the United States is highly dependent on imports of petroleum, and other raw materials, as well as consumer goods. See data in Chapter 6. For these reasons, it is not surprising that the U.S. government has for more than 70 years taken the lead in promoting trade liberalization agreements that open foreign markets for American products and services, and assure stable sources of supply for key raw materials. As a result, the United States has an average tariff of 3.5 percent ad valorem (as a percentage of value) on all dutiable imports, compared to 5.2 percent for Germany and the United Kingdom, and 5.1 percent for Japan. Developing countries typically have much higher rates: Brazil, 12.2 percent; China, 9.9 percent; and India 14.5 percent (WTO 2008). Interestingly, America’s first experience with international trade in the 18th century was like many poor, developing countries today. The United States exported agricultural products and raw materials—particularly of cotton, tobacco, and naval stores— and imported manufactures. The United States also took a relaxed approach to technology transfer and patent issues, as China, Vietnam, and other countries are accused of doing in recent times. Some of the founding generation—including John Adams and Thomas Jefferson— encouraged industrial piracy, and helped steal

Factors Shaping the Trade Debate

9

designs for advanced manufacturing equipment from Great Britain. Interestingly, renowned scientist and diplomat Benjamin Franklin favored the “free exchange of science and technology,” but his voice did not prevail. However, there is an important difference between American practice in the 18th century and emerging-market countries now. Not until 1883, when nations negotiated the Paris Convention for the Protection of Industrial Property, did international law promote respect for national patent and trademark laws (Ben-Atar 2004, 4). Over time, the geography and composition of American trade have changed. Until the 1960s, U.S. trade was primarily with European nations. Indeed, that year Europe took 36 percent of U.S. exports and supplied 29 percent of U.S. imports. A generation later, the Pacific Rim had become more important than the Atlantic. In 1997, 31 percent of U.S. exports went to Asia and 41 percent of imports arrived from Asia, much of these imports being consumer goods and manufactures (Carter 2006, 5:533 – 44). In 2008, America’s trade deficit with China and Japan ($339 billion) was larger than its combined deficit with Africa, Europe, South and Central America, and the Near East ($268.5 billion). It was also larger than the deficit with NAFTA partners Canada and Mexico ($138.6 billion) (U.S. Bureau of the Census 2009).

Trade Politics It is worth remembering that while ideas—such as free trade— influence policy debates, so does political power. Trade politics has several dimensions: the influence of interest groups, political parties, public opinion, and institutional competition between Congress and the executive. In the tug-of-war to shape government policies, one of the most important conflicts is between export-competing and importcompeting industries. Typically, businesses that have competitive advantages in the global market (such as Boeing, Caterpillar, the Hollywood entertainment industry, Microsoft, and Wal-Mart, among others) favor freer trade and want assured access to foreign markets. Among business associations that lobby the U.S. government, those representing large firms such as the Business Roundtable (composed of corporate CEOs), the Chamber of Commerce of the United States, and the National Association of Manufacturers generally espouse free trade and open markets. Their members actively engage members of Congress and support them

10

Background and History

with substantial campaign contributions. While big business is most comfortable with Republicans on trade issues, it worked closely with the pro-free-trade Clinton administration on a number of issues. Readers wishing to examine political contributions should consult: http://www.opensecrets.org. In a case study involving efforts to influence the federal bureaucracy, the Center for Public Integrity reports on efforts of the pharmaceutical industry to lobby the office of the U.S. Trade Representative. Drug makers use trade agreements to promote respect for their pharmaceutical patents abroad (Center for Public Integrity 2005). On the other side of the trade issue, businesses that face competition from imports (such as the textile and apparel industries, sugar growers, family farmers, and small manufacturers) often lobby for import restrictions on overseas competitors. The antifree-trade forces also rely heavily on the money of organized labor (particularly industrial unions most impacted by imports) and on the activist networks of environmental and consumer groups. These groups can mobilize demonstrators and orchestrate a blizzard of e-mails, or letters, on a topic of their choosing with only a few hours notice. In Congress, opponents of free trade work most effectively with Democrats from northern states, like Michigan, Ohio, and Pennsylvania, with large numbers of union members. Another important factor shaping trade politics is public opinion. Polls show declining grass-roots support for trade liberalization since the mid-1970s (Eckes 1995, 209). Over that period, the well-educated and economic elites continued to endorse free trade, emphasizing its benefits to consumers and world income. But, ordinary Americans—many of whom have experienced first-hand job dislocations associated with import competition— became more hostile. In May 2008, the Pew Research Center reported that in a survey of 1,502 adults, a 48-percent plurality thought free-trade agreements a bad thing, while 35 percent said they were a good thing (Pew 2008). Another important dimension of trade politics involves the longstanding tension between Congress and the executive over trade policy. Part of this reflected different regional interests, some of it legal and some of it institutional differences. In writing the Constitution of 1787, the founders provided for a separation of powers between the executive and the legislative branches. The executive branch obtained the authority to conduct diplomatic negotiations and to negotiate treaties subject to the approval of

Historical Overview 11

Congress (Article II: Section 2). Congress received the authority to regulate commerce and impose taxes (Article I: Section 8). This separation of powers provided for the legal basis for later institutional conflicts. Susan Schwab, President George W. Bush’s U.S. Trade Representative, once described this arrangement as an “awkward marriage” of the president’s treaty-making power and the Constitution’s commerce clause (Schwab 1994, 4 – 5). In practice, it frequently proved unworkable. During the 19th century, the executive branch set out to negotiate trade agreements with foreign powers on a number of occasions, but Congress refused to approve the agreements or sought to modify them after the negotiations were complete. This occurred in the administrations of John Tyler (term of office 1841 – 1845), Benjamin Harrison (term of office 1889 – 1893), and William McKinley (term of office 1897 – 1901). During the Great Depression of the 1930s, the pendulum swung in the opposite direction, when Secretary of State Cordell Hull persuaded Congress to grant the executive branch authority to raise or lower tariffs without the specific approval of Congress. As administered by the State Department before and after World War II, Hull’s mandate enabled the executive branch to cut tariffs sharply. With constituent complaints ringing in their ears, Congress sought in the 1960s to reclaim an active role in trade policy, one of the themes developed in the next section.

Historical Overview Two conflicting ideas—free trade or protection for domestic industries—have been at the root of many U.S. trade disputes since the early days of the American Republic. In the Washington administration, Treasury Secretary Alexander Hamilton and his rival Secretary of State Thomas Jefferson favored different trade strategies. Hamilton wanted to protect and encourage U.S. manufactures so that British manufacturers didn’t dominate the market. Jefferson, who was suspicious of industry and cities, offered an agrarian vision of the republic prospering from export sales of agriculture and raw materials. It was a classic debate between protectionism and free trade. As it turned out, Congress chose to pursue a third course—passing a revenue tariff averaging about 8.5 percent on an ad valorem basis—to generate income to pay the new government’s expenses (Eckes 1995, 14). America’s resort to a revenue tariff, paid on goods assessed at dockside customs

12

Background and History

houses, was compatible with the approach of other countries at the time. Indeed, many developing countries still prefer revenue tariffs because they are relatively easy to collect. In the 20th century developed countries would rely more on higher-yielding income taxes.

American System of High Tariffs During the Napoleonic Wars and the War of 1812, the United States experienced the vulnerabilities and dislocations of dependence on international trade. A more nationalistic trade policy resulted. Leaders came to appreciate that industrialization was vital to economic independence and prosperity. Henry Clay, the Kentucky Whig and a leader in Congress, pushed hard for the “American System” of using protective tariffs to build up infant industries. By 1828, when Congress passed the so-called Tariff of Abominations, the average duty on dutiable goods had increased to 61.7 percent, the highest in American history (Eckes 1995, 107). Democrats succeeded in whittling down high protective tariff levels during the 1840s and 1850s, and enacting several reciprocity agreements with China, Japan, and Canada. Their goal was a 20 percent revenue tariff. This approach reflected the Democratic Party’s southern orientation and the growing international enthusiasm for free trade. In Great Britain, Cobdenites, the followers of textile magnate Richard Cobden, successfully pressed for repeal of the corn laws, an important step in opening the British market to imports. In the United States, President Franklin Pierce took a step in the same direction when his administration negotiated a limited reciprocity treaty with Canada. It provided for limited free trade in certain raw materials. Congress abrogated it after the Civil War (1866). During the Civil War, Republican protectionists took charge of trade policy. Led by Vermont’s Justin Morrill, the chairman of the powerful Senate Finance Committee, the Republicans raised duties higher and higher, ostensibly to finance the war, but also to protect domestic industry. Morrill, a conservative Vermont farmer, pushed for abrogation of the Canadian reciprocity because he believed it harmed his state’s economic interests. U.S. trade policy remained highly protectionist until the Great Depression of the 1930s. The average duty on dutiable products exceeded 40 percent from the Civil War to the Great Depression, except for the Wilson administration’s ill-fated unilateral effort to lower tariffs in 1913

Historical Overview 13

(Eckes 1995, 107). While Democrats generally supported lower tariffs, they did not control both Congress and the executive, except during Woodrow Wilson’s presidency. Republicans did continue to support reciprocal negotiations to open trade with America’s new colonies— Cuba and the Philippines—and with neighboring Canada. President William Howard Taft and his aides negotiated a reciprocity treaty with Canada in 1911, but Canada, fearful of America’s expansionist political ambitions, rejected it. After World War I, high-tariff Republicans returned to power. President Warren Harding requested emergency tariff legislation, saying that he believed in protecting American industry, and it was his purpose to help America prosper first (Eckes 1995, 88). During the 1920s, Congress made two major revisions of the tariff: the Fordney-McCumber Act of 1922 and the Smoot-Hawley Tariff of 1930. The latter revision was named for Senator Reed Smoot of Utah, chairman of the Senate Finance Committee, and Representative Willis Hawley, chairman of the House Ways and Means Committee, the two committees most responsible for crafting tariff legislation. Smoot-Hawley is often depicted as the apogee of protectionist sentiment, and an imprudent act that exacerbated the Great Depression. Enacted over the protests of 1,000 economists, Smoot-Hawley raised the average duty on dutiable imports to nearly 44.6 percent, the highest since the Dingley Tariff of 1897. According to some academics, these rates brought international trade to a standstill, triggered foreign retaliation, and deepened the Great Depression. Other scholars who have reviewed the archival evidence believe the conventional interpretation of Smoot-Hawley is much exaggerated. There was little foreign retaliation, and it was the Great Depression, not the Tariff Act of 1930, that most impacted international trade patterns (Eckes 1995, 100 – 139).

Promoting Recovery and Reciprocal Trade During the Great Depression, the volume of world trade fell sharply, and political pressure compelled many governments to subsidize exports and restrict imports. Internationalist and free traders battled these protectionist impulses, and urged multilateral efforts to reduce tariffs and stabilize currencies. Secretary of State Cordell Hull, one of the leading advocates of trade liberalization in the United States, wanted President Franklin D. Roosevelt to take such an approach at the London Economic Conference of 1933,

14

Background and History

but the president overruled him. Eager to promote domestic recovery, Roosevelt soon devalued the dollar, effectively subsidizing exports and taxing imports. Other major countries also pursued nationalistic remedies, such as depreciation and trade controls. Despite adverse circumstances, Hull did not abandon his quest to open the channels of world trade. Emphasizing the link between exports and domestic jobs, he lobbied for a program of bilateral reciprocal tariff negotiations to create export opportunities. In 1934, Congress granted the executive branch temporary authority to raise or lower tariffs by 50 percent from 1930 levels for a three-year period. Interestingly, the legislation did not mention tariff reduction as an explicit goal. Rather, the program proposed to expand export markets for American products by regulating imports in accordance with the needs of American production (Lovett, Eckes, and Brinkman 2004, 56). In effect, Hull’s initiative produced a revolution in tariff-making. The program transferred tariff making from Congress, where it was reasonably transparent, to an executive agency—the State Department—with a foreign affairs agenda. Hull and his successors secretly negotiated 32 agreements from 1935 to 1947. All but one (Iran) was with nations in Europe or the Western hemisphere. It is noteworthy that the State Department concluded only one agreement with a major trading partner: the 1938 pact with Great Britain. Viewed from the early 21st century, the reciprocal trade program had a mixed record. Politically, it helped cement good relations with Great Britain, a partner in World War II, and it improved relations with a number of smaller nations in Western Europe and the Americas. It succeeded in sharply lowering U.S. tariffs, benefiting consumers and importers. From 1934 to 1960, the ratio of duties calculated to total dutiable imports fell from 45 percent to 10 percent (about half of the decline being attributable to tariff negotiations, the remainder to inflation and deflation) (Eckes 1995, 107). Viewed in commercial terms, the agreements obtained only modest concessions for American exporters of agricultural and manufactured products. But, the long-term impact was quite consequential. The bilateral concessions were extended to third parties freely on an unconditional most-favored nation basis, meaning that they did not have to compensate the original parties for the benefits. In this way, U.S. reciprocal tariff reductions—particularly those to Great Britain in 1938—aided other low-cost countries to penetrate the American market after World War II without

Historical Overview 15

opening their own markets to U.S. goods. Hull’s trade program, as it evolved, benefited free riders who themselves made few concessions but enjoyed the benefits.

Multilateral Trade Liberalization After World War II, the State Department sought to continue the bilateral trade liberalization program as part of a multilateral, or multi-country, initiative to lower trade barriers and establish an ITO. The U.S. Treasury separately devised plans for an International Monetary Fund and an International Bank for Reconstruction and Development at Bretton Woods, New Hampshire, in July 1944. Along with establishing a parallel institution for trade, the State Department sought to break up the British preferential system, which discriminated against American exports to British dominions. Another American goal was to integrate former enemies such as Germany and Japan into an open, market-driven, world trading system. Bilateral negotiations took place between principal suppliers within a multilateral framework at Geneva, Switzerland, in 1947 and Torquay, England, in 1951. The United States invited 19 nations, including the Soviet Union, to participate. Although the Soviets chose to pursue an autarkic course, 23 countries participated in the Geneva negotiations. They were conducted on a product-by-product basis between principal suppliers (such as the top producers of automobiles). As with reciprocal trade, the concessions were extended to every other trading country on an unconditional most-favored-nation status. The various bilateral agreements became the basis of the multilateral General Agreement on Tariffs and Trade (GATT). GATT took effect on January 1, 1948, and its first members were nine countries accounting for 80 percent of world trade at that time. They were Australia, Belgium, Canada, Cuba, France, Luxembourg, the Netherlands, the United Kingdom, and the United States. Over time, most of the important trading countries acceded to GATT—Italy (1949), West Germany (1951), and Japan (1955). Israel, Switzerland, and Spain joined in 1962. By the mid-1960s, GATT’s membership had grown to 75, and on its final day, December 31, 1994, membership had climbed to 128. Significantly, the most important nonmembers, Russia, China, and Taiwan, all wanted to join (Lovett, Eckes, and Brinkman 2004, 60).

16

Background and History

GATT, a temporary forum for trade negotiations, would endure for nearly half a century until the WTO was established on January 1, 1995. Indeed, the United States, the largest member by virtue of its economic power, opted to treat membership in GATT as a contractual arrangement, not as membership in an organization, thus avoiding the need for congressional approval. Despite the structural shortcomings, GATT succeeded in holding a series of multilateral negotiating rounds: Annecy, France (1949), Torquay, England (1950 – 51), Geneva (1956), and Geneva (1960 – 62). These rounds used the same bilateral product-by-product negotiating approach between principal suppliers. The concessions were extended to all participants in the GATT system on an unconditional most-favored nation basis. With other countries recovering from World War II, and facing difficult financial and economic problems in the transition period, the U.S. trade negotiators chose not to drive hard bargains. U.S. tariffs were relatively high, and the few imported goods available had little impact on domestic production or employment. During the years before passage of the 1962 Trade Expansion Act, the State Department administered trade policies that inevitably reflected foreign policy goals. The United States was engaged in a long Cold War struggle with the Soviet Union, and U.S. policy was to integrate its World War II enemies and allies into a prosperous economic system. As a result, at Torquay, the United States eased off on pressuring Great Britain to open its dominions to American exports. And, in negotiations with Japan, the United States was eager to help its former adversary export its way to recovery. The State Department took the view that the overriding interest was to strengthen national security by tying Japan to the non-Communist world (Eckes 1995, 170). In 1955, it opened bilateral negotiations with Japan as part of a required process for membership in the General Agreement on Tariffs and Trade, a temporary forum pending establishment of an international trade organization. While U.S. negotiators exhorted Japan to reduce duties on automobiles, electronics, chemicals, machine tools, and heavy machinery, because establishment of high-cost industries was incompatible with comparative advantage and the sound growth of a national economy, the Japanese demurred. K. Otabe, representing Japan’s Ministry of International Trade and Industry, argued that the logic of international trade theory was that the United States would specialize in automobiles and Japan in tuna. Rejecting that theory, he said Japan would continue to

Historical Overview 17

encourage and protect industries believed important for reasons of national policy (Eckes 1995, 171). As import competition grew from overseas producers of labor-intensive dinnerware, footwear, textiles, and apparel, congressional opposition to reciprocal trade grew. In 1958, the Senate Finance Committee turned down the Eisenhower administration’s request for authority to negotiate down tariffs an additional 25 percent and extend the program for five years (Eckes 1995, 175).

Kennedy Round After President John F. Kennedy took office in 1961, the State Department made another bid to resurrect the trade liberalization program. Under Secretary of State George Ball, himself a committed Europeanist who had represented foreign steel producers as a trade lawyer, warned of a trade challenge from the European Common Market. President Kennedy sent Congress a bold request to cut industrial tariffs by 50 percent in the next GATT round (Zeiler 1992). The Trade Expansion Act (TEA) authorized major new negotiating authority for the Kennedy administration to deal with the challenge of the European Economic Community (EEC), and it forced a significant reorganization of the trade liberalization program. Congress stipulated that a special trade representative (STR), reporting directly to the president, not to the foreign-policy oriented State Department, would handle negotiations. With this authority, the United States and other GATT members engaged in major tariff reduction negotiations during the Kennedy Round (1964 – 1967). As well as slashing tariffs on industrial goods, negotiators also made initial attempts to extend the multilateral system of rules to nontariff barriers. They negotiated an international antidumping code. But there was no progress on reducing agricultural protectionism and subsidies, nor did negotiators persuade Japan to provide genuine reciprocity and open its home market to foreign competition (Eckes 2000, 46 – 113). The U.S. Congress was not pleased with the results. Criticisms of concessions on chemicals, steel, machine tools, and electronics led some business groups to petition Congress for quotas or tariffs on imports. Chairman Russell Long (D-LA) and his colleagues on the Senate Finance Committee complained that the antidumping agreement lacked congressional authorization and refused to implement several side deals. This congressional dissatisfaction had consequences for the trade liberalization program. In the future

18

Background and History

Congress would insist on a more active role in negotiations, and U.S. negotiators could not strike a deal without taking into consideration congressional opinion. For American business, completion of the Kennedy Round was a significant event—in effect, it opened the U.S. market to global competition. At a time when jet travel and satellite communications were rapidly overcoming barriers of time and distance, the Kennedy Round cuts lowered the average ad valorem equivalent on dutiable U.S. imports to 8.6 percent (from 12.2 percent before concessions were implemented). Secretary of Commerce Alexander Trowbridge understood the significance: he warned that in the future, the American market would no longer be the “private preserve” of American business (Trowbridge 1967, 127 – 129). The round was also a turning point for the trade liberalization program. Polls showed a significant shift in public opinion against the tariff-reduction program. Thus, the Kennedy Round marked the end of a long period of executive leadership in trade negotiations that began with Hull’s reciprocal trade program in 1934. For the first time since the 1930s, a solid majority favored increased import restrictions. Besieged with complaints from constituents, Congress effectively declared a pause in trade liberalization and refused to renew the administration’s trade negotiating authority.

Fast Track and the Tokyo Round Seven years later, despite the turbulence of the Vietnam War and the Watergate scandal, a more assertive Congress proposed a different formula for negotiations—one that gave Congress a more active role. In the Trade Act of 1974, Congress renewed the president’s trade negotiating authority and authorized participation in the Tokyo Round of multilateral negotiations. It also established a fast-track procedure for expeditious consideration of the results. On the one hand, the executive committed to consulting regularly with Congress and private-sector organizations during the course of the negotiations. On the other hand, Congress promised to waive the usual review procedures for executive agreements. Instead, it pledged to permit a vote on implementing legislation within 90 days, and the fast-track agreement prohibited legislative amendments. Congress also gained executive branch support for a more effective import-remedy program to facilitate adjustment

Historical Overview 19

to international competition. An independent agency, the U.S. International Trade Commission, could recommend temporary tariffs or quota relief in instances where increased imports were a substantial cause of serious injury to domestic industries. During the negotiations, Robert Strauss, the Texas lawyer and political activist who President Jimmy Carter appointed special trade representative, worked closely with Congress and importsensitive industries. Many of the import-sensitive industries were exempt from the negotiations, so as to avoid controversy. While the Tokyo Round continued the multilateral trade liberalization process, it achieved far less than the Kennedy Round, as discussed in Chapter 3. However, the first experiment with fast-track negotiating authority worked reasonably well. Congress kept its end of the bargain, passing the accords with little discussion or dissent. Thanks to Robert Strauss’s successful lobbying, the Trade Agreements Act of 1979 passed the House of Representatives 395 to 7, and the Senate 90 to 4 with substantial bipartisan majorities. Despite the overwhelming vote, Congress remained somewhat skeptical that other governments would implement their obligations. Thus, it amended section 301of the trade law to give the president broad authority to enforce U.S. rights unilaterally. The 1979 act authorized the president to retaliate against unreasonable, or discriminatory, practices that affected commerce (Lovett, Eckes, and Brinkman 2004, 73 – 74). In retrospect, the Tokyo Round was a high-water mark in cooperation between the executive and the Congress. Enthusiasm for the agreements soon began to fade. In 1987, the Senate Finance Committee complained that the Tokyo Round agreements “have not had the effect of improving the American standard of living as intended” (U.S. Senate, Finance Committee 1987, 2 – 3).

Reagan’s Free-Trade Initiatives During the early 1980s, the Reagan administration attempted to reinvigorate the multilateral process. It wished to improve upon the Tokyo Round agreements and to extend the scope of the GATT regime to agriculture and services, trade-related investments, and intellectual property. But Europe and Japan were not interested. The former was in a deep recession, and its governments were more focused on regional negotiations to widen and deepen the European Community. Japan had little interest in opening its domestic agricultural and industrial markets to expanded foreign

20

Background and History

competition. Concerned that the long multilateral quest for freer trade might falter, U.S. Rep. Bill Brock urged GATT members to launch another round, and he began to pursue bilateral free-trade agreements with like-minded countries. The bilateral path proved more productive in the short-run as the Reagan administration concluded a pioneering agreement with Israel in 1985, then another with Canada in 1987. America’s resort to bilateralism also spurred the multilateral process. Israel was a small trading partner, but political and strategic interests drove the two countries to negotiate in 1984. At a time when the U.S. economy was in recession and the administration wished to move forward on trade liberalization, an agreement with Israel had political appeal to Congress. The pact eliminated tariffs and nontariff barriers on almost all trade between the two countries over a 10-year period. This first bilateral free-trade agreement (FTA) also included items not covered in GATT, such as trade in services, intellectual property, and trade-related performance requirements. However, Israel retained certain nontariff barriers and levies on agricultural items, and the United States did the same on textiles and apparel. The FTA with Israel, a small middle-income country with 4.2 million people, had relatively little economic significance for the United States. Interestingly, the bilateral U.S. trade surplus (which had existed before the FTA) disappeared by January 1995 when the agreement was fully implemented (Lovett, Eckes, and Brinkman 2004, 79). The Canadian FTA, signed in January 1988, was far more significant, and controversial. The two North American neighbors shared a 3,000-mile border, spoke a common language, and had similar governmental institutions, laws, and practices. They were both mature and prosperous economies, and each was the other’s largest trading partner. For Canadians, the prospects of assured access to the U.S. market was important if Canadian business was to compete successfully in the global economy. At a time when Europe seemed to be turning inward, and growing use of countervailing and antidumping duties threatened Canadian access to the U.S. market, an FTA looked attractive. For the United States, it was the culmination of aspirations more than a century old to integrate the North American market. It was also an opportunity to set an example for the Uruguay Round GATT negotiations by establishing rules regarding services, intellectual property, and subsidies that might influence the multilateral negotiations.

Historical Overview 21

The FTA provided for the elimination of tariffs and nontariff barriers by January 1998. In the controversial area of agricultural trade, the two sides agreed to eliminate all tariff over a 10-year period and reduce nontariff barriers. Interestingly, the FTA retained the 1965 U.S.–Canada Automotive Products Trade Agreement (APTA), which provided a limited form of free trade beneficial to existing producers (but not apparently to foreign producers that might set up factories in North America). The agreement indicated that provisions relating to government procurement were intended to serve as an impetus to GATT negotiations. The FTA established dispute settlement procedures intended to provide effective and expeditious dispute settlement procedures, and these included bi-national dispute resolution panels. While each country would continue to apply its own antidumping and countervailing duty laws to imports, the FTA provided for a special bi-national panel of trade experts to review appeals. The negotiators did not address a number of sensitive issues, including Canada’s desire to preserve and maintain its unique cultural heritage. As a result, the agreement generally excluded publishing and communications from the nontariff provisions. Nor did the two sides reach agreement on financial services and subsidies. As the FTA negotiations did not address exchange rates, some of the benefits to the bargain for the United States were nullified as the Canadian dollar depreciated. Finally, while the agreement established a structure for dismantling trade barriers between the United States and Canada, it did nothing to remove intra-provincial barriers. Twenty years later—in 2007—Ottawa and Quebec would talk about negotiating their own free trade pacts. Thus, critics can point out that the FTA gave Canadian business access to the entire U.S. market, but it did little to remove commercial barriers within the Canadian federation (White 2007).

North American Free Trade Agreement Frustrated with continuing delays in multilateral negotiations, the United States moved to turn the U.S.–Canadian bilateral agreement into a North American regional pact of more than 400 million consumers. President George H. W. Bush and his trade negotiator Carla Hills proposed to add Mexico and to integrate the North American regional market. For Mexican President Carlos Salinas de Gotari, a Yale educated economist, NAFTA was an opportunity to transform Mexico and immerse it in the emerging global

22

Background and History

economy. With more openness and a more favorable climate for business, Mexico could attract the foreign capital needed to create jobs and opportunities for its burgeoning population. Makers of U.S. foreign policy were concerned about instability and rising illegal immigration, and wanted to integrate Mexico into a regional agreement that would revive its economy and reduce border tensions. The U.S. business community, eager to invest in the medium-sized Mexican market, wanted guarantees against expropriation and fewer restrictions on exporting and use of domestic content. In February 1991, the two leaders, and Canadian Prime Minister Brian Mulroney, announced their intention to pursue a trilateral FTA intended to liberalize trade in goods and services, foreign investment, protection of intellectual property, and dispute settlement. In the summer of 1992, leaders of the three governments hailed a successful conclusion, and their subordinates raced to complete work on the text. It was initialed at a ceremony in San Antonio, Texas, a month before the U.S. presidential election. The deal included tariff eliminations. In 1992, average U.S. duties on imports from Mexico were 3 percent and Mexican duties were about 10 percent on U.S. products (Lovett, Eckes, and Brinkman 2004, 81). But in agricultural trade there were significant quantitative barriers that discouraged trade. For the United States, one of the big gains was a Mexican commitment to open the home market to U.S. agriculture over a 15-year period. Over time, as these provisions were phased in, Mexican consumers would gain, but inefficient family farmers—the campesinos—would leave the land. Some moved into Mexican cities, others migrated northward to the United States in pursuit of economic opportunities. At the core of NAFTA were the investment provisions. They opened the Mexican market to big U.S. banks and financial service providers, and encouraged the automobile industry and other big manufacturers to open Mexican plants. Until NAFTA, Mexico had strictly regulated foreign investment and prohibited or limited investment in many sectors. Nonetheless, the Mexican petroleum sector remained off limits to foreign investors. Most of all, NAFTA ensured that foreign investors would receive national treatment (the same as local investors), prohibited expropriation except for “public purpose”, and provided in such cases for prompt compensation at market prices (NAFTA, Chapter 11). A controversial provision of Chapter 11, relating to investor rights,

Historical Overview 23

allowed foreign investors to sue signatory governments in special tribunals to obtain cash compensation for government actions or policies that violated their rights under NAFTA. Mandatory dispute settlement thus was an important component of the NAFTA package. Big transnational business generally supported NAFTA— especially the investment provisions—and their lobbyists worked hand-in-hand with the Democratic administration to persuade members of Congress. So did big agriculture, such as the wheat, corn, and pork producers, who also saw great export opportunities. Small business and labor-intensive business—such as textile and apparel producers—generally opposed NAFTA, fearful that it would open the door to competition from inexpensive Mexican labor. So did organized labor, and some environmental and consumer groups. Proponents and opponents differed widely about the impact of NAFTA on U.S. jobs. Some studies showed relatively little impact, but others forecast job losses as high as 500,000 low-skill workers in industries such as textiles. Sugar and vegetable producers, as well as family farmers generally, worried that NAFTA would open the domestic market to cheap competition (Gerstenzang 1993). President Bill Clinton found the controversial NAFTA hot potato on his plate upon taking office in January 1993. Believing that NAFTA was good for the American economy, Clinton determined to press forward with the agreement. But he negotiated some labor and environmental side agreements to placate NAFTA’s opponents, and then pushed for swift congressional approval in November 1993. The ensuing debate was vigorous, and the Clinton administration pulled out all the stops to win. To gain congressional approval, Clinton emphasized export opportunities and minimized job dislocations to American workers. Practicing retail politics, he promised to go duck hunting with one Oklahoma congressman, to have the vice president host a fund raiser for another, and to support public works projects for others. The 900-page agreement passed the House 234 to 200 on November 17, even though a majority of Democrats opposed their president. NAFTA passed the Senate more easily 61-to-38 three days later. According to the Public Citizen’s Global Trade Watch, proponents of NAFTA spent $22.8 million on campaign contributions and $8 million on advertising to win congressional approval (Public Citizen 2000).

24

Background and History

Uruguay Round—WTO Meanwhile, the competitive pressure of bilateral and regional free trade initiatives helped persuade the European Community and Japan to enter another multilateral round. In September 1986, a GATT ministerial at Punta del Este, Uruguay, launched the eighth, and last, round of GATT negotiations. This one focused on improving the workings of the GATT system, particularly in agriculture, subsidies, safeguards, dispute settlement, and nontariff measures. In particular, the United States wanted to revise the ineffective GATT dispute settlement process. It also sought greater export opportunities for agricultural products, and improvements in GATT provisions to define, deter, and discourage unfair trading practices. Frustrated with free-riding countries and the lack of reciprocity, Congress also insisted that developing countries provide reciprocal benefits and assume equivalent obligations. The Uruguay Round was an exercise in frustrations. Whereas previously the United States and the European Community were the major players, this time developing countries took a larger role. As a result, the round stretched over eight years and consumed the attention of four U.S. trade negotiators: Bill Brock, Clayton Yeutter, Carla Hills, and Mickey Kantor. It concluded April 15, 1994, after intense bargains and many concessions by the United States. The key to the final agreement was a deal involving developing and developed nations. The latter agreed to phase out restraints on textiles and apparel and to improve market access for developing world agricultural products, in exchange for extending the multilateral system to cover intellectual property, services, and trade-related investment measures. Behind the deal was this reality: large transnational corporations based principally in the Northern Hemisphere were irritated at local-content restrictions in host countries and sought greater freedom to run their operations in the most efficient way possible. Also, Wall Street, the insurance industry, and telecommunications giants wanted an opportunity to sell their products and services in developing markets on the same terms as host-country competitors. The entertainment and pharmaceuticals industries insisted on stronger protections for patents and copyrights. In the Uruguay Round, governments in high-income countries responded to these requests, and effectively traded off import-competing, labor-intensive industries. It was a familiar pattern evident in prior trade negotiations.

Historical Overview 25

The agreement replaced the temporary GATT with a permanent institution: the World Trade Organization (WTO). It would serve as a forum and a vehicle for implementing trade agreements, as a tribunal for resolving trade disputes. For further discussion of this organization, see Chapter 3. President Clinton hailed the results, calling the Uruguay Round Agreements “the broadest, most comprehensive trade agreements in history.” The agreements would “add $100 – 200 billion to the U.S. economy each year and create hundreds of thousands of new, well-paying American jobs.” According to the president, the results would ensure that fast-growing markets in Asia and Latin America “will be open to international competition and that all of our trading partners will play by international trading rules” (Clinton 1994b). Clinton forecast that the agreement would “provide a global tax cut of $740 billion, reducing tariffs worldwide by more than a third” (Clinton 1994a). Big business was joyous. A spokesman for the Business Roundtable said the agreement would make it difficult for countries to impose investment restrictions that limited job creation and distorted trade. He predicted that the multilateral agreement would create “hundreds of thousands of high-wage, high-skills jobs in the United States” (Junkins 1994). Other major business associations concurred. Opposing the agreement were labor and consumer groups. Jack Sheinkman, president of the Amalgamated Clothing and Textile Workers Union, complained that his 230,000 members felt betrayed. The phase-out of textile quotas, so that developing nations could share in the U.S. market, would result in at least a million lost jobs (Sheinkman 1994). One of the criticisms of GATT had been that it had a toothless dispute resolution procedure. A single member (usually the country accused of violating international trade rules) could block implementation of a ruling. In the Uruguay Round, U.S. negotiators wanted a strong dispute resolution body, and used the threat of unilateral sanctions under Section 301 as a negotiating tool to make dispute resolution palatable to other members. But dispute resolution was a two-edged sword. It could be used to open foreign markets for America’s large corporations, and the American market for foreign competitors. Especially controversial in the U.S. debate was Article XVI of the WTO agreement. It stipulated: “Each Member shall ensure the conformity of its laws, regulations, and administrative procedures with its obligations as provided in the annexed Agreements”

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(WTO 1994, Chapter XVI). This provision appeared to allow the WTO to override the U.S. Constitution and domestic laws. Thus, members of the WTO could use the agreement to challenge national laws, including those of local governments, that appeared inconsistent with the trade-liberalization purposes of the WTO. According to some critics of the agreements, local health and safety concerns would take a back seat to trade liberalization and the harmonization of rules. Consumer advocate Ralph Nader said the agreement would undermine democratic decision making. The international rules would subordinate health and safety considerations to the requirements of international trade (Nader 1994). Nobel Prize-winning economist Joseph Stiglitz agreed that WTO agreements “threaten the autonomy of countries to set prudent rules” (Stiglitz 2005). However, Judith Bello, a former general counsel of the U.S. Trade Representative’s office, responded that WTO rulings were not binding in a traditional sense. “The WTO has no jailhouse, no bail bondsmen, no blue helmets, no truncheons, or tear gas.” Instead, the WTO would rely on voluntary compliance (Bello 1996).

The Battle of Seattle Public opposition to the WTO flared at the December 1999 WTO Summit in Seattle, Washington. The United States and other trade powers had hoped to launch a new millennial multilateral negotiating round after governments in attendance agreed on a negotiating agenda. But, led by Citizen Trade Watch’s Lori Wallach, representatives of organized labor, environmental, small farm, and other activists challenged government representatives, blocking access to the Seattle Convention Center where the sessions were to meet. The activists complained that the trade negotiating process was undemocratic and controlled by large transnational corporations. Their street protests, involving more than 40,000 demonstrators, produced violent conflicts with police, and succeeded in disrupting the conference. With television looking on, riot police and masked demonstrators clashed as clouds of tear gas and pepper spray made downtown Seattle a battle zone. While most of the demonstrators were from the United States, hundreds had come from far reaches of the world to disrupt the ministerial meeting and to protest the institutions of globalization. Subsequently, activists would target meetings of the International Monetary Fund and World Bank in Washington, D.C., a

Historical Overview 27

hemispheric free trade summit in Quebec, and other meetings of government leaders. From the numbers of people involved, it was evident that trade policy, once an arcane area of interest only to trade specialists, had energized a diverse public constituency.

Admitting China to the WTO The next big trade fight in Washington, D.C., pertained to permanent tariff treatment for China. Whereas in the Soviet Union, the Communist Party had resisted change—and lost power—the Chinese Communists sought to retain power by embracing capitalism and transforming China’s state-run economic system. From the standpoint of the Chinese government, membership in the WTO would enhance China’s prestige as a world power, assure its exports access to the world’s most lucrative export markets at the lowest tariff levels, and provide export-related employment for millions of its workers eager to leave rural poverty for factory jobs. Expanded trade would also help China to acquire advanced technologies to improve its military capabilities. China had negotiated terms of accession with WTO members. But to comply with its obligations to the WTO, the United States needed to approve legislation providing China with permanent most-favored-nation treatment (that is, the same benefits that it provided other members of the WTO). This is also called Permanent Normal Trade Relations (PNTR). In the United States, a conjunction of foreign policy and business interests supported Chinese membership. The Clinton administration wanted to integrate China, a county with over 1 billion people, into a marketoriented world trading system. Transnational business saw the unique economic opportunities involved. If China joined the WTO and integrated its economy into the global economy, its trading practices must conform to international rules. In short, China would be subject to international scrutiny and to dispute settlement procedures favorable to international investors. Improved access to the Chinese market for American corporations meant expanded opportunities to serve large numbers of new customers and to employ some of the world’s cheapest workers producing for export. Many Chinese workers earned considerably less than two dollars per day in manufacturing and assembly (Lett and Banister 2006, 40). To gain passage of PNTR legislation, the Chinese government did not need to hire Washington lobbyists. Boeing, Caterpillar,

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Background and History

and other transnational firms eager to benefit from business opportunities backed congressional approval, as did the Clinton administration. In testimony to Congress, the chairman of the powerful Business Roundtable described the deal as the “economic equivalent of tearing down the Berlin Wall” (Business Roundtable 2000). The CEO of another large firm doing business in China testified that normal trade relations with China served the “clear interest” of America’s consumers, exporters, and farmers (Hill 2000, 16). Labor, human rights, and small-business groups again fought hard to block PNTR. But in the end, the administration and big business prevailed. In the House, the measure passed 217 to 197 in May 2000. The Senate gave more lopsided approval to a normal trading relationship 83 to 15. Public Citizen reported that corporate interests spent more than $113 million in lobbying, political donations, and advertising to pass China PNTR. Of that sum, the largest amount involved $68.2 million in contributions to political parties and members of Congress. One member of Congress reported being offered as much as $200,000 in campaign contributions to support the measure. In other instances, corporate lobbyists threatened to cut off campaign contributions to legislators who opposed PNTR (Public Citizen 2000; Schlesinger 2000). Robert Cassidy, one of the negotiators of the China trade agreement, later admitted that the pact failed to deliver on expectations. Although China made most of the concessions, the United States lost 2.7 million manufacturing jobs as imports from China soared. Cassidy blamed China’s currency manipulation for keeping down labor costs and stimulating its exports (Cassidy 2009).

Regional and Bilateral Free Trade Clinton and his Republican successor George W. Bush continued the free trade initiatives begun under Reagan and George H. W. Bush. Both were fervent advocates of free trade, believing that it promoted prosperity and democracy. With the Cold War over and improvements in communications and transportation ushering in an age of globalization, they chose to help construct a new world economic order for the 21st century. It would be based on marketdriven economics and business-friendly international rules and institutions. They sought to integrate developing countries into a prosperous global economy. When controversies with developing

Historical Overview 29

countries muddled WTO negotiations, they opted for regional and bilateral approaches. In 1994, President Clinton and leaders of 33 other Western hemisphere nations met in Miami and agreed to work toward establishing a Free Trade Area for the Americas (FTAA) by 2005. They proposed to progressively eliminate trade and investment barriers. That initiative subsequently stalled as opposition mounted from farmers, environmentalist, and others, and as leftist governments in Venezuela and Bolivia voiced opposition. Venezuelan President Hugo Chavez denounced the FTAA as a “tool of imperialism” (Dominica 2008). Brazil, the leader of the South American Mercosur group, demanded that the United States eliminate agricultural subsidies. The Clinton administration also launched bilateral free-trade negotiations with Chile, Jordan, and Singapore. All three agreements were concluded under President George W. Bush after the terrorist attacks of September 11, 2001. Bush made free trade an integral element of his strategic response. Emphasizing the need to combat terrorism with open markets and trade opportunities, Bush succeeded in gaining renewed fast-track trade negotiating authority from Congress that did not allow for amendments. In July 2002, that legislation passed the House of Representatives by a thin 215 to 212 margin with a majority of Republicans supporting Bush and a majority of Democrats opposing (“Victory for Bush on Fast Track” 2002). The president and his chief trade negotiator, Robert Zoellick, promptly launched an ambitious effort to promote free trade around the world. Using three separate negotiating tracks— multilateral, regional, and bilateral—they attempted to open markets for American exports. Zoellick, Bush’s first U.S. Trade Representative (USTR) and the architect of this competitive liberalization strategy, declared that the administration wanted to encourage reformers who favored free trade. He vowed to move forward with those countries prepared to open their markets (Zoellick 2002). The office of the USTR, which has about 200 employees, was responsible for advancing Bush’s free-trade agenda. It attempted to negotiate 17 FTAs with 47 countries. With the exception of Brazil and Australia, the negotiating partners had relatively small markets. Trade with countries selected for FTA negotiations comprised 16 percent of U.S. trade, and about 16 percent of U.S. foreign direct investment. The United States did not press for negotiations with a number of large trading partners, such as the

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Background and History

European Union, Japan, and Switzerland. It anticipated difficulty negotiating sensitive sectors, such as agriculture and intellectual property rights (U.S. General Accounting Office 2007). Foreign policy influenced the choice of negotiating partners (Reinsch 2007). In Latin America, the goal was to isolate radical regimes, like Venezuela and Cuba, and encourage market-oriented development. In the Middle East, the goal was to strengthen longterm American allies, such as Jordan and smaller states in the Persian Gulf, and to reward other allies, such as Australia, Chile, and Singapore with a history of commitment to free trade and open markets. In January 2009 when Bush left office, his administration had compiled an impressive record. There were seven bilateral FTA negotiations completed and approved by Congress (Australia, Bahrain, Chile, Morocco, Oman, Peru, and Singapore) as well as a regional agreement CAFTA-Dominican Republic (CAFTA), involving another six countries: Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, and Nicaragua. Three other more controversial FTAs—involving Colombia, Panama, and South Korea—lay on the table awaiting congressional approval. Other bilateral negotiations with Bolivia, Brunei, Ecuador, Malaysia, New Zealand, SACU (the Southern African Customs Union), Thailand, and the United Arab Emirates were incomplete, or suspended. In addition, Bush had pursued a Free Trade Area of the Americas (FTAA), a Middle East Free Trade Initiative (MEFTA), and a multilateral agreement in the WTO’s Doha Development Round. CAFTA proved especially controversial. The Bush administration viewed it as part of an effort to extend NAFTA southward, and said CAFTA would bring “stability and security” to the region (Bush 2005a). The business community noted that Central American countries generally had free access to the American market as a result of prior trade concessions, but CAFTA would ensure free access for American exports, as well as benefit consumers. Critics, especially in the textile industry, saw it primarily as an investment agreement that would accelerate the movement of assembly-type manufacturing jobs out of the United States. A coalition of opponents, including environmental, consumer, and labor groups, waged an intensive campaign, and appeared to have enough votes to block CAFTA in the House of Representatives. But Speaker Dennis Hastert (R-IL) resorted to unusual

Summary

31

procedures. He extended the 15 minutes allotted for voting so that lobbyists could convert a few recalcitrant legislators. Forty-seven minutes later the administration’s supporters prevailed. The margin was a razor-thin 217 – 215. President Bush signed CAFTA into law, and said it was “more than a trade deal,” hinting at nationalsecurity implications (Bush 2005b). As the close vote indicated, trade politics had become much more partisan than 20 years earlier. Congress had approved the Tokyo Round agreements with only a few dissenting votes. But the battles over NAFTA, China PNTR, and CAFTA imposed a heavy toll on bipartisan support for trade liberalization. By 2005, a majority of Democrats, and a significant number of Republicans, in the House had awakened to public concerns about globalization and flawed trade policies. In the 2006 congressional elections, 37 free-trade seats flipped to trade-policy critics (7 seats in the Senate, 30 in the House), according to Lori Wallach of Citizen Trade Watch. In 2008, fair traders, as those favoring a fundamental overhaul of U.S. trade policies were known, gained 35 seats net (7 in the Senate, 28 in the House). Citizen Trade Watch claimed the new composition of Congress more closely reflected public opinion on trade matters (Wallach 2006; Public Citizen 2009).

Summary Over the course of the 20th century, the United States, once an ardent practitioner of protectionism, evolved into an enthusiastic advocate of free trade and open markets. As this chapter shows, this policy change reflected not only America’s responsibilities as a global power but also the new technological and business realities of globalization. It also occurred because Congress ceded its lead role in tariff-making to the executive branch. A series of presidents beginning with Franklin D. Roosevelt and continuing to the present used these trade-negotiating mandates to lower tariff levels and to integrate the United States into an emerging global economy. While free trade remained popular with business and government elites, opposition grew at the grassroots level. With plants closing and jobs disappearing overseas, many questioned whether the gains from free trade surpassed the costs to ordinary citizens, corporations, and communities. The next two chapters will offer contemporary perspectives on key trade-policy issues.

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References Bello, Judith. 1996. “The WTO Dispute Settlement Understanding: Less is More.” American Journal of International Law 90 (3): 416. Ben-Atar, Doron S. 2004. Trade Secrets: Intellectual Piracy and the Origins of the American Industrial Power. New Haven, CT: Yale University Press. Boudreaux, Donald. 2007, May 9. “Free Trade, Unilaterally.” Daily Speculations. Accessed January 2008 at http://www.dailyspeculations. com/wordpress/?cat=289. Bush, George W. 2005a, June 6. “President Discusses Trade, CAFTA at Organization of American States.” Accessed January 2008 at http:// www.whitehouse.gov/news/releases/2005/06/20050606 – 1.html. Bush, George W. 2005b, August 2. “President Signs CAFTA-DR.” Accessed February 2008 at http://www.whitehouse.gov/news/ releases/2005/08/20050802 – 2.html. Business Roundtable. 2000, January 26. “The Business Roundtable Launches Campaign for China PNTR.” Press Release. Accessed January 2008 at http://www.businessroundtable.org//newsroom/. Carter, Susan B., Scott Sigmund Gartner, Michael R. Haines, Alan L. Olmstead, Richard Sutch, and Gavin Wright, eds. 2006. Historical Statistics of the United States: Millennial Edition. New York: Cambridge University Press. Cassidy, Robert B. 2009, January 27. “False Expectations of Trade Agreements: Lessons for Change.” Accessed January 2009 at http:// www.epi.org/publications/entry/20090127_cassidy/. Center for Public Integrity. 2005, July 7. “Exporting Prices.” Accessed May 2008 at http://www.publicintegrity.org/Content.aspx?src=search& context=article&id=718. Chang, Ha-joon. 2002. Kicking Away the Ladder: Development Strategy in Historical Perspective. London: Anthem Press. Clinton, William J. 1994a, September 20. “Remarks Prior to a Meeting with Congressional Leaders.” Accessed at http://www.presidency.ucsb. edu/ws/index.php?pid=49114. Clinton, William J. 1994b, September 30. “Message to the Congress on the General Agreement on Tariffs and Trade.” Accessed January 2008 at http://frwebgate.access.gpo.gov. “Dominica to Sign Venezuelan-backed Trade Agreement.” 2008, January 13. BBC Monitoring Latin America. Accessed February 2008 at LexisNexis Academic, http://www.lexisnexis.com/us/lnacademic/. Dryden, Steve. 1995. Trade Warriors: USTR and the American Crusade for Free Trade. New York: Oxford University Press.

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Eckes, Alfred E., Jr. 1995. Opening America’s Market: U.S. Foreign Trade Policy since 1776. Chapel Hill: University of North Carolina Press. Eckes, Alfred E., Jr. 2000. Revisiting U.S. Trade Policy: Decisions in Perspective. Athens: Ohio University Press. Friedman, Milton. 1962. Capitalism and Freedom. Chicago: University of Chicago Press. Gerstenzang, James. 1993, November 14. “Treaty Hinges on Jobs to Be Gained— Or Lost.” Chicago Sun-Times, 34. Gomory, Ralph, and William Baumol. 2000. Global Trade and Conflicting National Interests. Cambridge, MA: MIT Press. Goodman, Peter S. 2008, May 12. “Dollar Shows Its Staying Power.” International Herald Tribune, 14. Griswold, Daniel T. 1999, September 1. “A Rising Trade Deficit Signals Good Times for U.S. Economy.” Accessed May 2008 at http://www.cato. org/pub_display.php?pub_id=4995. Hill, Andrew. 2000, May 24. “Greed and Fear Fuel Pro-China Deal Campaign.” Financial Times, 16. Ho, P. Sai-wing. 2008, June. “Arguing for Policy Space to Promote Economic Development: Prebisch, Myrdal, and Singer.” Journal of Economic Issues 42 (509 – 516). Junkins, Jerry. 1994, February 22. “Testimony” to Committee on Ways and Means, U.S. House of Representatives, 103rd Congress, 2d sess. Accessed February 2008 Federal Document Clearing House. Krueger, Anne O. 2003, September 10. “Address at the Fifth WTO Ministerial Conference.” Accessed January 2008 at http://www.imf.org/ external/np/speeches/2003/091003.htm. Krugman, Paul. 2007, December 28. “Trouble with Trade.” New York Times, 23. Landler, Mark. 2008, December 26. “Dollar Shift: Chinese Pockets Filled as Americans’ Emptied.” New York Times, 1. Lett, Erin, and Judith Banister. 2006, November. “Labor Costs of Manufacturing Employees in China: An Update to 2003 – 04.” Monthly Labor Review, 40 – 46. Accessed May 2008 at http://www.bls.gov/opub/ mlr/2006/11/art4full.pdf. Lighthizer, Robert. 2007, June 12. “Testimony on Trade Enforcement for a Twenty-first Century Economy,” Committee on Finance, U.S. Senate, 110th Congress, 1st sess. Accessed January 2008 at http://www.senate. gov/~finance/hearings/testimony/2007test/061207testrl.pdf. Lovett, William, Alfred Eckes, and Richard Brinkman. 2004. U.S. Trade Policy: History, Theory, and the WTO. 2nd ed., Armonk, NY: M. E. Sharpe.

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Mazur, Jay. 2000, January-February. “Labor’s New Internationalism,” Foreign Affairs, 79. Accessed January 2008 at http://www.globalpolicy. org/socecon/labor/01internationalism.htm. McMillion, Charles. 2009, January 16. “The Economic State of the Union: 2009.” Manufacturing News, 16/1, 5. Nader, Ralph. 1994, March 16. “Testimony” to Committee on Finance, U.S. Senate, 103rd Congress, 2nd sess. Accessed 01/2008 at Federal Document Clearing House. Nguyen, Elena L. 2008, July. “The International Investment Position of the United States at Yearend 2007.” Survey of Current Business, 9. North American Free Trade Agreement. 1994. “Chapter Eleven.” Accessed February 2008 at http://www.nafta-sec-alena.org/ DefaultSite/index_e.aspx?DetailID=78. Pew Research Center. 2008, May 1. “Public Support for Free Trade Declines.” Accessed May 2008 at http://people-press.org/reports/ display.php3?ReportID=414. Public Citizen. 2000. “Lobbying, Advertising and Political Donations Surpass All Previous Records.” Accessed January 2008 at http://www. citizen.org/print_article.cfm?ID=6081. Public Citizen. 2009, January 8. “Election 2008: Fair Trade Gets an Upgrade.” Accessed January 2009 at http://www.citizen.org/ documents/ElectionReportFINAL.pdf. Reinsch, Bill. 2007, October 1. “Word from the President.” Accessed January 2008 at http://www.nftc.org/default.asp?Mode=DirectorDisplay&id=205. Roberts, Paul Craig. 2003, August 17. “Trade No Think.” VDARE. com. Accessed January 2008 at http://www.vdare.com/roberts/trade_ nothink.htm. Samuelson, Paul. 2004. “Where Ricardo and Mill Rebut and Confirm Arguments of Mainstream Economists Supporting Globalization.” Journal of Economic Perspectives 18:3 (Summer), 135 – 46. Accessed January 2008 at http://www.aeaweb.org/jep/contents/#7. Schlesinger, Robert. 2000. “GOP Colleagues Fail to Help Cook.” The Hill, 3. Schwab, Susan. 1994. Trade-Offs: Negotiating the Omnibus Trade and Competitiveness Act. Boston, MA: Harvard Business School Press. Sheinkman, Joel. 1994, March 16. “Testimony” to Committee on Finance, U.S. Senate, 103rd Congress, 2nd Sess. Accessed February 2008 at Federal Document Clearing House. Stiglitz, Joseph. 2005. “The Overselling of Globalization.” Globalization: What’s New. Edited by Michael M. Weinstein. New York: Columbia University Press, 235.

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Trowbridge, Alexander. 1967, July 31. U.S. Department of State Bulletin, 127 – 29. U.S. Bureau of the Census. 2009. Foreign Trade Statistics. Accessed February 2009 at http://www.census.gov/foreign-trade/statistics/. U.S. General Accounting Office. 2007, November 7. An Analysis of Free Trade Agreements and Congressional and Private Sector Consultations under Trade Promotion Authority. GAO-08 – 59. Washington, D.C.: GAO. U.S. House of Representatives. Committee on Ways and Means. 1994, September 27. Uruguay Round Trade Agreements, Texts of Agreements, Implementing Bill, Statement of Administrative Action, and Required Supporting Statements, 103rd Cong., 2nd sess., 1 – 2. U.S. Senate. Committee on Finance. 1987, June 12. Omnibus Trade Act of 1987, Report on S. 490, 100th Cong., 1st sess., Report 100 – 71, 2 – 3. U.S. Trade Deficit Review Commission. 2000. The U.S. Trade Deficit: Causes, Consequences, and Recommendations for Action. Washington, D.C.: GPO. Accessed January 2008 at http://govinfo.library.unt.edu/tdrc/ reports/reports.html. U.S. Treasury. 2009, January 16. “Major Foreign Holders of Treasury Securities.” Accessed February 2009 at http://www.treas.gov/tic/mfh.txt. “Victory for Bush on Fast Track.” 2002. CQ Almanac. Washington, D.C.: Congressional Quarterly. Accessed May 2008 at http://library.cqpress. com/cqalmanac/cqual02 – 236 – 10371 – 664226. Wallach, Lori. 2006, November 8. “Nationwide Candidates Win by Battling for New Trade Policies.” Hot Issues. Accessed January 2008 at http://www.citizen.org/hot_issues/issue.cfm?ID=1471. White, Marianne. 2007, November 27. “Ontario, Quebec Eye Trade Deal.” The Windsor Star, A-11. World Trade Organization (WTO). 1994, April 15. “Agreement Establishing the World Trade Organization.” Accessed May 2008 at http://www.wto.org/english/docs_e/legal_e/legal_ ehtm#wtoagreement. World Trade Organization (WTO). 2008. “Trade Profiles.” Accessed November 2008 at http://stat.wto.org/CountryProfile/WSDB CountryPFHome.aspx?Lang. Zeiler, Thomas W. 1992. American Trade & Power in the 1960s. New York: Columbia University Press. Zoellick, Robert. 2002, December 7. “Unleashing the Trade Winds,” The Economist, special report. Accessed January 2009 at LexisNexis Academic.http://www.lexisnexis.com/us/lnacademic/.

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2 Problems, Controversies, and Solutions

A

wide-ranging debate over future U.S. trade policy is under way in the United States. It involves officials in the executive branch and Congress, and a variety of private and public interest groups with stakes in trade policy. This chapter strives to introduce some of the key issues and parties to the debate, and to identify possible solutions. Readers seeking more information on the latest developments are encouraged to examine resources and Web sites mentioned in Chapter 7.

Background to the Debate During the administrations of Bill Clinton (1993 –2001) and George W. Bush (2001– 2009), U.S. officials pushed hard for freetrade agreements (FTAs). But these pacts differed markedly from the free-trade agreements envisaged by the classical economists and discussed in academic textbooks. Economists frequently write about FTAs as if they involve only eliminating tariffs and quantitative restraints (quotas) on goods moving between two or more countries. Such agreements, they say, could be written on the back of a postcard. The FTAs negotiated under Clinton and Bush were much longer, and contained hundreds of pages of legal text; NAFTA has 824 pages, the FTA with Singapore 1,586 pages, and the CAFTA-Dominican Agreement 3,725 pages. In addition to eliminating tariffs and quotas on trade in goods, these arrangements address services, finance, and information. They include dispute-resolution procedures, intellectual property protections, investment guarantees, government procurement, and various

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other provisions intended to establish rules for global business in the 21st century. Written by lawyers, not economists, these FTAs seek to facilitate access to markets and to accord foreign businesses treatment equal to that provided domestic businesses in the host country. Some say they should be more accurately labeled market-sharing agreements, rather than free-trade agreements, because they spell out in detailed language the terms of competition between domestic and foreign firms. While popular with international lawyers and business executives, these FTAs generated little enthusiasm in mainstream America. Even before the 2008–2009 recession, public opinion polls showed support for trade liberalization and globalization had declined during the Clinton and Bush presidencies. Citizens seemed less interested in how imports benefitted consumers than in the visible costs of globalization. Job layoffs, associated with rising imports and factory closings, generated headlines, and focused attention on trade-impacted individuals, industries, and communities. In January 2008, Fortune magazine released a poll of 1,000 respondents indicating that Americans were souring on free trade. Sixty-three percent believed international trade was bad for the United States because it resulted in loss of jobs and lower wages. Only 30 percent thought trade beneficial because it led to lower consumer prices. Seventy-seven percent were extremely or very concerned about the safety of imported products. Only 3 percent were unconcerned. The poll also revealed that by a 64-to-30 percent margin, Americans said they would be willing to pay higher prices on consumer goods to keep down foreign competition (Easton 2008). Other polls showed similar results (Public Citizen 2009a, 28–29). Many ordinary people associated manufacturing job losses— over 4 million from 2000 to 2008 — with rising imports from NAFTA and China (U.S. Bureau of Labor Statistics 2008). Fear of foreign competition was not limited to blue-collar workers. As corporations contracted out activities (outsourcing) and moved jobs overseas (offshoring), many white-collar workers and professionals also worried about employment opportunities. Alan Blinder, a prominent Princeton University economist, warned that 28 to 42 million service-sector jobs could move offshore (Blinder 2006). Helping to fan the flames of criticism was CNN commentator Lou Dobbs, an independent populist. In hard-hitting, nightly news programs, he attacked flawed trade agreements, faith-based free trade, and the outsourcing of American jobs to cheap labor

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countries at the expense of the middle class. Dobbs’s commentaries helped focus public ire on trade issues and elected officials in Washington (Fleischer 2005). Also contributing to the negative mood was a steady flow of product recalls and media headlines highlighting health and safety issues. Stories about Chinese toothpaste tainted with antifreeze and Chinese toys containing excessive amounts of lead revealed the hidden, and unforeseen, costs of globalization (Smith-Spark 2007). In an open unregulated world economy in which national regulatory standards and governance varied widely, consumers found themselves vulnerable to harmful deceptions. Certainly, expanding trade produced rapid growth and lower prices. But, it also enhanced income inequality and dislocations for those least able to cope and adapt. The consequence was to stir a farranging, and increasingly partisan, debate over how the United States should shape and regulate its trade in the volatile new age of globalization.

Future Trade Priorities What trade policies should the United States pursue? Hostility to one-sided trade agreements and globalization — the new fair trade sentiment — contributed importantly to the outcome of congressional elections in 2006 when Democrats took control of Congress. Trade remained an important issue in the 2008 elections. With stock markets declining and unemployment mounting, Democrats strengthened their congressional majorities and won the presidency (Public Citizen 2009a). During the presidential primaries, Democratic candidates generally criticized President Bush’s free-trade policies, and urged changes. Senators Hillary Clinton (D-NY) and Barack Obama (D-IL) both voiced opposition to FTAs negotiated with Colombia and South Korea, and urged renegotiation of NAFTA. They blamed the Bush administration for inattention to labor, safety, and environmental standards, and for failure to enforce existing U.S. trade laws against unfair practices. The Democrats urged expanded adjustment assistance to dislocated workers in order to lessen discontent and to prepare workers for better job opportunities. Obama, at heart an internationalist, said he recognized the reality of globalization and the benefits of trade, but insisted that existing trade agreements should provide reciprocal benefits.

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Concerned that the protectionist rhetoric of the primaries might be misinterpreted, his staff signaled to the Canadian government that criticisms of trade policy should be treated as political posturing, not as a statement of policy plans (Goldstein 2008). During the transition, Obama continued to straddle the conflicting trade debate. Labor supporters applauded his opposition to Bush’s bilateral FTAs, his promise to renegotiate NAFTA, and his pledge to enforce existing agreements. Business supporters noted that in selecting former Dallas mayor Ron Kirk, as U.S. Trade Representative, Obama had assigned the key trade-policy post to a free trader. What did these statements and appointments mean for Obama’s policies? His supporters did not know. Some insiders, such as former U.S. Trade Representative Mickey Kantor, forecast that an Obama administration would emphasize big multilateral and regional deals, not bilateral deals, as the Bush administration had done (Davis and Meckler 2008). Others suspected that the many controversies, and the deep divisions among Democrats in Congress on this issue, would force Obama to deemphasize trade and focus on other urgent matters, such as creating jobs and stimulating the economy (Drajem 2008).

Free Trade Fault Line U.S. presidents receive advice on trade policy from many sources. One recommendation, enjoying favor with Wall Street and the transnational business community, involves a renewed commitment to freeing trade and opening markets, and most importantly to avoiding protectionist actions. This approach has support in both major political parties, particularly among large business and financial campaign contributors. Many of them hope the Obama administration will continue the internationalist, trade-opening policies of Bill Clinton and George W. Bush, a Republican. In trade politics, the voice of transnational business is well represented by the Business Roundtable, the Chamber of Commerce, the U.S. Council for International Business, the Emergency Committee on American Trade (ECAT), the National Association of Manufacturers, and the National Foreign Trade Council, among others. These powerful lobbying groups insist that America must continue to provide trade leadership to open markets and respond to the challenges of globalization in a rapidly changing world. For them, the path out of the world recession involves

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American engagement with the global economy (Business Roundtable, 2009). In essence, big business wants government to continue trading assured access to the mature American market for similar business opportunities in foreign markets — especially, the highgrowth, emerging markets: Brazil, Russia, India, and China. The business agenda involves far more than trade in goods and agricultural products. Many free-trade supporters are service providers involved with banking, insurance, shipping and transportation, and software. Others seek foreign investment opportunities. To conduct business in the 21st century, global business wants national treatment in foreign countries. That is, it wants treatment equal to that received by domestic companies in those countries. From the standpoint of big business, the unresolved trade issues are not border problems, like tariffs, quotas, and customs regulations. They are internal regulatory issues involving such things as product standards, investment policies, protection for intellectual property, government procurement, and fair and effective dispute settlement procedures. The last item raises sensitive political and constitutional issues involving governance and the rule-of-law. Advocates for transnational business reject the argument that the United States should turn its back on foreign business opportunities and focus on rebuilding the domestic economy. They claim the United States is competing effectively in the world economy. Officials of the Business Roundtable, and other corporate leaders, cite statistics showing America’s world-class farmers, manufacturers, and service providers have made steady gains from expanding trade. More than 15 million U.S. jobs depend on exports, they say, and these typically pay 13-to-18 percent above the average wage. Big business also asserts that ordinary Americans benefit in multiple ways from imports. Imports hold down inflation and give consumers greater purchasing power. They provide jobs to millions of Americans in transportation, distribution, and retail. Imports even enable U.S. manufacturers to obtain lower-priced components and thus stay competitive globally while producing in America, advocates for the large corporations claim (McGraw 2007). Transnational corporations believe that trade agreements should cover investment issues because the two subjects are inseparable. They want to move capital freely around the world in response to global market conditions and opportunities. Big business says outflows of foreign direct investment benefit U.S.

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exports. Exports to foreign affiliates of U.S. firms account for nearly one-quarter of U.S. exports of goods. U.S. companies with foreign investments, they say, account for two-thirds of U.S. exports. Meanwhile, foreign investments in the United States employ 5.3 million workers (McGraw 2007, Business Roundtable 2009). In essence, business proponents of free trade claim that what is good for transnational business is good for the world, and the United States. The Council for International Business, the U.S. affiliate of the International Chamber of Commerce that represents 300 multinational corporations, says it desires to promote an open system of global trade, finance, and investment in which the private sector can prosper and contribute to economic growth, human welfare, and protection of the environment (U.S. Council for International Business 2008). Big multinational corporations strongly oppose “Buy-American” policies intended to shelter the domestic producers from foreign competition. Such initiatives, they say, would send the wrong signal to trading partners, inviting them to adopt buy-local rules and thus undermining global commerce (U.S. Council for International Business 2009). Business support for free trade and open markets is not limited to transnational firms eager to produce globally. The free traders include farm groups and food processors eager to end trade barriers to food product exports, U.S.-based manufacturing firms anxious to obtain cheap components, and retailers such as Wal-Mart, reliant on foreign supplies. Worried that grassroots America may embrace isolationism and turn its back on worldwide trade and investment opportunities, lobbyists for big business seek to blunt the appeal of fairtrade and protectionist solutions. The U.S. Chamber of Commerce pledged $60 million in the 2008 elections to defeat populist types (Hamburger 2008). When economic conditions in the United States worsened during 2008 and early 2009, transnational business, and its internationalist allies, sought to make the case that the overwhelming majority of citizens benefit greatly from international economic engagement (U.S. Chamber 2009). They urged newly-elected leaders to reject Smoot-Hawley type unilateralism that many economists think worsened the Great Depression (Bergsten 2008b). On the other side of the trade priorities debate is a loose coalition of small and medium-sized businesses, labor unions, and activists representing environmentalists, small farmers, and consumers. This alliance includes liberals and conservatives, small-town

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Republicans, and labor-oriented Democrats. Industries such as steel and textiles also are often found on the protectionist side of the debate. These groups agree generally on the need to delay future trade negotiations and to defeat proposed free-trade agreements. Some of them favor vigorous enforcement of U.S. trade-remedy laws to offset injury caused by foreign dumping and export subsidies. For a discussion of these quasi-judicial laws, see later in this chapter. Opponents of further trade liberalization dispute the beneficial claims of free-trade enthusiasts. These critics say the transnational firms overstate the gains from trade and minimize losses. They hold transnationals responsible for offshoring large numbers of manufacturing, research, and middle-management jobs. The trade skeptics blame the large firms for the huge and growing trade deficit with China (“NAM Committee 2005). They also criticize the multinationals opposing “Buy-American” purchasing requirements in government spending programs. Global Trade Watch says the real reason is that the big companies have moved much of their production to low-wage foreign locations and may benefit less from “Buy-American” government spending (Public Citizen 2009b). Organized labor, which has lost millions of members in manufacturing industries like automobiles and steel, castigates big corporations for shipping 525,000 white collar and 3 million manufacturing jobs overseas since 1992. According to the AFL-CIO, business-led globalization drives down labor standards around the world, as the private sector seeks to avoid regulations and responsibilities to workers and communities (AFL-CIO 2009). Labor is especially concerned about the impact of free trade and globalization on working people’s incomes. It blames America’s massive trade deficit accounts for massive job losses in the manufacturing sector. It claims that wages for nonsupervisory workers (80% of the labor force) have stagnated, while the White House enthusiastically pushed free-trade agreements. Economist Lawrence Mishel of the Economic Policy Institute, which has close ties to organized labor, calculates that trade has probably cost the median household between $2,000 and $6,000 in annual earnings. He argues that cheap shoes, clothes, and consumer goods do not compensate workers for the burdens of globalization (Mishel 2007). Organized labor is eager to restore balance to trade policy. It says the Bush administration aggressively pursued the interests of multinational corporations — rules on investment, intellectual

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property, government procurement, and service sector access— while ignoring workers rights and the environment. According to Thea Lee, the AFL-CIO’s Policy Director, U.S. trade policy has advanced corporate rights at the exclusion of other legitimate concerns (Lee 2007). Organized labor hopes that the Obama administration will be more sensitive to the circumstances of domestic workers. Representatives of small and medium-sized businesses agree that the U.S. government has advanced the free-trade agenda of transnationals at the expense of smaller firms and their workers. Many small and medium-size businesses (having fewer than 500 employees) are rooted in local communities, have local ownership, and retain close ties to their workers, who often are unionized. Owners of such firms have little desire to produce in foreign countries and sell in global markets. They blame large U.S. multinational corporations for using free trade to break the power of unions and reduce the wages of workers in their effort to remain globally competitive (Roeser 2003). Associations representing import-sensitive manufacturers urge the Obama administration to replace the current flawed trade model and level the playing field for domestic manufacturers. Calling the current world trading system a “Ponzi scheme dwarfing Bernie Madoff’s,” Kevin Kearns of the U.S. Business and Industrial Council exhorts President Obama to ensure that any stimulus plan for the American economy create new jobs in this country, and does not reward consumers for buying foreign-made goods (Kearns 2009). Auggie Tantillo of the American Manufacturing Trade Action Coalition (AMTAC) urges the U.S. government to use access to its market as a lever to remove unfair foreign trade practices such as China’s WTO-illegal export subsidies and artificiallycheap currency (AMTAC 2008b). At the local and state level, a variety of activists engage the trade debate. One coalition of 347 national, state, and local organizations — mostly environmental, faith, labor, and consumer groups — has urged President Obama and Congress to support campaign promises to reform U.S. trade policies. The activists blame the current free-trade model and mismanaged trade deals for soaring trade deficits, lost jobs, environmental destruction, lost local taxes, and unsafe products. The activists accuse the federal government of trading away self-determination, personal freedom, and democratic processes (Citizens Trade Campaign 2009). The Alliance for American Manufacturing, an advocacy group

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funded by organized labor and some domestic manufacturers, has also sought to rally grassroots opinion. During the 2008 elections, it held a series of town-hall meetings in major cities featuring television star John Ratzenberger, who played Cliff in the hit series Cheers. He told voters that they must hold politicians accountable for flawed trade policies contributing to the loss of American manufacturing jobs (Majors 2007).

Future Trade Negotiations With the world in a recession, and nations seeking to protect domestic jobs, trade negotiations did not seem an immediate priority for many elected officials in 2009. Despite its focus on domestic recovery and reforming the financial system, the Obama administration faces pressure to resume trade negotiations at the multilateral, regional, and bilateral levels. Pascal Lamy, the head of the WTO, has urged Obama to engage the international community through negotiations, rather than building walls as the United States did during the Great Depression of the 1930s (Lamy 2008). If history is any guide, the Obama administration at some point will ask Congress for a new mandate of trade negotiating authority. Trade-promotion authority (TPA), or fast-track, as it was previously called, involves a deal between the executive and the Congress to streamline and simplify the congressional approval process. In return for extensive consultations during the negotiations, Congress agrees to vote on a trade agreement promptly and without amendments. USTR desires fast-track authority so that foreign negotiators can make their best offers, knowing that Congress will not try to shake them down for additional concessions after the agreement is signed. Key members of Congress seem to like fast-track because the process involves consultations. Congress thus has some opportunity to influence negotiations before being presented with a signed agreement. Fast-track came into existence with the 1974 Trade Act. For 40 years after passage of Cordell Hull’s reciprocal trade act in 1934, Congress had ceded tariff reduction power to the executive. But, during the Kennedy Round Congress, as noted in Chapter 1, Congress concluded that the Johnson administration had gone beyond tariff-cutting and had negotiated on nontariff issues without specific approval. Congress balked on renewing negotiating authority until 1974, when the Nixon administration proposed a

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fast-track compromise. It authorized the president to negotiate agreements in consultation with Congress. After entering into a trade agreement, the president was required to submit implementing legislation. The House and Senate then had 90 legislative days to vote on the bill. No amendments were allowed in committee or upon the floor, thus forcing an up-or-down vote on the entire bill (Eckes 1999). The original fast-track legislation lapsed in 1994. By then, the United States had entered into the Uruguay Round agreements setting up the World Trade Organization and the North American Free Trade Agreement (NAFTA). A Republican-controlled Congress, headed by Speaker of the House Newt Gingrich, refused to renew fast-track authority for President Bill Clinton. However, after the election of President George W. Bush, the Republicancontrolled Congress chose in 2002 to renew fast-track for five years. It was relabeled trade promotion authority (TPA). The legislative initiative took 18 months, and succeeded only after the Bush administration agreed to expand benefits for trade-displaced workers. This enabled a number of probusiness Democrats to support the trade promotion authority. TPA expired on July 1, 2007, and a Democrat-controlled Congress took no action to renew it. In the 2006 congressional elections, outsourcing and free trade had been controversial, and the new Democratic leadership in Congress had no disposition to give Bush another blank check on trade (Smith 2008). Should Congress give the Obama administration this authority? To U.S.-based transnational business, the renewal of presidential trade negotiating authority is important. Their argument is a pragmatic one. U.S. exporters pay no duties when they sell to free-trade partners, but they pay an average of 14 percent to countries not having free-trade agreements with the United States (NAM 2007a). In the absence of a free-trade agreement, this gives European and Asian competitors who do have free-trade pacts a significant cost advantage. Consequently, U.S. business wants to level the playing field. The Business Roundtable claims that between 1994 and 2002, when the president did not have fasttrack authority, U.S. exporters lost market share in Latin America, Africa, and Asia (McGraw 2007). Eager to open global markets for manufactures, farmers, and service providers, big business wants the executive branch and Congress to work together on trade issues in a bipartisan way (Reinsch 2007a; Business Roundtable 2009).

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On TPA renewal, there is no clear consensus. Even the business community is divided. Opposing reauthorization are groups representing domestic manufacturers. Their arguments include constitutional concerns. Auggie Tantillo, president of AMTAC, argues that fast-track is a blank check for the executive branch to offshore U.S. industries. In his view, trade promotion authority allows the president to usurp constitutional powers granted to the legislative branch to regulate commerce. It benefits special interests who write big checks for political campaigns, not ordinary Americans (AMTAC 2007, 2008a). Labor unions also oppose TPA. The AFL-CIO claims that Bush-administration free trade policies resulted in bad agreements, spiraling deficits, stagnant wages, and lost jobs. Organized labor wants global trade rules that link protection for workers’ fundamental human rights to market access. It argues there must be a better balance between domestic rule-making and international obligations. This way, trade agreements would not jeopardize the ability of governments to provide services and to regulate public health, consumer safety, the environment, and labor markets (AFL-CIO 2007a). Environmental and consumer groups offer specific examples of how trade agreements have trumped other concerns. Earthjustice points to Chapter 11 of the NAFTA agreement, which allows investors to sue state governments if it appears that they have taken actions that might infringe the terms of the trade agreement. In one much-discussed case, Methanex, a Canadian firm that produced a gasoline additive MTBE, sued California in 2001 when it banned the chemical saying it was poisoning supplies of drinking water (Earthjustice 2001). Lori Wallach, the director of Public Citizen’s Global Trade Watch, asserts that fast-track trumps constitutional checks and balances, and flattens federalism. Elected officials at the federal, state, and local levels have difficulty holding U.S. trade negotiators accountable for concessions. In her view, corporate lobbyists call the shots (Wallach 2007a, Wallach 2007b). Whether or not the Obama administration can gain support for trade negotiations may depend on a group of fair-trade Democrats, such as Sherrod Brown of Ohio and Byron Dorgan of North Dakota. They have long opposed what they consider job-killing trade pacts and flawed free-trade policies. They and colleagues want to develop a trade policy that works for workers and U.S. businesses, not simply for big business. The fair-trade Democrats

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seek to revamp trade agreements, and enhance oversight and accountability by including benchmarks. They propose giving the Treasury Department greater authority to address China’s currency manipulation, and product safety. These legislators say they favor more trade, but they want trade that produces positive results, not hazardous products, extensive job losses, and gargantuan trade deficits. They argue that future trade agreements should have enforceable environmental, labor, and anticounterfeiting standards (Brown, Sherrod 2007). In light of the wide opposition to open-ended negotiating authority, the Obama administration could choose to avoid a bitter fight over this procedure. It might focus instead on building congressional support for individual agreements, an approach recommended by Charlene Barshefsky, a former USTR in the Clinton administration. She argues that the focus on fast-track is misplaced and its value in negotiations overstated (Barshefsky 2008).

Pending Agreements One vexing issue is how to handle bilateral agreements that the George W. Bush administration negotiated with Colombia, Panama, and South Korea. In early 2008, Bush urged Congress to approve these three pacts in order to level the playing field, provide access to nearly 100 million customers, and promote America’s strategic interests. Failure to pass the Colombian agreement, he warned, would “embolden the purveyors of false populism in our hemisphere,” a slap at Venezuelan leader Hugo Chavez (Bush 2008). Bush’s appeal failed to sway a Congress caught up in election-year politics. Organized labor, a powerful voice in the Democratic presidential primaries, considered Bush out of touch with the concerns of working families and it criticized violence in Colombia against labor leaders. Congressional leaders dismissed Bush’s call for an early vote on Colombia. When the president insisted on submitting the Colombia FTA to the House of Representatives in April under fast-track rules, Speaker Nancy Pelosi acted to delay consideration. By a 224 to 195 vote, the House voted along partisan lines to suspend the 90-day voting requirement in fast-track. Pelosi gained the support of 6 Republicans and lost only 10 Democrats. Bush and fellow Republicans denounced the unprecedented move. Democrats saw it as a way

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to avoid dividing the party over a trade issue in a presidential election (Hulse 2008).

U.S.– Colombia FTA What are the merits of the controversial Colombia FTA? A country with 46 million consumers, Colombia is the second-largest country in South America (after Brazil), but it accounts for only 0.5 percent of U.S. trade. With two-way trade amounting to over $14 billion, the FTA would be the biggest in the Western hemisphere since NAFTA was approved in 1994. According to the U.S. trade representative, over 80 percent of U.S. exports to Colombia would become duty-free immediately and the rest over 10 years. The pact would create new opportunities for farmers and ranchers. U.S. exports of beef, cotton, wheat, and soybeans would immediately gain duty-free status. Also, the FTA offers strong protections for U.S. investors, including a binding international arbitration mechanism, and expanded access for service providers, including financial services. There would also be greater protection for intellectual property rights, an open and competitive telecommunications market, and increased transparency in dispute settlement mechanisms. The agreement, USTR says, includes internationallyrecognized labor rights and commitments to protect the environment (USTR 2008c). Implementation of the pact was expected to have few adverse effects for U.S. industry and employment. Sugar imports might increase. Export-oriented U.S. agriculture anticipated big gains. When fully implemented, the FTA was expected to boost profits of the average U.S. pork producer by 14 percent (Witness for Peace 2006; National Pork Producers 2007). Some opponents in Colombia feared free trade in agricultural products —wheat, pork, soybeans — would drive thousands of campesinos off the land, as NAFTA had done in Mexico (“Faces of Colombia” 2006). The principal reasons for the AFL-CIO’s vigorous opposition relate to domestic circumstances in Colombia. Organized labor said that in 2006, 72 Colombian trade unionists were murdered for exercising basic labor rights, and in 2007 another 39 were killed, the highest rate in the world. Opponents of the FTA allege that Colombia’s government has ties to right-wing paramilitary groups blamed for the killings. U.S. labor unions lack confidence in Colombia’s commitment to meet International Labor Organization standards. In effect, labor has chosen to link its support of the

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trade agreement to a resolution of specific human-rights concerns (AFL-CIO 2008b). Despite the intense opposition of unions, and their close ties to congressional Democrats, business took up the fight for the pact. Caterpillar, Citigroup, and Wal-Mart teamed up to mobilize business support under the auspices of the 1,000-member Latin American Trade Coalition, an affiliate of the U.S. Chamber of Commerce (Heflin 2008). Supporters of the pact have pushed the national-security argument. They allege that refusal to approve the agreement would be a propaganda triumph for Venezuelan dictator Chavez, and a catastrophic setback for U.S. plans to promote a broader free-trade arrangement in the Americas.

U.S.–Panama FTA At first impression, the proposed FTA with Panama appears less controversial than the one with Colombia. Panama is a small country with a service-based economy, centered on the Panama Canal, and it has longstanding economic ties to the United States. The U.S. dollar is Panama’s principal currency. Moreover, the U.S.–Panama FTA has strong champions among the service industries. Fedex and UPS want the pact to better protect their operations. The service industries say the agreement would promote a secure and predictable legal framework for U.S. investors in Panama (USTR 2007a). Firms eager to participate in expansion of the Panama Canal, like Caterpillar, see vast business opportunities. However, the deal hit an obstacle when Panama elected a legislative leader accused of killing a U.S. soldier in 1992. Other concerns related to labor issues and to Panama’s status as a tax haven for those seeking to dodge U.S. income taxes (Cohn 2009). The pact languished at the end of the Bush administration, but the Obama administration has indicated it wants to win congressional approval (Lacey 2007; Rosenberg 2009).

U.S.–South Korea FTA The proposed free-trade agreement with the Republic of Korea, the world’s tenth largest economy, is far more significant economically and strategically. South Korea has 49 million consumers with a per capita gross domestic product of nearly $25,000, approximately double that of Mexico. South Korea is America’s

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seventh largest trading partner, and its sixth largest export market for agricultural products (USTR 2006). The pact pleases many in big business. The U.S.–Korea FTA Business Coalition, which includes 500 businesses, among them Boeing, Chevron, Citigroup, and UPS, applauds the agreement (US-Korea FTA 2008). It would make almost 95 percent of goods trade duty-free within three years, and eliminate significant nontariff market access barriers to providers of goods, services, and investments (USTR 2007b). The NAM also is enthusiastic about the intellectual-property provisions. John Engler, its president, says approval of the agreement would be a plus for most U.S. industries (NAM 2007b). But Democrats in Congress chose to oppose the South Korean FTA. They say it does not address effectively South Korean nontariff barriers blocking U.S. exports of manufactured products. They are particularly concerned about the one-sided relationship in automotive trade and the labor provisions. South Korea exports more than 700,000 cars to the United States but imports fewer than 5,000. The AFL-CIO complains that the pact does more to protect the interests of multinational corporations than to promote equitable development and balanced trade (AFL-CIO 2007b). They also observe that South Korean labor leaders oppose the FTA as it maximizes profits while putting the working class in poverty and exploitation. U.S. agriculture, which has powerful friends in Congress, was disappointed with the results. Because of intense opposition from militant farmers, South Korea refused to negotiate on rice. It also declined to remove a ban on beef imports from the United States imposed after concerns about mad-cow disease. This disturbed Senator Max Baucus (D-MT), a key congressional gatekeeper. As chairman of the Senate Finance Committee, which must approve the agreement, Baucus had the power to block congressional consideration. As a senator from Montana, a major cattle raising state, Baucus was understandably sensitive to the concerns of the National Cattleman’s Association that the agreement did not provide for a resumption of commercially viable beef trade. South Korean president Lee Myung-bak sought to break the stalemate during a state visit to the United States in April 2008. He announced that Seoul would lift U.S. restrictions on beef. In South Korea, farmers took to the streets in protest, and the South Korean government backed away from its pledge to open the beef

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market. As this volume went to press, the outcome of the South Korean agreement remains in doubt (“Where’s the Beef?” 2008). The Obama administration wants to renegotiate the agreement to improve terms for U.S. automakers and beef exporters, but South Korea has refused to reopen the agreement.

WTO Negotiations Another important dimension of the wide-ranging trade debate relates to the stalled Doha Development Round of multilateral trade negotiations. The WTO launched the so-called Doha Round in November, 2001, at a meeting in Doha, Qatar. One important goal was to integrate the least developed countries into the global trading system by providing market access for their agricultural exports and manufactures. Nations also committed to phasing out all forms of export subsidies and trade-distorting domestic support as part of the agricultural negotiations. In manufactures, the round sought to reduce or eliminate tariffs and nontariff barriers. It was expected, in turn, that the developing countries would consent to terms of access for services and to greater protection of intellectual property. As discussed in Chapter 3, a stalemate developed between developing and developed countries, and the Doha Round has floundered. Developing countries, led by Brazil and India, resisted opening their markets to services and manufactures without improved opportunities for sales of developing-country agricultural exports. However, Japan and the European Union oppose liberalizing agricultural trade, and some say the United States did not offer to reduce farm subsidies sufficiently. Despite disappointments, many in the transnational business community continue to stress the importance of a breakthrough agreement in the Doha round with the 153 members of the WTO. Big business desires a broad agreement that includes liberalization in trade, services, and agriculture. To break the deadlock, some veteran observers, such as Bill Reinsch of the National Foreign Trade Council, suggest that it may be time to drop agriculture, and to seek free trade with Europe and Japan in manufactures and services that will stimulate job growth in the United States (Reinsch 2007b). For the politically powerful farmers, this suggestion is unappealing. Farmers have long insisted that their support for the Doha Round hinges on obtaining substantial export opportunities. For

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decades, big U.S. agriculture has sought the reduction or elimination of export subsidies and state trading, harmonization of trade-distorting domestic subsidies, and expanded market access to foreign markets. The American Farm Bureau, which seeks to represent all farmers and be the voice of agriculture, supports WTO negotiations to create a fair and level playing field for U.S. farmers (American Farm Bureau 2008). But recognizing that other countries are reluctant to open up their agricultural markets as part of a multilateral agreement, the farm bureau has pushed for bilateral deals, as well as renewed trade promotion authority for the president (U.S. Department of Agriculture 2007). The powerful farm lobby traditionally has exerted significant clout on trade negotiations through Congress. Chairman Max Baucus of the Senate Finance Committee and ranking Republican Chuck Grassley of Iowa, both from agricultural states, can be counted on to stand up for protrade farm interests when their committee reviews any trade agreement. While big agriculture generally supports trade negotiations, family farmers do not. Groups like the National Farmers Union (NFU), which represents family farmers and ranchers, have vigorously opposed renewal of trade negotiating authority and conclusion of the WTO round. NFU complains that the results of FTA negotiations have consistently failed to match the promises and rhetoric of free-trade exponents. NFU President Tom Buis has accused U.S. trade negotiators of seeking to trade away the interests of America’s family farmers and ranchers in the Doha round for the benefit of multinational trading companies. He also argues that America’s family farms are being forced to compete with countries that do not have to meet our high labor, environmental, and health standards (National Farmers Union 2009). The National Family Farm Coalition (NFFC) applauded the failure of Doha Round negotiations in August 2008. It favors an agricultural trade policy based on principles of food sovereignty emphasizing local farms rather than the free-trade model that puts farmers around the world on a race to the bottom. It blames the transnational corporate trading companies for promoting free trade policies that expose consumers to harmful and poisonous food products, while driving small family farmers off the land (National Family Farm Coalition 2007, 2008). Organized labor has little positive to say about concluding the Doha negotiations. It is not a priority. Before the United States removes remaining trade and investment barriers, labor wants

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the government and the private sector to improve domestic education, training, research, and infrastructure so that companies can remain in America and compete successfully in the global economy (Lee 2008). While the Obama administration may choose to invest its negotiating resources in an effort to salvage the Doha Round, many experts believe the multilateral approach is no longer viable. The balance of power in the WTO has shifted from developed countries in the Atlantic region to developing countries led by Brazil, China, and India. One blue-ribbon panel of former trade officials has urged the United States to emphasize pluralistic agreements on specific topics with like-minded countries. One example might be an information technology agreement under WTO auspices. The group has also urged Obama to focus on helping bilateral free-trade agreements evolve into broader regional arrangements, an approach that could reenergize regional FTAs for Latin America, the Middle East, and the Asia Pacific (Yerkey 2008).

Bilateral and Regional Trade Negotiations Big business is likely to keep pushing the U.S. government to engage the world and knock down market barriers abroad despite adverse economic conditions in many markets (U.S. Chamber 2008b; Business Roundtable 2008). Leaders of the politicallypowerful Consumer Electronics Association, the Motion Picture Association of America, and the Recording Industry Association of America are also strong supporters of the bilateral approach. They argue bilateral trade agreements would eliminate harmful tariffs, reinforce America’s commitment to strong intellectual property rights, and establish a level playing field for U.S. workers by insisting on greater standards and transparencies abroad. The result would benefit our industry, economy, artists, and consumers (Shapiro 2008). In such circumstances, the Obama administration may choose to develop a new template for bilateral and regional trade negotiations. Critics of Bush’s approach claimed U.S. negotiators pursued a cookie cutter approach (American Friends Service Committee 2006; Levin 2005). Since embarking on the bilateral FTA approach with Israel, Canada, and then NAFTA, the United States developed a comprehensive formula for FTAs that involved far more than trade. In each FTA, the United States proposed to negotiate on tariffs, nontariff barriers, agriculture, intellectual property,

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services, and investments. Among the goals in each agreement were promoting transparency in government procurement, liberalizing finances and services, promoting privatization, and protecting investors from discrimination. The agreements sought to encourage reform and openness, strengthen regulatory environments, and promote democratic decision-making. Obama’s allies think negotiators should give greater attention in trade pacts to labor, environmental, and safety issues, and to monitoring enforcement than the Bush administration did. Populist Senate Democrats, led by Sherrod Brown and Byron Dorgan, have proposed that FTA implementing legislation contain benchmarks for gauging the agreement’s impact on U.S. jobs, wages, exports, and effects on labor and environmental conditions. If the targets are not met, legislators might force a vote on withdrawing from the FTA (Cohn 2008). Obama and Congress may also choose to rethink the Bush administration’s emphasis on using trade agreements to advance foreign policy objectives. During the Bush years, foreign policy goals influenced the choice of FTA partners. Among the U.S. goals were strengthening strategic relationships and promoting reform in partner countries (U.S. General Accounting Office 2007). After the September 11 attacks, the Bush administration proposed a Middle East free trade initiative, and pursued free-trade initiatives with a number of moderate Arab countries, including Morocco, Bahrain, Oman, and the United Arab Emirates. USTR made specific reference to national security issues in announcing its intent to negotiate with Oman and Panama. With Morocco, the United States suggested that the FTA would add momentum to political reforms. With members of CAFTA and the Dominican Republic, as well as the Andean countries, the United States wanted to promote free-market reforms, deepen democracy, strengthen the rule of law, and promote sustainable development. With South Korea, the United States sought to strengthen regulatory transparency. Many of the bilateral and regional initiatives related to broader efforts to achieve regional free-trade agreements. The negotiations with Andean countries, CAFTA, and the Dominican Republic complemented the broader Free Trade for the Americas initiative. Indeed, the negotiators contemplated that CAFTA might be folded into the Free Trade Agreement for the Americans. The Bush administration also considered negotiations with Asian and Middle Eastern countries part of broader regional undertakings.

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Critics of this approach, such as Dorgan, question whether foreign-policy goals should continue to shape trade policy. They argue that current trade policy is “soft-headed foreign policy” (Dorgan 2003). It exposes American workers and factories to import competition in order to advance unrealistic strategic advantages, and the interests of large corporations and investors. Former U.S. trade negotiator Robert Cassidy offers similar criticisms (Cassidy 2009). While key officials in Congress and the executive branch seem to think the multitrack approach is an effective way to lower barriers, some academic economists and supporters of the multilateral approach disagree. They claim it undercuts existing commitments to nondiscrimination and promotes confusion. One prominent critic is Jagdish Bhagwati of Columbia University, a free-trade enthusiast and consultant to the World Trade Organization. When Bush’s chief trade negotiator Robert Zoellick first announced his competitive approach, Bhagwati criticized a lemming-like rush into bilateral agreements that posed a deadly threat to the global trading system. He predicted that the proliferation of bilateral pacts would result in a spaghetti bowl of rules and tariff schedules. He also accused Washington of adopting bilateral FTAs to advance the interests of domestic lobbyists and interest groups. On this point Bhagwati was apparently thinking of provisions in agreements relating to environmental and labor standards, protection of intellectual property, and a ban on the use of capital controls (Bhagwati and Panagariya 2003). Defenders of the FTA approach, such as Daniel Griswold, an analyst at the Cato Institute, a free-trade oriented think-tank in Washington, D.C., claim that FTAs can serve as useful templates for broader multilateral negotiations. Signed bilateral and regional agreements prevent backsliding in hard times, thus assuring foreign investors that reforms will remain permanent. From this perspective, any agreement to remove trade barriers promotes freedom and development (Griswold 2003).

Debating the Gains and Losses from Trade The ongoing public debate over trade policy also focuses on how trade liberalization has benefited, or harmed, American workers

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and consumers. Not surprisingly, USTR claims that exports have risen faster to countries with free-trade agreements than to nonfree-trade agreement countries. USTR also estimates that annual incomes in the United States are $9,000 higher per household ($1 trillion total) as a result of trade liberalization since 1945 (USTR 2008a). The USTR concludes that exports of manufactures provide an estimated 5.7 million jobs in the United States, including one in six manufacturing jobs. Agriculture exports (including processed food) provide 806,000 jobs. Also, jobs supported by exports of goods pay more than the U.S. national average; an estimated 13 percent to 18 percent more. Based on this, USTR suggests that further reductions in trade barriers will spur the creation of more, higher paying jobs in the United States. And, because services account for 8 out of 10 jobs in the United States, they could benefit significantly from the conclusion of a successful Doha Round. And, if the remaining barriers to trade flows were eliminated, the USTR has asserted this would add another $500 billion to annual income or $4,500 per U.S. household (Schwab 2007). Opponents of the trade liberalization program challenge USTR’s numbers and its analysis. Josh Bivens of the Economic Policy Institute, affiliated with organized labor, disputes the claim that trade liberalization has produced income-gains of $1 trillion. He says the economic gains from the integration of the U.S. economy with a much poorer global economy are quite small. He accuses some zealous free traders of reaching beyond the evidence to make a case for trade liberalization (Bivens 2007a, 2007b). Citizen Trade Watch, an affiliate of consumer advocate Ralph Nader’s organization, also rebuts USTR’s principal claims. It argues that trade liberalization has been harmful to U.S. workers and costly to consumers. While USTR claims domestically that trade agreements boost exports more than to non-FTA countries, the Nader organization retorts that claim is valid only if the USTR ignores Mexico, Canada, and Israel. These are the three FTA countries with which the United States has had large deficits. Indeed, Citizen Trade Watch claims that U.S. trade officials know that trade agreements are more beneficial to trading partners. In a speech to a South Korean audience, Deputy USTR Karan Bhatia denied the United States would get the bulk of the benefits from a FTA. History, he said, shows that the bilateral trade surpluses of our FTA trading partners go up (Wallach 2007b; Bhatia 2006). In congressional testimony, Citizen Trade Watch Director Lori Wallach has explained that the average American worker makes

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only a nickel more per hour, after adjustment for inflation, than in 1973 before Congress passed the fast-track negotiating authority. In the absence of trade agreements that place American workers in a race-to-the-bottom with low-wage workers worldwide, she asserts that U.S. workers would see wage increases that more closely track productivity improvements. She charges that the free-trade pacts have been used to extend drug patent protections from 17 to 20 years, effectively providing wind-fall patent protectionism to the drug industry at the expense of consumers (Wallach 2007b). As noted earlier, other critics of government trade policy claim it has weakened the nation’s manufacturing base and contributed to the loss of more than 3 million manufacturing jobs since January 2001. Since implementation of NAFTA in 1994, the textile and apparel industry has lost 1.1 million jobs. Defenders of the textile industry say the jobs lost typically pay 194 percent of jobs in the leisure and hospitality sectors, where many dislocated workers end up (McMillion 2008).

Responding to China One of the most difficult issues facing U.S. leadership is how to handle the complex relationship with the People’s Republic of China. That country is ruled by the Communist Party, which tolerates little dissent, and is viewed by the Pentagon as a strategic rival. Over the last two decades, China has also become one of America’s leading trading partners. In 2007, China replaced Canada as the leading source of U.S. imports, and in 2008 supplied $337.8 billion of goods. But while Americans imported more and more toys, apparel, electronics, and other products from China’s factories, U.S. exports to China lagged. In 2008, the United States exported only $71.5 billion for a bilateral deficit of $266.3 billion, the largest deficit ever recorded with a single country (U.S. Census 2009). One firm, the giant retailer Wal-Mart, accounts for a substantial portion of the deficit (Wal-Mart 2007). The unbalanced trading relationship, which has continued for more than 20 years, has stirred controversy and aroused calls for a unilateral response. Critics note that approximately half of the total U.S. trade deficit in manufacture is with China. The deficit is not confined to cheap-labor manufactures. In 2008, the United States ran an advanced technology deficit of $72.7 billion

Responding to China 59

with China, evidence that Chinese exports have become increasingly sophisticated (U.S. Census 2009). This pattern reflects the fact that many major companies are shifting research and development to East Asia. Since 2000, more than 700 foreign companies have opened research and development (R&D) facilities in China, including 8 of the 10 largest R&D spending companies in the world (Atkinson 2007). As a result of the one-sided trade, China has accumulated huge hard-currency reserves of over $2 trillion (CIA 2009). China then invests the dollar reserves in U.S. treasury bonds and other assets, helping to keep interest rates low, so that American consumers can continue buying Chinese goods (Bradsher 2009). What explains the persistent trade deficit? One factor is cheap Chinese labor. Hourly compensation costs in China, while rising, are about one-eighth of U.S. levels (Holland 2009; Lett and Banister 2006). Globalization has enabled large transnational corporations to make use of China’s cheap labor for manufacturing products to serve global markets. Chinese workers frequently work long hours in unsafe and unhealthy conditions. Other explanations for the deficit involve China’s government policies. Some, such as Robert Cassidy, a former USTR negotiator, blame China for manipulating its currency, the renminbi (Cassidy 2009). It remains cheap, perhaps undervalued as much as 40 percent (China Currency Coalition 2008). This benefits Chinese exports and provides jobs in export-competing industries for young people eager to leave agricultural villages. It promotes social stability in China. Another interpretation focuses on various unfair trade practices. These are described in USTR’s annual reports to Congress, the National Trade Estimate Report on Foreign Trade Barriers. These official reports detail China’s problems with intellectual property enforcement, subsidies, industrial policy, and import and export restrictions (USTR 2008b). During the global recession that began in 2008, China has taken additional steps to aid exporters with grants and cheap loans in an effort to preserve jobs and maintain political stability (Engardio 2009). What should be done, if anything? Many economists say that consumers in high-income countries are big winners from Chinese export production. They purchase large quantities of inexpensively-priced Chinese televisions and cameras, clothing, footwear, and toys. In August 2007, the Club for Growth released a petition, signed by 1,028 of America’s top economists, opposing

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protectionist action against China. The economists argued that expanding trade with China had led to strong job growth, higher productivity, more affordable goods, and a higher standard of living for residents of both countries (Club for Growth 2007). The U.S. business community appears divided over the onesided trading relationship with China. Big business, which has invested heavily in the China relationship, does not want to rock the boat. It counsels engagement and dialogue, observing that the proportion of our global trade deficit coming from East Asia is less than a decade earlier, and that the “Made in China” label is misleading. Multinational companies from Japan, South Korea, Taiwan, the United States, and other countries use China as the final assembly point for their global supply chains. A decade ago, many of these goods probably said “Made in Japan” (U.S.–China Business Council 2009). Big business also emphasizes future opportunities in a rapidly growing Asia. The U.S.–China Business Council, whose leadership board includes representation from Boeing, Caterpillar, Dow, Fedex, Fluor, Ford, Motorola, Proctor and Gamble, and Wal-Mart among others, advocates a balanced approach to trade relations with China, one that seeks to remove trade barriers. They would like to see greater access to the China market, more regulatory transparency, and better intellectual property rights protection for foreign firms operating in China. But, the USCBC has opposed retaliatory measures against China for its trade surpluses and currency practices, claiming these will do more harm than good. It holds out the prospect of increased U.S. service exports over the next decade. In 2007, the United States ran about a $5.4 billion surplus on service trade with China. USCBC cites an economic study that the surplus in services could rise to $60 billion by 2015 (U.S.–China Business Council 2009; China Business Forum 2007). Small and medium-sized manufacturers based in the United States generally disagree with trade policies facilitating Chinese exports to the United States. Many import-competing domestic manufacturers complain that Chinese prices are so low— sometimes even lower than the cost of the raw materials —that they cannot compete in the United States. As a result, several splinter business groups have emerged to lobby for a more confrontational approach to China. They blame transnational firms for the huge and growing trade deficit and for offshoring of American jobs. The Alliance for American Manufacturing (AAM), a partnership of the United Steelworkers

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and steel-related manufacturers, blames illegal subsidies, currency manipulation, and other unfair trade practices for China’s huge bilateral trade surplus. AAM claims the trade deficit with China has dislocated 2.3 million American workers. It notes that displaced American workers often have no choice but to accept jobs in lower-paying industries, such as retail and services, with few retirement and healthcare benefits (AAM 2008; Scott 2008). It urges vigorous enforcement of U.S. trade remedy laws, and congressional action to declare China’s currency manipulation practices a subsidy that warrants countervailing duties. Some economists argue that the key to China’s trade imbalance with the United States is currency revaluation. An increase in the value of China’s currency versus the U.S. dollar would make its exports more costly to American consumers. Economist C. Fred Bergsten, founder of the Peterson Institute of International Economics, a free-trade oriented think-tank, says that China’s current account surplus is rapidly becoming the central global imbalance. He estimates that China’s surplus (about $400 billion in 2007) could reach $500 billion (11 percent of GDP) in 2009. Bergsten calls on China for a further 30 percent appreciation of the renminbi, and warns that a future U.S. administration and its European counterpart might turn to trade sanctions (Bergsten 2008a). The International Monetary Fund and the G7 group of industrialized countries have also issued statements urging faster appreciation of China’s currency (IMF 2008; G7 2007). In the absence of a positive response from China, Congress and U.S. interest groups have pressed unilateral measures to force the needed currency realignment. The China Currency Coalition, headed by attorney Skip Hartquist, is an alliance of unions and domestic manufacturers that seeks immediate elimination of China’s currency undervaluation, estimated at 40 percent. This coalition urges the Congress convening in 2009 to pass, and President Obama to sign, legislation making currency misalignment and manipulation actionable under U.S. trade remedy laws (China Currency Coalition 2008). Proponents believe that such legislation would be compatible with Washington’s obligations under the World Trade Organization (AMTAC 2007). Organized labor sees currency realignment as part of the solution, but it offers other remedies as well. The unions claim that cheap labor from China, Vietnam, and other low-income countries pose a clear and present threat to the wages and working conditions of American factory workers. While generally promoting

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workers’ basic rights and union activity, where possible, the AFL-CIO plays up sweatshop working conditions and it has encouraged student boycotts of goods from developing countries (AFL-CIO 2008a). For the Obama administration, the China trade issue has many dimensions. On the one hand, while Obama campaigned for office, he echoed the concerns of voters in manufacturing states about China’s currency manipulation and unfair subsidies, and pledged to address the one-sided relationship. Obama also pledged to use trade agreements to spread good labor and environmental standards around the world. As a result, some in China worry the administration might call for all imported goods to meet basic labor and environmental standards, a response that would hit Chinese manufacturers who spend little on environmental compliance (Holland 2009) Against that is the financial reality that the United States has become dependent on Chinese capital to finance its budget deficits. Obama needs to sell more than $1 trillion in government bonds, and this may prove difficult if he takes action to reduce Chinese exports and protect American manufacturing jobs (Orlik 2009).

Cuban Trade For nearly 50 years — since February 1962— the United States has embargoed trade with Cuba, an action taken after the government of President Fidel Castro expropriated properties of U.S. corporations and citizens. It has also sought to isolate Cuba diplomatically, to limit travel, and block investments. During the Clinton administration, the embargo was modified to allow the sale of certain U.S. food and medicine, but with government licensing. In 2008, the United States sold $718 million in goods to Cuba. The Obama administration has hinted that it might be willing to ease restrictions on travel and remittances (Gomez 2008). Many Cuban-Americans support the embargo, arguing that any unilateral lifting of sanctions would simply strengthen the Castro regime. But, a variety of business and farm groups have been pressing Congress to ease the sanctions. The American Farm Bureau, the business Roundtable, and the U.S. Chamber of Commerce, along with other business groups, have urged President Obama to suspend the embargo and help open a new market for

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American business (USA *Engage 2008). Any change in Washington’s position on Cuban trade is bound to be controversial and will involve foreign-policy decision-makers at the White House, the National Security Council, and the State Department.

Assisting Trade Dislocated Workers How should society help the workers dislocated by global trade competition? Free traders argue that trade is so beneficial that the winners from trade could compensate the losers and everyone would be better off. But, in most market-based economies, there is no effective mechanism for distributing a share of the gains to those who lose jobs and incomes. Thus, free traders often support programs of adjustment assistance to enable trade-impacted workers to train for new jobs and economic opportunities. Free traders often view adjustment assistance as a safety valve against a build-up of broad-based protectionist sentiment. Since 1962, the United States has administered a program of trade adjustment assistance (TAA). It involved a package of cash benefits, training programs, health-insurance rebates, relocation assistance, and, wage insurance for workers aged 50 and older. Workers certified as dislocated by imports could obtain up to 130 weeks of training, and 52 weeks of income support on top of the 26 weeks in unemployment insurance provided by states. It costs the federal government about $1 billion per year (U.S. Department of Labor 2008). In the past, adjustment assistance has not worked well, according to several studies. Reportedly, most eligible workers did not sign up for the program. For those who completed training, one-third had difficulty finding new jobs. Among those finding new jobs, 75 percent took jobs that paid less than their old wages (Sparshott 2005). Another study showed that among those reemployed after trade-related job losses, the average earned 10 percent less than before (Bernstein 2004). Public Citizen’s Global Trade Watch observes that a worker who loses a job when an employer moves a plant to China may be ineligible for benefits. However, if the employer moves the job to Mexico — a country with which the United States has a free-trade agreement — the worker may be eligible. Even in manufacturing plants, nonproduction workers may have no access to benefits (Public Citizen 2008a). Also, many workers do not receive

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adjustment assistance because of inadequate federal funding. As a result, the AFL-CIO has urged Congress to enact a better funding formula and to extend eligibility to include technology and service workers (Parks 2007). Interestingly, global business sees an expanded program of adjustment assistance as necessary to mitigate protectionist sentiment attributable to the maldistribution of gains from globalization. Major business groups, such as the U.S. Chamber of Commerce and the Business Roundtable, have favored programs to improve worker competitiveness and facilitate adjustment to globalization (U.S. Chamber 2008a; Business Roundtable 2009). Opposition comes from libertarian economists like Sallie James of the Cato Institution. She considers adjustment assistance a relic of the past, and wants Congress to end the program. The program no longer buys political support for trade liberalization. Furthermore, Democrats in Congress want to expand the program to include service workers and workers affected by trade with countries such as India and China, with which the United States does not have free-trade agreements (James 2007). Congress and the Obama administration succeeded in revising the adjustment assistance program early in 2009. During the presidential campaign, Obama had committed himself to updating the current system by extending coverage to service industries, creating flexible education accounts to help workers retrain, and providing retraining assistance to workers in industries vulnerable to dislocations (Obama 2008). In the economic stimulus package approved in February 2009, Congress agreed to expand benefits to service sectors and to workers affected by offshoring, not simply countries with which the United States had a freetrade agreement. With improved benefits, the TAA changes were expected to cost $1.6 billion.

Trade and Human Rights Another emerging issue in trade policy is human rights. It is a broad subject, encompassing working conditions and labor rights, democracy and transparency, and even the rights of authors and artists to profit from their creations. Some economists, such as Jagdish Bhagwati, take the traditional view that trade issues are not human rights issues, and trade organizations like the WTO have no responsibility to address them (Bhagwati 1988, 122 –123;

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Hedges 2000). But there is another interpretation offered by legal scholars such as Ernst-Ulrich Petersmann: citizens are valid subjects for WTO consideration (Petersmann 2000). Human rights advocates often promote integration of social clauses found in the International Covenant on Economic, Social, and Cultural Rights into the WTO. Activists say these could facilitate the organization of unions, place more controls on child labor, outlaw forced labor and overtime, and replace prevailing subsistence wages with a decent standard of living (Aaronson 2007, 23 –24). In the past, the United States has used trade sanctions as an instrument to promote human rights. In the Tariff Act of 1930, the United States banned goods produced through forced labor, a provision aimed at the Soviet Union. Subsequent administrations chose not to enforce that provision, because vigorous administration would undercut other foreign policy objectives such as détente with the Soviet Union. However, on other occasions, the United States has acted unilaterally, using trade sanctions against countries accused of human rights violations. Examples include the Helms-Burton embargo on trade with Fidel Castro’s Cuba, imposed for political repression. Also, the Jackson-Vanik effort to tie most-favored-nation tariff treatment for the Soviet Union to that government’s respect for the rights of Jews to emigrate. More recently, Congress has banned imports from Myanmar (Burma), a country accused of slave labor and other egregious human-rights violations. The U.S. Congress also uses hearings on trade relations to call attention to human rights conditions — one of the most recent being hearings on the U.S.–Colombia FTA (Aaronson and Zimmerman 2008, 162 –163). As part of a bargain with the Bush administration in March 2007, leaders of congressional Democrats agreed to seek approval of certain FTA agreements if the administration agreed to seek adherence to core International Labor Organization labor standards in trade agreements. These included the freedom of association and the right to organize and bargain collectively, as well as prohibitions on child labor, forced labor, and discrimination in employment. The AFL-CIO had insisted on these protections from its friends in Congress. It wanted enforceable provisions subject to the same dispute settlement provisions in commercial areas of the FTAs (Aaronson and Zimmerman 2008, 163). Free trade economists blasted the compromise, saying it was a ploy by prounion Democrats to drive up labor costs in poor

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countries in order to lessen competition with U.S. producers. They argued that gains in labor standards do not come from a foreign government using the threat of trade penalties but by economic growth and rising living standards associated with trade expansion (Brown, Stern, Deardorff, and Bhagwati 2007). Bhagwati warned that major developing countries, such as Brazil and India, were generally opposed to including labor standards in trade agreements (Bhagwati 2007). The economists suggested a more constructive approach would be for Democrats to help U.S. workers adapt to globalization through wage insurance, more extensive retraining programs, and portable pensions. They also favored universal health insurance. From the standpoint of business and the Bush administration, such labor commitments had a hidden dimension. Because they applied to all parties to an agreement, they could be viewed as a union effort to use trade agreements to change U.S. labor laws. It was feared that trading partners could use dispute settlement provisions to challenge U.S. law and thus encroach on U.S. sovereignty. Future U.S. presidents will need to revisit the issue. They must decide whether labor clauses are to be included in the core of future free-trade agreements, and how to administer them. In the Jordan FTA, negotiated during the Clinton administration and approved in 2001, negotiators placed labor rights in the main text. At the time, Congress worried that Jordan could challenge U.S. sovereignty over its labor laws. As it turned out, the two governments backed away from any commitments to use trade sanctions to enforce labor agreements. Enthusiasm for enforcement waned, and violations occurred. In 2006, the National Labor Committee for Worker and Human Rights disclosed that guest workers (nearly 34,000) from Bangladesh and China were working in Jordanian garment factories receiving low pay and working in substandard conditions. The workers, producing garments for J. C. Penny, Sears, Target, Wal-Mart, and other U.S. retailers, complained of not being paid for months, being hit by supervisors, and working 20-hour days (Greenhouse and Barbaro 2006). It was evident that simply placing language about labor rights in trade agreements did not ensure compliance, or effective enforcement. After adverse publicity, U.S. purchasers chose to suspend contracts. To satisfy their buyers, some of the Jordanian suppliers then agreed to a voluntary monitoring program, administered by the International Labour Organization. The majority of funding

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would come from the U.S. Agency for International Development, which administered aid funds (Ellis 2008). The Bush administration also sought, with encouragement from Congress, to use FTAs to promote democracy in developing countries. In a speech to Congress in February 2001, President Bush asserted that free trade promotes greater political and personal freedom (Bush 2001). This advocacy, as business historian Susan Aaronson points out, is not new, and has bipartisan roots. Over the course of the last 60 years, the U.S. government has included provisions in multilateral and bilateral trade agreements that require trade partners to encourage transparency, protect due process rights, and promote citizen participation in policymaking. Behind this approach is the belief that transparency and greater political participation create legitimacy for programs and promote stability (Aaronson and Zimmerman 2008, 183). After September 11, 2001, the Bush administration saw FTAs as a way to encourage democracy, particularly in the Middle East, and to cement democracy in Central America. As a result, they have used foreign aid and other public funds to train foreign officials how to meet their WTO obligations. Aaronson’s research has led her to conclude that the longer a country remains in the GATT/WTO framework, the more democratic it tends to become. She suggests that WTO rules and procedures encourage due process and political participation in member countries and may spill over to other aspects of the polity (Aaronson and Zimmerman 2008). Even China, she says, now invites public participation in revisions to labor and intellectual property laws.

Trade and Environment Another hot issue in trade policy involves the environment. The traditional view of economists and most advocates of the multilateral trading system was that trade creates wealth and benefits humankind. This view held that trade was also good for the environment. It expanded access to environmentally-friendly technologies, promoted efficiency and less waste, and created wealth that could be used for environmental improvements. Trade advocates, however, assigned primacy to the rules of the world trading system. They worried that national governments might use environmental considerations as a loophole to protect national industries and impair the terms of the trade bargain.

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Environmentalists tend to look at the links between the two subjects quite differently. Many of them associate expanded economic activity with greater environmental damage, and believe that the greater wealth created will not necessarily lead to environmental improvements. They note that the free-market pricing system, the basis of most international trade, does not reflect the full costs of environmental damage. They further believe that national governments instinctively strive to protect national industries against costly environmental demands, thus the only effective solution involves a strong system of rules at the national and international levels (United Nations Environmental Program 2005, 4 – 5). In trade negotiations, these two perspectives — sometimes conflicting, sometimes compatible — increasingly arise. NAFTA broke new ground when it included language stating that where NAFTA law and multilateral agreements on the environment may conflict, the latter shall prevail. But, in the investment section, it appeared to assign higher priority to investors’ rights in the controversial Chapter 11, allowing private parties to sue governments. Investors have invoked these types of investment treaty protections to challenge government actions involving waste management, regulation of pollutants, and land-use planning. The Uruguay Round agreements establishing the WTO also contain dispute settlement language allowing governments to challenge the trade restrictions of other governments. There have even been instances where foreign governments successfully used WTO dispute resolution panels to challenge U.S. domestic environmental laws as nontariff barriers. In each case, the United States chose to change its laws and regulations to avoid having to pay compensation. One famous case involved reformulated gasoline. Venezuela and Brazil challenged Environmental Protection Agency regulations on use of additives to reduce emissions claiming that the rules discriminated against foreign producers, a violation of GATT’s nondiscrimination principle. The WTO panel agreed and recommended the United States change its regulations to comply with GATT. The United States did so in 1997 (Woellert 1997). Another celebrated case involved turtles drowning in shrimp nets. The United States sought to ban imported shrimp from countries without sea turtle protections, but several Asian nations filed a complaint with the WTO. The panel decided against the United States, effectively ordering Washington to change its

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environmental protection regulations, or pay penalties (Ylagan 2006). According to Lori Wallach of Citizen Trade Watch, the United States has lost many WTO attacks against domestic public interest laws (Wallach 2007b). It is not surprising then that nongovernmental organizations (NGOs) supporting environmental issues have challenged the Bush administration’s push for FTAs. The Sierra Club, Friends of the Earth, and Citizen Trade Watch, among other NGOs, have warned that trade agreements containing provisions like NAFTA’s Chapter 11 threaten the ability of state governments to make laws protecting health and environment (Seligman 2005). They have also argued that trade agreements could have the effect of increasing global sprawl. Often times the rules pertaining to services forbid limitations on the numbers of service providers, such as big-box stores, and regulations limiting advertising, licensing, or municipal zoning could face challenges in dispute settlement mechanisms (Sierra Club undated). Environmental activists had some success in shaping the Trade Act of 2002. Eleven environmental organizations released a joint statement in January, 2000, asserting that trade agreements should support environmental protection, and not undermine it. They wanted assurances that private investors could not challenge domestic environmental laws and regulations, and they wanted trade agreements to defer to multilateral agreements on the environment when there were conflicts with trade rules (Public Citizen 2000). Although they did not succeed in placing the above language in the act, the Trade Act of 2002 does require environmental reviews of trade agreements. USTR states that the U.S. government has been active in promoting a trade liberalization agenda that seeks to integrate economic, social, and environmental policies (USTR 2008c. The environmental reviews take into account public comments as well as those of government agencies. The review for the Colombia FTA, for example, included sections on transboundary air and water pollution, various migratory species such as shrimp and turtles, tuna and dolphins, wildlife, and birds. The conflict between trade and environmental priorities has also come up in debates over global-warming. Europeans, eager to counteract global warming, wish to reduce carbon emissions. In January, 2008, the European Commission released a climate strategy intended to reduce greenhouse-gas emissions by 20 percent by 2020. The strategy involves auctioning carbon-emission

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certificates (Whitehead and Jones 2008). As there is fear that European industry may simply close factories and move to countries without strong environmental laws, the strategy must somehow address traded goods. How can Europe reduce imports of carbonintensive goods — such as steel, cement, and aluminum—from countries such as the United States, India, and China which are not parties to the Kyoto climate-change protocol? France has proposed a tax on carbon-intensive imports, an approach that the Bush administration quickly labeled protectionism (Stokes 2008). However, some in the Obama administration are considering a similar approach. Secretary of Energy Steven Chu has indicated that the administration might slap a carbon tariff on imports from countries that have not imposed greenhouse-gas reduction mandates. Critics say this approach would violate WTO commitments (Talley and Barkley 2009).

Trade and Sovereignty One of the important legal issues growing out of NAFTA and U.S. membership in the World Trade Organization is whether those agreements encroach on national sovereignty, essentially the legitimate authority to govern a nation state. Defenders of the Uruguay Round agreements establishing the controversial dispute settlement mechanism emphasize that the agreements do not give the international organization the power to change U.S. laws. Only Congress and the executive can do that. A ruling by the WTO that a U.S. statute or procedure violates the WTO has no domestic effect unless Congress alters the law. During congressional hearings, then USTR Mickey Kantor stated that no dispute panel ruling could force the United States to change federal, state, or local laws. According to this line of reasoning, U.S. commitments to the WTO were only contractual, and the United States retained the choice of paying compensation or obeying. At the time, critics challenged this view, and claimed that the WTO dispute settlement mechanism created binding obligations for the United States. Some legal scholars concluded that Congress and the president had assigned sweeping legislative power to an unaccountable, extra-constitutional body (McBride 2001). Activists, such as Lori Wallach of Global Trade Watch, claim that domestic policies are being undermined by trade agreements. Whereas trade agreements previously dealt with issues at the

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border — such as tariffs, quotas, and customs issues —NAFTA and the WTO in effect require members to conform their domestic laws to broader requirements, the terms of the trade bargain. They effectively set constraints on domestic food safety standards, environmental and product safety rules, regulation of service sectors, intellectual property standards, government procurement, tax policy, and investment policy. More than 90 percent of all disputes taken to the WTO have been decided on behalf of the complaining party. By mid-2008, complainants had won 6 of 51 cases brought against the United States (88%). WTO panels have declared illegal certain clean air regulations, turtle protections, antidumping, farm subsidies, and tax policies (Public Citizen 2008b). The Internet gambling case brought by Antigua against the United States in 2003 is a good example, critics say, of trade rules trumping public interest laws. Antigua claimed that U.S. antiracketeering statutes in effect banned Internet gambling and were trade barriers. A WTO panel agreed with Antigua. When the United States sought to withdraw the gambling and betting sector from the WTO’s purview, it was ordered to pay compensation. Antigua was awarded $21 million in compensation — and other settlements are expected for the European Union, Costa Rica, and Macau (Pruzin 2008). Can the United States withdraw from the World Trade Organization? Under the terms of accession, Congress stipulated that USTR must provide a detailed report every five years on the costs and benefits of U.S. participation in the WTO. Any member of Congress may then introduce a bill to withdraw and leaders of Congress must allow a vote. In 2000, after the Clinton administration reported, the House of Representatives voted 363 to 56 to reject the withdrawal resolution. Thirty-three Republicans and 21 Democrats voted in favor of withdrawal (Abrams 2000). In 2005, a similar vote occurred and this time the margin was 338 to 86. Sponsoring the withdrawal resolution were Socialist Bernie Sanders of Vermont and libertarian Republican Ron Paul of Texas (Abrams 2005). The House of Representatives will have another opportunity to vote in 2010.

Trade and Safety The terrorist attacks of September 11, 2001, and more recent episodes involving harmful imports of toys, food, toothpaste, and

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medicines, underscore a new reality. The global economy is relatively open and efficient, and global supply chains present opportunities for those who would do harm as well as those who strive to do good. The ubiquitous 20 or 40-foot shipping containers can conceal shoes, apparel, and nuclear weapons —perhaps all in the same large box. In 2007, the United States imported 17.9 million waterborne containers (TEU), meaning that every minute of every day 34 containers from overseas suppliers were unloaded at U.S. seaports (Army, 2008). Before September 11, 2001, Customs had the resources to physically inspect less than two percent of those containers (Tischler 2002). An intrusive physical inspection of a single container by two inspectors could take all day and delay a shipment with perishable contents for a day or more (Flynn 2002). The nightmare scenario is that foreign terrorists slip nuclear weapons into a container full of textiles or televisions, and detonate bombs upon arrival in America, killing hundreds of thousands. Such a catastrophic event would bring shipping to a halt, and bring crippling lawsuits against the shipper and importer. Congress has decreed that all containers entering the United States must have tamper-proof high security seals by 2008 and be scanned by 2012. While importers like Wal-Mart and customs officials think the scanning goal is unrealistic, the port of Hong Kong scans every container with radiation and gamma-ray screeners. It is estimated that screening of this kind at all major container ports could cost about $1.5 billion, or $15 per container (Bartelme 2007). Shippers complain that the extra security measures are a “giant mistake” that will result in congestion at ports, and huge costs for suppliers, shippers, and consumers. Canadian and European shippers view the new law as a “barrier to trade,” and may urge their governments to challenge Washington’s action before the WTO. In their view, the United States has moved unilaterally to shift the burden of protecting the United States to its trading partners, and this contradicts WTO obligations to fair and consistent trade policy (Collins 2007; Urquhart, 2007). Imports of harmful products —including toys, food, and medicines — also pose new challenges for national regulatory authorities in the era of global supply chains. Food imports have more than doubled since the United States joined the WTO, and

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the United States has become increasingly dependent on foreign food supplies (Public Citizen 2007b). With manufacturers sourcing more and more ingredients in China and other developing countries, safety concerns have emerged. A series of products ranging from children’s toys to pet food and toothpaste were discovered to contain poisonous substances. Seafood is a particular item of concern. Seventy percent of the world’s farmed fish comes from China. With acute water shortages and sewage contaminating water supplies, Chinese fish farmers have mixed illegal veterinary drugs and pesticides into food to keep their fish alive. However, importing nations have discovered that these contain poisonous and carcinogenic residues posing health threats to consumers. As a result, regulators in the European Union and Japan have banned Chinese seafood, and U.S. officials have rejected shipments (Barboza 2007b). Quality-control problems also abound with Chinese drugs exported to foreign markets. Since 2006, contaminated Chinese drugs have been blamed for more than 100 deaths in Central America and the Caribbean. In February, 2008, a Chinese factory owned by a U.S. firm was the source of an ingredient linked to an allergic reaction in a blood thinner sold by Baxter International. China reportedly does not inspect plants that make drugs solely for export, and it does not permit foreign inspectors to conduct surprise inspections (Greising and Japsen 2008). Nor does the Food and Drug Administration (FDA) have the resources to inspect carefully the food it regulates. It spends only $3.5 million per year to inspect foreign drug production plants. In 2007, it was estimated that the FDA could inspect only 0.6 percent of the vegetables, fruit, seafood, grains, dairy, and animal feed at the border. The U.S. Department of Agriculture was able to inspect only 11 percent of beef, pork, and chicken imported (Martin and Palmer 2007). However, China is not the only supplying country with product problems. According to the New York Times, FDA inspectors refused more produce from the Dominican Republic and Denmark than from China. The problem is that the rapidly-growing global supply chain simply has overwhelmed the resources of regulatory authorities to cope with the flood of imports (Martin and Palmer 2007). With low prices driving the supply chain, unscrupulous producers have financial incentives to scrimp on product quality.

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This is what the U.S. Consumer Product Safety Commission discovered in an investigation of harmful toys from China. In an intensely competitive environment, toy suppliers resorted to paint with high lead levels because this paint sold at one-third the price. Similar problems have also emerged in India, Malaysia, and Singapore. In China, while safety standards are reportedly high— indeed, sometimes higher than in the United States —enforcement is lax (Barboza 2007a). As consumer worries mounted about unsafe imports in 2007, President Bush created a cabinet-level Working Group on Import Safety. Congress also conducted investigations. Among the ideas proposed was promoting stronger standards in supplying countries. The U.S. Department of Agriculture qualifies only 33 countries to export meat or poultry to the United States, but the FDA attempts to monitor imports from 150 countries, many with much lower food standards than the United States (Schmit 2007). But the agency does not have enough staff to inspect in a timely way foreign plants making food products, medical devices, and drugs. At its current pace, the New York Times concluded that the FDA would need 13 years to inspect every foreign drug plant and 1,900 years to check every foreign food plant. In 2007, the FDA inspected 100 of 190,000 foreign food plants, and 30 of 3,000 foreign drug plants, even though 80 percent of the nation’s drug supply is imported (Harris 2008). One problem in inspecting foreign food imports are commitments in free-trade agreements, and WTO obligations. These pledge nondiscrimination and “national treatment” for imports, and effectively bar the United States from inspecting imported foods at a greater rate than domestic foods. Thus, the United States is obliged to rely on possibly unreliable foreign inspectors to certify the safety of food imports (Public Citizen 2007a). The Obama administration is expected to increase funding for the FDA and to attempt more effective enforcement of existing health and safety laws.

Enforcing U.S. Trade Laws A familiar complaint from trade-impacted industries is that U.S. policymakers are unable, or unwilling, to enforce current U.S. trade remedy laws. As a result, some critics of trade policy claim the deck is stacked against U.S. manufacturers and workers (AAM

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2007). The AFL-CIO, in particular, has accused the Bush administration of not enforcing existing laws (AFL-CIO 2007c). Their concerns relate to a series of U.S. laws enacted by Congress to assist domestic industries cope with increased import competition or to offset unfair foreign trade practices. These laws are considered compatible with WTO obligations, although several WTO panel decisions have challenged certain aspects of U.S. administrative practice. Under international trade law, temporary, not permanent, safeguard protection is allowed to cushion domestic producers from import competition and to facilitate orderly adjustment. The U.S. escape clause offers up to eight years of import protection to industries that can demonstrate that increased imports are a substantial cause of serious injury. If a hearing before the bipartisan U.S. International Trade Commission leads to a recommendation for relief, the president and his administration must decide whether relief is consistent with the national economic interest. In recent years, the White House has been reluctant to provide import relief under this statute, although it did authorize tariffs for the domestic steel industry in 2002. Another reason for less successful escape-clause actions is that with the globalization of business, industries choose not to seek such relief. Members of a domestic industry with significant overseas exposure may not consider it advantageous to support a petition for import relief in the United States. As part of the negotiations that led to most-favored-nation treatment for China, Beijing agreed to several safeguard provisions. One was Section 421, which authorized the president of the United States to impose safeguard relief with respect to Chinese imports that are disrupting the U.S. market. In four cases, the International Trade Commission found that the standard for relief had been met, but the administration denied relief, effectively rendering the law a dead letter. Some critics, including the AFLCIO, say the president’s discretion to deny remedies in safeguard actions needs to be severely curtailed, or eliminated. Other trade remedy laws address certain practices considered unfair under international trade law. One is dumping when foreign exporters sell goods to importers at less than fair value. Another involves the use of government subsidies to benefit producers, a practice that GATT and the WTO have held to distort international trade. U.S. law permits the imposition of antidumping, or countervailing duties, when a domestic industry can show

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that it has been materially injured, or threatened with material injury, by dumping or subsidies. These are quasi-judicial decisions involving the U.S. Department of Commerce (which investigates dumping and subsidy margins) and the U.S. International Trade Commission (which determines whether the domestic industry represented by the petitioner is materially injured, or threatened with material injury). If both agencies reach affirmative determinations, duties are imposed to offset the margin of unfairness. The president cannot set aside such determinations for policy reasons. Instead, parties can challenge decisions with legal appeals to the specialized U.S. Court of International Trade, located in New York City. For more details on this process, as well as other laws described in this section, see USTR’s Annual Report on the Trade Agreements Program and the U.S. International Trade Commission’s Year in Review (USTR annual; U.S. International Trade Commission annual). Antidumping and countervailing duty laws were used extensively in the 1980s, particularly by the United States steel industry. The volume of cases has declined considerably in recent years. Some who practice trade law claim that these laws have fallen out of favor because some commissioners at the ITC have interpreted the standard to demand a high level of injury. Also, the administration has cut back appropriations for the Department of Commerce’s unit responsible for determining dumping and subsidy margins. Another negative factor has been a series of U.S. court and WTO dispute settlement decisions forcing changes in agency practices and creating uncertainty among the trade bar about the likely outcome of case filings (Hillman 2007). Some trade lawyers, such as Robert Lighthizer, a former deputy USTR and Senate finance committee staffer, blame the WTO dispute settlement process. Lighthizer complains that rogue WTO panel decisions have consistently undermined U.S. interests, resulting in lost U.S. sovereignty. In Lighthizer’s view, the WTO has chosen to judge U.S. tax policy, public morals, foreign policy, and environmental measures (Lighthizer 2007). Responding to political pressures, the Bush administration signaled that it might support more assertive use of U.S. countervailing duty laws against China. Because the United States had considered China a nonmarket economy, it long exempted that country from U.S. countervailing duty law. But in March 2007, the Department of Commerce reversed its long-standing

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position, effectively opening the way for case filings against China from U.S. producers. A surge in case filings followed as trade lawyers sought to use the quasi-judicial process to impose barriers on subsidized Chinese exports. Whether the Obama administration vigorously enforces these laws will depend on its appointments to the administering agencies (especially the Department of Commerce and the U.S. International Trade Commission).

Trade and Economic Recovery During the Great Depression of the 1930s, nations unilaterally pursued domestic recovery with little regard for international consequences. In the United States, Congress enacted, and President Herbert Hoover signed, the controversial Smoot-Hawley tariff. After a change of presidential administrations in 1933, President Franklin D. Roosevelt torpedoed the London Economic Conference, convened under the League of Nations, and devalued the dollar in terms of gold by 40 percent (Eichengreen 2008; James 2001). Other countries suspended currency convertibility and devalued. Some, like Nazi Germany, imposed exchange and trade controls. The United Kingdom devised a preferential trading system (Kindleberger 1973). The result was beggar-thyneighbor economics, and the collapse of international trade and finance. Not until World War II did many economies return to full employment. In the early 21st century, the community of nations faced a similar economic challenge. With unemployment rising, and trade and financial flows shrinking as a result of the 2008 –2009 global recession, governments moved again to stimulate their economies through public-sector, deficit-spending and monetary ease. They also imposed unilaterally trade and financial restrictions. India embargoed imports of Chinese toys for six months. Russia placed new tariffs on imported cars and agricultural equipment. The European Union resumed export subsidies for dairy farmers and the U.S. Congress considered an economic recovery bill with “Buy-American” provisions favoring domestic iron, steel, and manufactures over imports. With commercial and financial globalization apparently moving in reverse, it was no surprise that foreign governments and media pundits warned about the

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disastrous consequences of isolationism, protectionism, and nationalism (Miller 2009). President Obama blinked first. After Canada and the European Union protested that the “Buy-American” clause would trigger retaliation and invite a trade war, the new president sought to water down the provision so that the preferences would be applied consistent with U.S. obligations under trade agreements and the WTO. The president would have authority to suspend “Buy-American” provisions for countries, party to the WTO government procurement agreement. This would exempt Canada, Japan, and most European countries, but not India, China, and Brazil. The latter had not signed the procurement pact. Nonetheless, big business with extensive commitments in the latter countries hoped to kill the controversial provision in a House-Senate conference over the bill (Scheid 2009). But, labor, consumer and other activist groups called on the Obama administration redeem campaign pledges to stimulate the economy and overhaul failed policies of the past. The “Buy-American” debate raised a delicate issue: Did existing trade agreements limit the policy tools national governments required to address an economic crisis? If so, would the rules-based WTO trading system become a casualty of economic turbulence?

Conclusion In this chapter, we have presented a survey of various trade policy issues, controversies, and solutions. Obviously, this is a rapidlychanging topic. The global recession that began in 2008 has forced the Obama administration to emphasize domestic recovery, a key to the health of the international economy, while deferring further market-opening initiatives such as completion of the Doha multilateral round of WTO trade negotiations. Some fear the preoccupation of national governments with domestic employment and recovery may invite a wave of nationalism and protectionism, as in the 1930s. Another scenario is that the global economic crisis may produce greater consensus on the need for more extensive agreements to structure and regulate the international economy. Whatever the outcome, there is likely to be continuing debate between those who wish to open markets in the name of free trade and those who counsel a greater emphasis on national interest

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in trade negotiations. As it has for more than two centuries, U.S. trade policy remains controversial.

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Holland, Tom. 2009, January 22. “Obama’s Soft Power May Be Hard for Beijing to Swallow.” South China Morning Post, 10. Hulse, Carl. 2008, April 11. “House Votes to Put Off Trade Deal Bush Sought.” New York Times, 1. “IMF Emphasized the Need for China and other Asian Economies To Tolerate Faster Currency Appreciation.” 2008, May 19. Action Economics Alerts. Accessed May 2008 at LexisNexis Academic, http://www. lexisnexis.com/us/lnacademic/. James, Harold. 2001. The End of Globalization: Lessons from the Great Depression. Cambridge, MA: Harvard University Press. James, Sally. 2007, October 24. “Trading Down.” National Review. Kearns, Kevin L. 2009, January 9. “Domestic Manufacturers Decry Nation’s Job Losses; Urge Trade Policy Overhaul as Key to Economic Recovery.” Accessed January 2009 at http://americaneconomicalert. org/view_art.asp?Prod_ID=3124. Kindleberger, Charles P. 1973. The World in Depression 1929–1939. Berkeley: University of California Press. Lacey, Marc. 2007, November 28. “Fugitive from U.S. Justice Leads Panama’s Assembly.” New York Times, 3. Lamy, Pascal. December 31, 2008. “Protectionism Won’t Work.” Newsweek. Lee, Thea. 2007, March 28. “Testimony” before U.S. House of Representatives, Committee on Foreign Affairs. Accessed February 2008 at http://www.internationalrelations.house.gov/110/lee032807.htm. Lee, Thea. 2008, May 28. “Trade Agreements Should be Reexamined.” Policy Innovations. Accessed May 2008 at http://www.policyinnovations. org/index.html. Lett, Erin, and Judith Banister. 2006, November. “Labor Costs of Manufacturing Employees in China.” Monthly Labor Review 129 (11): 40. Levin, Sander. 2005, December 7. “Levin Votes in Support of Bahrain FTA.” Accessed May 2008 at http://www.house.gov/apps/list/press/ mi12_levin/120705.shtml. Lighthizer, Robert. 2007, June 12. “Testimony” before U.S. Senate, Committee on Finance. Accessed February 2008 at http://finance.senate. gov/sitepages/hearing061207.htm. Majors, Stephen. 2007, November 9. “ ‘Cheers’ Actor Goes on the Road to Promote U.S. Manufacturing.” Associated Press. Accessed February 2008 at http://www.boston.com/news/local/connecticut/ articles/2007/11/08/cheers_actor_ goes_on_the_road_to_ promote_us_ manufacturing/. Martin, Andrew, and Griff Palmer. 2007, July 12. “China Not Sole Source of Dubious Food.” New York Times, 1.

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Parks, James. 2007, June 6. “Jobless Workers Need Stronger Assistance Plans.” Accessed May 2008 at http://blog.aflcio.org/2007/06/06/ jobless-workers-need-strong-assistance-plans. Petersmann, Ernst-Ulrich. 2000. “The WTO Constitution and Human Rights.” Journal of International Economic Law 3 (1): 19 – 25. Pruzin, Daniel. 2008, January 30. “Antigua, Costa Rica Request Arbitration on Compensation from U.S. over Gambling,” BNA Daily Report for Executives. Public Citizen, Global Trade Watch. 2000, January 1. “Trade & Environment Principles.” Accessed February 2008 at http://www. citizen.org/trade/wto/ENVIRONMENT/articles.cfm?ID-5555. Public Citizen, Global Trade Watch. 2007a, July. Trade Deficit in Food Safety. Accessed February 2008 at http://www.citizen.org/documents/ FoodSafetyReportFinal.pdf. Public Citizen, Global Trade Watch. 2007b, July 25. “New Report Reveals How Pending Trade Agreements Will Worsen Imported Food Safety Problems by Increasing Food Imports.” Accessed May 2008 at http://www.citizen.org/pressroom/release.cfm?ID=2481. Public Citizen, Global Trade Watch. 2008a. “(Consolidated) Trade Adjustment Assistance (2003-present).” Accessed May 2008 at http:// www.citizen.org/trade/forms/taa_search.cfm?dataset=3. Public Citizen, Global Trade Watch. 2008b, May 9. “Fatally Flawed WTO Dispute System.” Accessed May 2008 at http://www.citizen.org/ documents/WTOPDisputesSummaryOnePagerwtables.pdf. Public Citizen, Global Trade Watch. 2009a, January 8. “Election 2008: Fair Trade Gets an Upgrade.” Accessed January 2009 at http://www. citizen.org/documents/ElectionReportFINAL.pdf. Public Citizen, Global Trade Watch. 2009b, January 29. “Companies that Offshored Jobs Attacking ‘Buy America’/Stimulus on False Grounds.” Accessed February 2009 at http://www.citizen.org/hot_issues/issue. cfm?ID2135. Reinsch, Bill. 2007a, October 1. “Word from the President.” Accessed February 2008 at http://www.nftc.org. Reinsch, Bill. 2007b, December 1. “Word from the President.” Accessed February 2008 at http://www.nftc.org. “Reopening NAFTA Too Risky, Former Mexican President Salinas Says.” 2008, May 16. Financial Post (Canada), 5. Roeser, Tom. 2003, July 12. “Conservative Sees Free Trade as Threat to Manufacturing.” Chicago Sun-Times, 12. Rosenberg, Mica. 2009, May 4. “Panama’s President-Elect to Push U.S. Trade Deal,” Reuters. Accessed May 2009 at www.reuters.com/article/ marketsNews/idUSN0441743720090504.

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3 Worldwide Perspective

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his chapter offers a global perspective for the trade policy debate in the United States. First, it considers how the contemporary trading world emerged, examining patterns of commercial exchange among the most important trading nations and regions. Whether the global financial crisis and recession that began in 2008 will alter these patterns and inaugurate a new era of government regulation and protectionism is a subject best left for future analysis. The present chapter also looks at national trade strategies, and how governments have responded to this marketdriven age of globalization. Then we focus on key institutional and legal foundations — particularly on the General Agreement on Tariffs and Trade (GATT) and its successor the World Trade Organization (WTO). The WTO oversees multilateral trade negotiations, and administers the rules that govern the world trading system. Finally, the chapter considers the recent trend toward regionalism. Major trading nations, frustrated with the slow pace of multilateral negotiations, have increasingly turned to bilateral and regional arrangements to widen and deepen commercial and financial relationships.

Contemporary Trade Patterns From the end of World War II until the early 1970s, the world economy slowly recovered from the destruction of World War II and adjusted to new circumstances. Among them was the decolonization of European empires, and the proliferation of new nations in Africa, Asia, and the Caribbean. Also, a protracted Cold War

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struggle between the United States and its allies, and the Soviet Union and its allies, left the international economy divided between two different economic and political systems. Democratic governments in Western Europe and North America relied on mixed economic systems, combining state ownership and intervention with private-sector activity. The Soviet Union, and its allies in Asia and Europe, confiscated private property and adopted state planning and autocratic governments. There was little trade between the two blocs. During this phase (1948 – 1973), Western Europe and East Asia gradually revived. International trade expanded rapidly even though much of it was government managed or regulated. Until the mid-1970s, the Atlantic Ocean was the undisputed center of world trade. Europe and the Americas accounted for the bulk of world exports during that period — 74.5 percent in 1948, and 72.5 percent in 1973, compared to 59.7 percent in 2007 (WTO 2008a, 10). In the last three decades of the 20th century, as the contemporary phase of globalization accelerated, the trading world experienced remarkable changes. The Cold War ended, and state-managed economies, such as China and the remnants of the Soviet Union, abandoned central planning and chose to compete in the global marketplace. Higher energy prices enriched the Organization of the Petroleum Exporting Countries (OPEC). The European Common Market, founded in 1957 with 6 members, expanded to add 21 more nations. In other regions, similar trading blocs emerged— the North American Free Trade Agreement (NAFTA), the Association of South East Asian Nations (ASEAN), and Mercosur (the Southern Common Market including Brazil and Argentina). Most of all, improvements in transportation (wide-bodied jet aircraft and container ships) and communications (satellites, fiber optics, cell phones, and computers) interlinked peoples and nations, and facilitated business activity. Under the auspices of the GATT (the WTO in 1995), trade liberalization and market integration continued. National governments removed obstacles to trade at their borders and subscribed to international rules for their domestic economies. They consented to more transparent decision making. Throughout the trading world, private enterprise revived and asserted political influence. With an agenda set by transnational business and finance, the revitalized private sector lobbied governments to privatize, de-regulate, and open economies to global competition.

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As globalization accelerated, traditional barriers of time and distance dissolved. Goods, services, money, labor, and information moved easily from country to country, and around the world in 24 hours or less. Borders became less relevant, and flows of money, goods, services, information, and people multiplied. On the trade front, the results were especially dramatic. Countries simplified and harmonized their tariff structures. They lowered tariffs and simplified other border obstacles — such as regulatory inspections and customs procedures. More and more countries became participants in a global trading system that had once been dominated by the rich countries of the North Atlantic region. The numbers told the story. In Western Europe and North America, gross domestic product (GDP) averaged gains of between 2.5 and 3 percent annually. In the developing world, the pattern was quite different. Africa and much of Latin America enjoyed uneven growth — some countries actually falling below colonial levels. But in the 1970s East Asia came alive. Japan and a group of smaller countries — Hong Kong, Malaysia, Singapore, South Korea, Taiwan, and Thailand — generated high rates of GDP and export growth. China, India, and Vietnam would follow. In the early 21st century, China’s growth soared above 10 percent, its exports of goods and services climbing 23 percent annually between 2000 and 2006. India followed along with GDP growth of between 8 and 9 percent, and exports of goods and services at an annual average rate of 16 percent between 2000 and 2006 (WDI; WTO 2008b). Asia’s rapid development contributed to its emergence as a major center of world trade. Exports from the Asian region rose from 14.9 percent of the world total in 1973 to 27.9 percent in 2007. China’s exports soared from 1 percent of the world total in 1973 to 8.9 percent in 2007. Six Asian countries — Hong Kong, Malaysia, South Korea, Singapore, Taiwan, and Thailand — also did well — up from 3.4 percent to 9.3 percent (WTO 2008a, 10). Asia’s gains meant lost market share for other regions. The United States’ share of world exports continued to slide from 12.3 percent in 1973 to 8.5 percent in 2007, while U.S. economic growth averaged about 3 percent. South and Central America also lost market share, falling from 4.3 to 3.7 percent of world exports. In Africa, the pattern was also down—from 4.8 to 3.1 percent; and in Australia and New Zealand, declining from 2.1 to 1.2 percent. Europe was the big relative loser, falling from 50.9 percent of world exports in 1973 to 42.4 percent in 2007 (WTO 2008a, 10).

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Despite the surge of Asian exports to the developed world, the majority of international trade remains intra-regional trade (within Europe, for example). Between 56 and 58 percent of world trade flows occur within regions. This fact suggests that distance still matters in an increasingly globalized world economy (WTO 2008a, 3). What explains the surging growth of Asia and its rapidly expanding trade with the United States and Western Europe? Many factors obviously contributed—including the new technologies of transportation and communications—that enabled global production. The Vietnam War initiated this trend. U.S. shipping firms carrying military cargoes to Vietnam looked for commercial shipments—shoes, textiles, and electronics—to carry on the return voyage. From these modest beginnings, U.S. producers and retailers gradually would shift their supply chain to emerging Asia where costs were lower—especially labor costs—and quality proved satisfactory (Levinson 2006, 186 –188). One key enabling factor was America’s relatively open market to imports. While America’s share of world exports declined, its share of world imports rose from 12.3 percent in 1973 to 14.5 percent in 2007. But Asian growth also fueled a demand for imports — as Asia’s share of world imports rose sharply from 14.9 to 25.3 percent in 2005 (WTO 2008a, 11; Chang 2003, 107–124). As merchandise trade expanded over the last 30 years, and new Asian suppliers targeted world markets, huge imbalances appeared between what some countries exported and imported. One such imbalance involved the United States. America’s current account deficit rose to 6.2 percent of GDP in 2006, and then declined to 4.7 percent in 2008. Major Asian countries had significant surpluses: China’s current-account surplus was 10 percent of GDP in 2008; Taiwan, 6.4 percent; and Japan, 3.2 percent. Among oil exporters in 2008, Saudi Arabia ran a surplus of 28.9 percent of GDP in 2008, Norway, 18.4 percent; Venezuela, 12.3 percent; and Russia, 6.1 percent (IMF 2009). Were these imbalances the result of flawed trade policies? WTO economists claim that the chronic imbalances are primarily a macroeconomic phenomenon and have little association with trade policy (WTO 2007b, 26). But, as noted in Chapter 2, many critics of U.S. trade policy think differently. They blame one-sided trade agreements, lax enforcement of mutual obligations, undervalued foreign currencies, and market distortions, such as export subsidies, for the asymmetries.

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An important component of a nation’s overall balance with the rest of the world involves trade in services. This category includes many types of economic activity, ranging from banking and insurance, to shipping, tourism, and transportation. It also involves business consulting and information technology services. Because business services often cross borders only in electronic form, they are difficult to count and measure. The United States was the leading exporter of commercial services in 2007, accounting for 13.9 percent of world exports and 10.9 percent of imports. Hong Kong and China together account for 6.2 percent of service exports, more than Japan but less than Germany. India, the twenty-sixth largest exporter of merchandise, is the ninth largest exporter of services and the thirteenth largest importer (WTO 2008a, 14). Much of the world’s trade in services involves the transactions of foreign affiliates of big corporations. The WTO estimates that foreign affiliates of U.S. service providers sell more than twice as much as conventional service exports, suggesting the difficulty of measuring a nation’s competitiveness in world trade (WTO 2007a, 6). While trade policy is the focus of this volume, any discussion of trade inevitably touches on finance. Before the 2007– 2008 recession, world capital flows far surpassed world trade flows. According to the WTO, total world exports were about $11.8 trillion that year, but in foreign exchange markets daily trading amounted to over $3.2 trillion — suggesting annual financial flows far exceed trade flows (WTO 2007a, 10; Bank for International Settlements 2007). As in trade, the most active countries in private finance are located in Western Europe and North America. In 2007, developed countries exported $1,692 billion in foreign direct investment (FDI). Europe accounted for 61 percent and the United States for another 15.7 percent of the world total. Interestingly, developing economies exported $253.1 billion in FDI, or about 12.7 percent. While 68 percent of the FDI inflows went to developed countries (Europe 46.3%, and the United States 12.7%), China and East Asia received about $157 billion (8.5%) (UNCTAD 2008a, 2). The growth of private investment in certain large, rapidly growing developing economies is a relatively new phenomenon. In 1985, the first year for which data was available, traditional relationships dominated flows of private investment. Residents of the United Kingdom and the Netherlands invested in America.

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Residents of the United States invested in Canada and the United Kingdom, but little capital flowed to developing countries. Twenty years later, the pattern was quite different. In 2005, the United States was the largest FDI recipient in the world but China was the leader for developing countries. China attracted large sums of investment capital from the Virgin Islands, Taiwan, Japan, the United States, and Hong Kong. Developing Asia, including China, attracted more than two-thirds of total inflows to developing countries in 2006. China was also a major exporter of investment capital — investing in petroleum and raw materials, as well as technology (UNCTAD 2007b, 19 – 20). Over the last quarter century, transnational business has flourished. Of the 100 largest transnational corporations, 84 have their headquarters in the United States, Europe, or Japan. But, a recent trend is for firms in developing countries to compete on the global stage. According to UNCTAD data in 2007, among the 100 largest transnationals there were seven from developing countries, six of these Asian, and one Mexican (UNCTAD 2007b, 24). One proxy for the growing integration of financial markets was the proliferation of international agreements pertaining to investment issues. UNCTAD reported that at the end of 2007 there were approximately 5,600 international investment agreements, including 2,608 bilateral investment treaties (BITs), 2,730 double taxation treaties (DTTs), and 254 other agreements. Nearly every country had signed at least one. No single international authority coordinated the overall structure. Many of these agreements were concluded in the period between 1997 and 2002. Developing countries were party to 76 percent of all BITs, 61 percent of all DTTs, and 81 percent of all other international investment agreements. Many of the agreements were between developing countries, especially in the Southern Hemisphere (UNCTAD 2007b, 16 –19; UNCTAD 2008b). Before the sub-prime banking crisis spread globally in 2008, depressing equity and commodity markets, and disrupting world trade patterns, some observers perceived that the world economy was in the midst of a historic shift of power. Emerging market countries, like Brazil, China, India, and Russia, were growing rapidly. Chicago economist David Hale noted that in 2007 developing economies accounted for 29 percent of total world output compared with 18 percent in 1995. Developing countries held 75 percent of the $6 trillion in world foreign exchange reserves, and their stock markets had a capitalization of $17.8 trillion, more

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than $17.5 trillion for the U.S. market. Hale suggested that, while the United States was the engine of growth for the world economy in the late 20th century, developing markets may have taken over that role in the early 21st century (Hale 2008).

Leading Trading Partners and Strategies In this section, we look briefly at some of the leading trading powers, and their trade strategies. The countries considered have extensive trading relationships with the United States and play leadership roles in the WTO and regional trading arrangements. They are discussed in descending order, according to their shares of world trade.

European Union (EU) Because the 27 members of the European Union defer to the European Commission in Brussels on trade policy issues, we treat them as a single unit. The European Union accounts for nearly 40 percent of the world’s exports and imports. In 2007, it had a population of 494 million and a GDP of $13.8 trillion, exceeding the United States at $13.9 trillion. If trade among members of the European Union is excluded, it is the world’s leading exporter and second-largest importer, accounting for 16.4 percent of world exports in 2007 and 18.4 percent of world imports. The European Union is America’s largest trading partner, and the two work closely together, despite some differences (WTO 2008b). The story of the giant European Union begins with efforts at the end of World War II to integrate the economies of Germany and France, longtime political enemies, with an iron-andsteel community. In 1957, the two former enemies, the Benelux countries, and Italy signed the Treaty of Rome, creating the Common Market, an experiment to erect a common external tariff (including a common agricultural policy) and remove internal barriers. Over time, the Common Market expanded, adding the United Kingdom, Ireland, and Denmark in 1973, and in the 1980s, Greece, Spain, and Portugal. In 1995, Austria, Finland, and Sweden joined, making 15 members. As a result of the Maastricht Treaty in 1992, the European Union deepened its bonds with

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cooperation in defense and foreign policy, legal and judicial matters, and creation of an economic and monetary union — removing final border barriers. Then on January 1, 1999, all of its members except the United Kingdom, Sweden, and Denmark launched a common currency, the euro, which in only a few years has become one of the world’s leading currencies and a rival to the U.S. dollar (Eichengreen 2007). In 2004, 10 more countries joined the European Union: Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, and Slovenia. Romania and Bulgaria acceded in 2007. Because the 1957 Treaty of Rome established a customs union — with a common external tariff and no customs duties on internal trade — and a common agricultural policy, the European Commission in Brussels took charge of trade policy. Until the last decade of the 20th century, European trade policy had an Atlantic and Mediterranean focus. As a partner with the United States in the GATT, Europe promoted multilateral trade liberalization and a stronger rules-based international trading system. Meanwhile, Europe maintained preferential arrangements with former European colonies in the Mediterranean region and the Caribbean. As the price for membership in Europe, the United Kingdom was obliged to reorient its trade to the continent and away from its former commonwealth and colonies. While the United States and Europe were able to lower and then essentially remove manufacturing duties between themselves as part of the various GATT rounds, agricultural barriers lingered as a problem. On all imported goods, EU tariffs average 5.2 percent, but agricultural products averaged 15 percent (WTO 2008b). Protection for high-cost agriculture has been an integral part of the European Union experiment from 1957. To effect the common market, member countries accepted a costly program of subsidies and prices to benefit European farmers. Some in France saw this Common Agricultural Policy (CAP) as a way of retaining distinctive features of rural life. Although necessary politically, it has proven a costly drain on funds (44% of EU expenditures in 2005), and a constant source of trade frictions. The CAP continues to distort world agricultural trade. The World Bank calculates that the European Union provides half of all agricultural support in OECD countries. As a share of gross farm receipts, agricultural support during the period 2003 to 2005 in the European Union amounted to 34 percent, in Japan 58 percent, and in the United States 16 percent. One result is that

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the European Union is the world’s leading exporter of agricultural products. It exports substantial quantities of products that might be imported more efficiently — including sugar, wheat, cheese, meat, and milk products (World Bank 2007, 97). EU leaders have been reluctant to reduce agricultural subsidies or to open the European Union market to increased imports of farm products from developing countries. In France and Ireland, opposition to changes in the common agricultural policy runs strong among rural voters. In both countries, concern over agricultural trade produced strong votes against the proposed new European Constitution, which would weaken the ability of national governments to protect farmers. Thus, it is not surprising that governments of developing countries blame farm lobbies in the rich countries for the deadlock in Doha Round agricultural trade negotiations.

China With a population of 1.3 billion people, China is the world’s largest, rapidly-growing economy. Its gross domestic product is about one-half the size of the American economy. Within the last two decades, China also has emerged as a major player in world trade. After the European Union, it ranks as the world’s second largest exporter, accounting for about 8.8 percent of exports. China is the world’s third-largest importer, taking 6.8 percent of imports. China’s leading export markets are the European Union (20.1%), the United States (19.1%), and Hong Kong (15.1%). China’s imports come from Japan (14%), the European Union (11.6%), South Korea (10.9%), Taiwan (10.6%), and Hong Kong (9%). While the United States is China’s leading export market, the United States does not rank among China’s five leading suppliers of imports. China’s average duty on all imports is about 9.9 percent; on agricultural goods, 15.8 percent (WTO 2008b). In 2008, China was the world’s factory, and a leading exporter of manufactures. China imports raw materials from Australia, Brazil, and many other countries, then adds cheap labor, and exports the results. As a member of the WTO, China has gained assured access to export markets in North America and Western Europe. Some commentators say China pursues a mercantilistic trade policy for national advantage. Mercantilist nations seek to export more than they import, and to accumulate monetary reserves for national advantage. William Hawkins, an analyst with the

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U.S. Business and Industrial Council, compares China to 18thcentury European empires. In its dealings with developing countries in Africa, Asia, and the Americas, China seeks markets for its manufactures and raw materials for its industry (Hawkins 2005). Eamonn Fingleton, an international trade analyst based in Tokyo, complains that American corporations have become instruments of this mercantilism. He says they transfer advanced technology to China and lobby for the Chinese interests in Washington (Fingleton 2008).

Japan With a population of about 128 million, Japan has an economy of more than $4.3 trillion, roughly one-third the size of the U.S. economy in production. Japan is the fourth-leading exporter of merchandise and the third-leading exporter of commercial services. Its principal export markets are the United States (20.4%), China (15.3%), the European Union (14.8%), and South Korea (7.6%). On the import side, Japan is the fourth-leading importer of merchandise, and the third-leading importer of commercial services. Japan’s principal suppliers are China (20.6%), the United States (11.6%), the European Union (10.5%), Saudi Arabia (5.7%), and the United Arab Emirates (5.2%). Like the European Union, Japan has relatively low average tariff levels (5.1%), but keeps tariffs on agricultural products much higher (21.8%) (WTO 2008b). As a matter of national policy, Japan seeks to lift its food self-sufficiency above 50 percent (“Japan to Set Roadmap” 2008). Until the Seattle WTO conference of 1999, Japan was a strong backer of multilateral trade negotiations. While maneuvering to protect Japanese rice farmers and other agriculture, its trade policy was directed at maintaining secure access to its largest markets and gaining improved terms of access to developing markets through multilateral negotiations. In the GATT/WTO negotiations, Japan usually maintained a low profile, offering few concessions, but taking advantage of concessions offered by its trading partners to boost exports.

Canada Long an important trading nation and active participant in world trade negotiations, Canada has about 33 million people and a $1.2 trillion economy. Among all trading nations, Canada ranks fifth in both exports and imports of goods (excluding intra-EU trade).

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Canada is highly dependent on the North American market; the United States takes 79.1 percent of its exports, and Mexico another 1.1 percent. The next largest markets are the European Union (7.7%), China (2.1%), and Japan (2%). As an importer, Canada’s largest suppliers are the United States (54.2%), the European Union (12.1%), China (9.4%), Mexico (4.2%), and Japan (3.8%). Canada’s average applied duties are 5.5 percent on all goods, and 17.9 percent on agricultural products (WTO 2008b). Canada has long supported the multilateral trade liberalization process to advance its economic interests. Its trade specialists take active part in WTO negotiations and help administer the global trading system. As a member of the Cairns group nations, Canada looks to the WTO to improve opportunities for its agricultural exports. It has used the WTO dispute settlement mechanism to attack U.S. corn subsidies. With its vast deposits of oil sands in Alberta, Canada also has become a major player in international oil markets. Because assured access to the U.S. market is vital to Canada’s economic health, it has not hesitated in recent years to pursue bilateral and regional agreements — such as the Canada-US FTA in 1988, and the North American Free Trade Agreement (NAFTA) in 1994. While seeking improved access to foreign markets, Canada seeks to preserve its distinctive culture with restrictions on foreign magazines and films. Foreign firms entering Canada quickly find that provincial barriers restrict internal trade. As a consequence, the provinces of Ontario and Quebec are discussing the negotiation of an inter-provincial free-trade agreement (Morrissy 2008).

Mexico Until 1995, after NAFTA took effect, Mexico was not a member of the GATT/WTO system. Ruled by one political party since the Mexican Revolution, Mexico pursued isolationist economic policies, and sought to keep its distance from its large North American neighbor. But faced with a burgeoning population of 105 million (2007) and inadequate job creation, Mexico’s leadership made a decision to look outward for foreign investment to create jobs. Choosing to integrate with the international system, Mexico has lowered tariffs. Its average ad valorem tariff is 12.6 percent. Mexico ranks tenth among the world’s exporters (excluding intra-EU trade) and eighth among importers. Of its exports, 82.2 percent go to the United States, 5.3 percent to the European Union, and

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2.4 percent to Canada. Of its imports, 49.8 percent arrive from the United States, 12 percent from the European Union, 10.5 percent from China, 5.8 percent from Japan, and 4.5 percent from South Korea (WTO 2008b). Much of Mexico’s trade is cross-border trade in which components arrive from the United States and are assembled by Mexican labor. The final products are shipped back across the border to U.S. markets. Mexico exports more automobiles and auto parts to the United States than the United States does to the world. When higher energy prices hiked shipping costs in 2008, some United States and Canadian firms that shifted manufacturing assembly to China discussed moving factories back to Mexico to be nearer the North American market (Engardio 2008; Macdonald 2008).

Russia The Russian Federation has 141.6 million people and a GDP of about $2 trillion. As the world’s largest exporter of natural gas and the second largest exporter of oil (USEIA 2008, 1), Russia enjoys new significance in world trade. Fuels and mining products amount to 68 percent of exports. Its principal export markets are the EU (55.8%), Turkey (5.2%), the Ukraine (4.7%), China (4.5%), and Switzerland (4.1%) (WTO 2008b). Russia wishes to join the World Trade Organization. From the Russian point of view, WTO membership is an important step toward integrating the Russian economy into the global economy, and attracting foreign investment capital. Among the contentious issues have been energy pricing, intellectual property rights, and agriculture. European manufacturers worry that Russia’s energypricing structure might give Russian industry an unfair advantage in export markets (Cooper 2008b, 13 –14). The United States and the European Union have been concerned about Russia’s capacity to comply with the WTO’s Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). While Russia has taken steps to bring its laws into compliance with WTO rules, enforcement of those laws remains unsatisfactory to foreign interests. Foreign governments have complained that the Russian judicial system has been slow to address issues of intellectual property infringement. Russian production of pirated DVDs has been a special problem. In 2006, U.S. holders of copyrights lost an estimated $2.1 billion to pirates. Counterfeit

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purchases of American products far exceed legitimate purchases of such products in Russia (Cooper 2008b, 11). Agricultural policy is especially sensitive in Russia — given the dislocations in converting from a state-managed economy. Along with the vexing issue of agricultural subsidies, outside suppliers have been perturbed at Russia’s use of quotas on poultry, beef, and pork, allegedly for health reasons. In other areas of discussion — such as financial services and telecommunications— the Russian government has sought to employ infant industry protection (USTR 2008, 467– 477). If the Obama administration wishes to integrate Russia into the WTO, it must persuade Congress to modify existing U.S. laws so that Russia can receive permanent normal trade relations status. Congress must exempt Russia from the Jackson-Vanik amendment, which denies countries unconditional most-favored-nation status if they restrict freedom of emigration. Russia, Kazakhstan, and several other former communist states are still subject to this restriction (Cooper 2008a).

Brazil The largest country in Latin America by area and population (192 million), Brazil has a GDP of about $1.8 trillion. It is the world’s sixteenth-largest exporter of merchandise. Traditionally, Brazil’s largest export markets have been the European Union (25.2%), the United States (15.8%), Argentina (9.0%), China (6.7%), and Venezuela (2.9%). During 2009 Brazil’s exports to China have soared, and China became its leading trading partner (Duffy 2009). On the import side, Brazil is the 19th largest market for merchandise. Its tariffs average 12.2 percent, with nonagricultural goods averaging 12.5 percent. Like many developing economies, Brazil has not bound its tariffs at these lower levels, and could lift them to higher levels — averaging 31.4 percent on all goods and 35.5 percent on agricultural products — without violating commitments to the WTO ( WTO 2008b). One of GATT’s original members, Brazil seeks to lead the developing world in the WTO. During the Doha Round, Brazil has represented the group of 21 developing countries on agricultural matters. Brazilian Ambassador Rubens Barbosa has emphasized that there is a new balance of power, and the WTO can no longer function as a club in which the big countries — the United States

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and the European Union — tell the others what to do (Hagstrom 2003; Smith 2003). With a large domestic market, a diversified economy with strengths in agriculture, raw materials, manufacturing, and technology, Brazil seeks market access for its products. It has historically pursued an import substitution policy (that is, substituting domestic production for imports), and even today it uses subsidy and government procurement policies to encourage national production. In services, it has been slow to open up the domestic market to foreign financial services, telecommunications providers, and cable and media companies. But Brazil strives to attract foreign investment, and because of its market size and growth potential, it has become one of the developing world’s most attractive hosts for foreign capital (USTR 2008). Brazil has also taken an interest in encouraging South-South trade among countries in the Southern Hemisphere. It has used the WTO dispute settlement mechanism to successfully challenge U.S. farm subsidies for cotton and EU subsidies for sugar.

Australia Australia, one of the leaders of the Cairns Group of food-exporting nations, is a good example of an agricultural and raw-materialsoriented economy dependent on open trade. Australia has a population of about 21 million and a gross domestic product of more than $733 billion. It ranks 19th in the world as an exporter, and 14th as an importer of merchandise. Australia’s principal export markets are Japan (19%), China (14%), the European Union (11.4%), South Korea (8%), and the United States (6%) (WTO 2008b). Long a protectionist nation, Australia began to reduce its tariffs in the late 1980s and now has applied tariffs comparable to other major trading countries. The average duty applied to all imports is 3.5 percent, and 1.3 percent on agricultural products. The largest share of its imports come from the EU (21.9%), followed by China (15.5%), the United States (12.9%), Japan (9.6%), and Singapore (5.6%) (WTO 2008b) Eager to gain assured access to its major overseas markets, Australia has negotiated bilateral FTAs with Chile, New Zealand, Singapore, Thailand, and the United States. It is negotiating FTAs with China, the Gulf Cooperation Council, Japan, Malaysia, South Korea, and ASEAN. Under consideration are FTAs with India and Indonesia.

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India India seeks to take an active role in global trade negotiations, and to provide leadership to developing countries, as befits a founding member of GATT/WTO and a country with the world’s secondlargest population of 1.1 billion people. Although it has a growing middle class of 300 million, the vast majority of its people have low incomes. It is estimated that 800 million Indians live on less than $1 per day. Total GDP is nearly $3 trillion on a purchasing power basis (WTO 2008b). As a trading country, India ranks 18th in exports and 12th in imports if intra-European trade is excluded. In services, it is much more important. India is the fifth leading exporter and the seventh leading importer of services. India’s tariffs are relatively high — averaging 14.5 percent, with agricultural products averaging 34.4 percent. Because it has not bound these tariffs against increases, India could impose even higher rates without violating its international commitments (WTO 2008b). India’s principal export markets are the European Union (21.7%), the United States (13.8%), the United Arab Emirates (9.9%), and China (6.5%). It buys from the United States (14.8%); China (11.2%); and the United States (6.5%) (WTO 2008b). For much of its history, India rejected free-market economics and relied on central planning, industrial policy to promote manufacturing, and government control over foreign trade and foreign investment. Trade policy was highly protectionist and sought to substitute Indian production for imports. The average tariff surpassed 200 percent, and quotas also restricted trade. Compared to its neighbors in Southeast Asia, India has enjoyed a low rate of growth from 1950 to 1980 (3.5%). With the collapse of its major trading partner, the Soviet Union, in the early 1990s, India began to liberalize its economy and open up to trade and investment. While inadequate ports, roads, power, and other infrastructure complicate India’s efforts to expand exports of manufactures, it has large numbers of welleducated people eager to take service-related jobs. Annually, India’s colleges and universities turn out 2.5 million graduates, including 350,000 engineers. This has attracted large numbers of U.S. and other transnational firms, such as General Electric, to set up operations and research centers in India. In addition, Indian entrepreneurs have developed a number of world-class competitors such as Tata in engineering and manufacturing, and Infosys and

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Wipro in software and information technology. Call centers and back-office operations flourish in India, as North American and European firms moved jobs to India to take advantage of welleducated and relatively inexpensive labor. But India still restricts foreign investment in retail in order to protect small stores. In trade policy, India has sought to rally developing countries in the WTO as a counterweight to the influence of the European Union and the United States. But while seeking market access for manufactures and agricultural exports in the rich industrial countries, it has been reluctant to open its own agricultural market to world competition and to lower its tariffs on manufactures as much as high-income countries wanted in Doha Round negotiations. In deference to its generic drug manufacturers, who reproduced overseas patented drugs by a different process, and to its consumers who benefited from low prices, India has been slow to comply with the WTO’s TRIPS code (USTR 2008).

South Africa As the African country with the highest standard of living, and enormous mineral wealth, South Africa, another founding member of GATT, often takes a leadership role on regional trade matters. With a population of about 48 million, South Africa has a GDP of $463 billion. Despite its mineral riches, manufactures compose 55 percent of South Africa’s exports, and these go to the European Union (33%), the United States (11.8%), Japan (11%), and China (6.5%). On the import side, South Africa’s applied tariffs average 7.8 percent, and 9.2 percent on agricultural products. South Africa obtains 33.7 percent of its imports from the European Union, followed by China (10.7%), and the United States (7.7%) (WTO 2008, October). In WTO trade negotiations, South Africa has worked closely with Brazil and India to represent the interests of developing countries and to promote South-South trade, that is, trade among countries in the Southern Hemisphere. One of its special priorities has been to obtain inexpensive drugs for AIDS patients from generic pharmaceutical producers in the developing world. However, pharmaceutical firms in India and Brazil copied drugs patented and produced in Western Europe and the United States and then sold them to thirdworld customers at a fraction of the price. This activity conflicted with the WTO’s TRIPS accord on intellectual property protection.

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Eventually, in 2002, the United States agreed not to challenge poor countries that imported drugs from generic suppliers to fight HIV/AIDS, malaria, tuberculosis, and other infectious epidemics under compulsory licensing rules of the WTO (Jack 2006, 3).

World Trade Organization (W TO) At the close of World War II, the victors established several international economic institutions: the International Monetary Fund (IMF) to promote currency stability; the International Bank for Reconstruction and Development (now known as the World Bank) to promote economic development; and the General Agreement on Tariffs and Trade (GATT), a temporary contractual arrangement pending establishment of the permanent International Trade Organization (the ITO). Fifty countries sent delegations to the UN Conference on Trade and Employment in Havana, Cuba, during the winter of 1947 – 1948 to negotiate the charter for the ITO. The draft charter extended beyond trade to cover commodity agreements, employment, restrictive business practices, international investment, and services. As it turned out, the charter was too advanced and grandiose for its times. Fearful that rules represented an attempt to impose bureaucratic planning on the world economy in the name of freer trade, the U.S. business community successfully lobbied Congress against the charter. As a consequence, the GATT, which was intended only as a transitional mechanism, endured for 47 years. The GATT was both a forum for trade negotiations, and set of rules for trade relations. The protocols were provisional and the secretariat administering them remained an interim committee. Over eight negotiating rounds, beginning with the multilateral round at Geneva in 1947, this temporary arrangement succeeded in lowering duties on trade in manufactures. For a discussion of the early GATT rounds, see Chapter 1. In the early rounds, the principal producers of individual products negotiated reductions bilaterally on a product-by-product basis with principal suppliers. Then they extended the concessions on a nondiscriminatory most-favored nation basis to other trading countries without them having to make reciprocal reductions. For example, the United Kingdom and the United States, the principal auto producers of the postwar period, agreed to lower duties on the auto trade. Emerging industrial powers, such as South Korea and Japan,

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gained the benefits of these concessions without providing equivalent access to their own markets. As a result, Japanese and South Korean auto manufacturers gained unobstructed access to the U.S. market for their exports, but a variety of trade barriers impeded sales of U.S. cars to their own consumers. As the example suggests, the GATT was initially a small club dominated by the rich countries of Western Europe and North America. At its founding, GATT had 23 members, 12 of which were developed countries and 11 of which were developing. For more than a decade its membership remained small, and the members made decisions by consensus. As late as the Dillon Round of 1960 –1962, there were only 26 participants, but then the membership began to expand under the leadership of its first directorgeneral, Eric Wyndham White of the United Kingdom. As more members joined the GATT in the 1960s — especially developing countries — the negotiations became more difficult and time consuming. Some of the new members lacked the capacity to honor their obligations and even to pay their dues (Eckes 2000, 12 – 23). In the early GATT rounds, negotiators picked the low-hanging fruit of high tariffs on industrial goods. By the 1960s, GATT sought to address complex issues involving nontariff barriers and agriculture. With more members involved, each round took longer to conclude. In the Kennedy Round of the 1960s, 40 nations had participated and the negotiating process lasted three years. It produced tariff cuts of 36 to 39 percent for participating industrial countries. By the 1970s, the Tokyo Round, which lasted six years, engaged 102 members — many of them newcomers to the international trade system.

Tokyo Round To backers of the multilateral trading system, the results of the Tokyo Round (1973 – 1979) proved disappointing. It achieved far less than the Kennedy Round. Advanced countries agreed to cut tariffs on industrial goods by about 33 percent (from about 8.1% ad valorem for the United States to 5.6 percent of total imports). While the United States had hoped to roll back the European Community’s variable levy system for protecting agriculture, these efforts achieved little. But the Tokyo Round did extend GATT rules to nontariff matters. Governments approved a number of nontariff codes relating to countervailing duties and subsidies, antidumping duties, product standards and technical barriers, import

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licensing, government procurement, and customs valuation. Generally, these codes, binding only to GATT members who accepted them, established a large body of laws to deal with various technical issues. In effect, the negotiators sought to harmonize administrative procedures and national laws dealing with a variety of impediments to international trade (Lowenfeld 2002, 54 – 55). Most developing nations did not participate actively in the Tokyo Round. Although they asserted rights to all of the tariff concessions granted by rich countries to one another, many of the poor countries looked to the United Nations Conference on Trade and Development (UNCTAD), and its director Raul Prebisch for leadership. Prebisch, who in the 1950s and 1960s advocated tariffs and import substitution as the path to development, urged the rich countries to provide one-way tariff preferences to the exports of the poor countries. And, in the Tokyo Round, GATT members made permanent the Generalized System of Preferences (GSP), essentially waiving the core principle of nondiscrimination for developing countries. The U.S. program, for example, allowed GSP-eligible countries duty-free access to the U.S. market subject to certain conditions. The executive branch retained authority to cancel a country’s eligibility if its exports exceeded certain limits, or in certain other circumstances. The European Community administered a similar GSP program. The net effect of these unilateral market access programs was that developing countries played a minor role in GATT and looked to bilateral negotiations with the European Union and the United States for trade benefits. They also made little effort to liberalize and bind their tariffs against future changes (Hoekman and Ozden 2005, 10). As it turned out, the Tokyo Round did more than sustain the multilateral process. It took strides to accommodate the world trading system to the needs of multinational business, as it extended international trade rules to nontariff issues.

Uruguay Round—WTO The eighth, and last, of the GATT rounds, the Uruguay Round, involved 123 countries and took seven and one-half years to conclude in 1994. Initially, there had been little enthusiasm for more multilateral negotiations after the Tokyo Round. But the pressure of bilateral and regional free trade initiatives helped persuade the European Community and Japan to join in launching

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another round. They did so in September 1986, when GATT held a ministerial at Punta del Este, Uruguay. The Uruguay Round focused on improving the workings of the international trade system, particularly in the areas of agriculture, subsidies, safeguards, dispute settlement, and nontariff measures. The United States sought to revise the ineffective GATT dispute settlement process, which allowed members to block an adverse finding. The United States also wanted to promote more open and fair conditions of trade in agricultural commodities and improvements in GATT provisions to address certain unfair trading practices. Frustrated with free-riding countries and the lack of reciprocity, Congress had instructed negotiators to obtain improved market access for U.S. exports to developing countries. Although differing on agriculture, the European Union had a similar set of interests: improving dispute settlement, establishing rules for services, and gaining greater access to developing country markets. The Uruguay Round proved another exercise in frustrations. Whereas previously the United States and the European Community were the major players, this time developing countries took a larger role. Two-thirds of the 123 participants were developing countries. The key to the final agreement was a deal involving developing and developed nations. The latter agreed to phase out restraints on textiles and apparel and to improve market access for developing world agricultural products, in exchange for extending the multilateral system to cover intellectual property, services, and trade-related investment measures (TRIMs). Behind the deal was this reality: large transnational corporations based principally in the Northern Hemisphere were frustrated with local-content restrictions in host countries and sought greater freedom to run their operations in the most efficient way possible. Also, Wall Street, the insurance industry, and telecommunications giants wanted an opportunity to sell their products and services in developing markets on the same terms as host-country competitors. And the entertainment and pharmaceuticals industries insisted on stronger protections for patents and copyrights. The final agreement replaced the temporary GATT with a permanent institution: the World Trade Organization. It would serve as a forum and a vehicle for implementing trade agreements. The agreement also contained 13 different accords covering trade in goods and agriculture, as well as sanitary and phytosanitary

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measures (covering risks associated with disease, pests, additives, toxins, and the like). Others concerned textiles and clothing; technical barriers to trade (standards); TRIMs; antidumping, customs valuation, preshipment inspection, rules of origin, import licensing procedures, subsidies, and countervailing measures; and safeguards. In addition, participants approved a General Agreement on Trade in Services (GATS); TRIPS; a dispute settlement understanding; trade policy review mechanism; and four plurilateral trade agreements covering government procurement, civil aircraft, dairy, and bovine meat. These were known as plurilaterals, because they applied only to their signers, a smaller group than the whole WTO membership. The final act also set out an additional negotiating agenda, one including financial services, basic telecommunications services, and civil aircraft. These matters were left largely unresolved until later negotiations. Those interested in the details of the Uruguay Round agreements are encouraged to consult books in the reference section to this chapter, particularly Barton, Goldstein, Josling, and Steinberg 2006; Bethlehem, McRae, Neufeld, and Van Damme, and for a critical point of view, Wallach and Sforza 1999. From the standpoint of developing countries, agreements on textiles and clothing, and on agriculture were most important. The textile pact promised to end country-by-country quotas on imports of textiles and apparel by January 1, 2005. This was implemented, benefiting low-cost textile exporters such as China, Bangladesh, and Vietnam. But many inefficient African producers experienced heavy losses, as did medium-income countries with higher cost structures, such as the Philippines, Taiwan, Turkey, and South Korea. In the agriculture agreement, member countries committed to establish a fair and market-oriented agricultural system. They pledged to improve access to their markets, cut support to agriculture, and reduce export subsidies. How these goals were to be achieved, the negotiators left for future discussions. Afterward, the poor countries would complain that the United States and the European Union did not keep their side of the bargain. Among the most controversial aspects of the trade package were the WTO’s voting formula and its dispute settlement mechanism. The WTO sought to operate by consensus, but if consensus could not be achieved, it voted on a one country/one-vote basis. Each member was entitled to one vote, no matter the size of its stake in the global economy. Thus, the United States (then with

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a population of 285 million) had voting power equal to Grenada, which had a population of 108,000. As created in the Uruguay Round, the new WTO was no “rich man’s club.” Developing nations now held more than two-thirds of the votes, although they accounted for only 38 percent of world trade. Even though the WTO sought to avoid votes, the concerns of the poorest countries shaped the WTO agenda far more than they did under the GATT.

WTO Leadership Transition As noted previously, the United States and the European Union had dominated GATT. Smaller trading countries, such as Australia and Canada, took an active leadership role but the reality was that when Europe and the United States agreed, the others usually acquiesced. Even though GATT functioned by consensus (giving each member a veto), dissent was unusual. In the WTO, an organization in which two-thirds of the members were low-income countries, all longtime members of GATT, such as India, Brazil, and South Africa, sought to lead the developing world. Their first triumph came in 2002 when the developing countries challenged the United States and Europeans on the selection of a new director general. Traditionally, the head of GATT had been a European, but in 1999 members deadlocked and decided to share the six-year term between Mike Moore, a former prime minister of New Zealand, and Supachai Panitchpakdi of Thailand. Moore had the misfortune to preside over the turbulent WTO ministerial in Seattle in December 1999. He had hoped to launch a development round of negotiations to address some of the complaints about the uneven distribution of gains from the Uruguay Round. Poor countries complained that rich countries had agreed to cut farm subsidies, but did not. Frustrated at not having improved access for their agricultural exports, developing countries refused to lower tariffs and open markets to manufactures and service providers from high-income countries. If the unrest in Seattle was a blow to those who sought to strengthen the multilateral system, the terrorist attacks of September 2001 presented a second chance. This time nations united behind the launching of another trade round — the so-called Doha Development Round (DDR), named for Doha, Qatar, where the WTO met in November 2001. In this round, participants aspired to use trade liberalization to integrate poor countries into the

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international system. They sought to reduce poverty and promote economic development, thus promoting greater prosperity, social stability, and world peace. Some members, notably the Europeans, hoped to address a variety of new issues in the context of the multilateral round — these involved investment, competition, transparency in government procurement, and trade facilitation. These, the so-called Singapore issues, had been raised at a 1996 WTO ministerial in that Asian city-state. Critics — particularly India — claimed that the first three of the Singapore issues were strictly-speaking nontrade issues and impinged on domestic sovereignty (Khor 2004). The DDR has had a turbulent history. From the initial aspirations soon came frustrations, deadlock, and fiascos, such as the turbulent ministerial in Cancun, Mexico, in 2003. Gradually, the deadlock lead to postponement and eventual suspension of the negotiations in July 2006. Indian Trade Minister Kamal Nath asserted the round was not dead but was “between intensive care and the crematorium” (Blustein 2006). While the United States and Europe pointed fingers at the other for the deadlock, the confrontational approach of developing countries was another important factor. Interestingly, several new groupings of nations used the Doha Round of negotiations to challenge the traditional leadership role of the United States and the European Union. Among the most important of these new groupings are the Cairns group of 19 food-exporting countries, and the Group of Twenty (G-20) and the Group of Thirty-Three (G-33) developing nations.

Cairns Group Formed in 1986 at Cairns, Australia, the members include developed and developing countries such as Argentina, Australia, Brazil, Canada, Indonesia, Malaysia, New Zealand, Pakistan, the Philippines, South Africa, and Thailand among others. One of the group’s longtime goals is eliminating agricultural export subsidies that distort world trade. In particular, they want the Doha Round to achieve new market access opportunities for farmers. Many of their concerns relate to EU and U.S. agricultural policies. They have called upon the European Union to make tariff cuts on sensitive agricultural products, and for the United States and the European Union to reduce significantly the amount they spend on trade-distorting domestic support.

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Leading members of the group —Argentina, Australia, Canada, and New Zealand — tend to have relatively low tariffs on imports and do not have the resources to heavily subsidize agriculture as do governments of Japan, the United States and the European Union. They often align with the United States in negotiations. For further information, see http://www.cairnsgroup.org/.

Group of Twenty Eager to offset the power of the United States and the European Union in WTO negotiations, Brazil, India, and South Africa organized the Group of Twenty (G-20) in August 2003. This grouping of developing nations was determined to press proposals for agricultural liberalization at the Cancun ministerial of the WTO. It emphasized that the greatest contribution to the success of the Doha Round must come from developed countries, not developing countries. The G-20 has 23 members, 5 from Africa including South Africa; 6 from Asia, including China and India; and 12 from Latin America. It claims to represent 60 percent of the world’s population, 70 percent of the world’s rural population, and 26 percent of the world’s agricultural exports. Significantly, the G-20 does not include such high-income agricultural producers as Australia, Canada, and New Zealand, members of the Cairns group. The G-20 often employs a confrontational negotiating strategy in which it claims to represent the South against the North in trade debates. While the confrontational approach has not been successful in the Doha Round, some scholars say the G-20 has eroded the influence of the United States and the European Union and made the WTO more democratic (Crump and Maswood 2007). Some think the G-20 has been punching above its weight and actual influence in world trade, and thus jeopardizing the future of the multi lateral system. For further information, see http://www.g-20.mre. gov.br/.

Group of Thirty-Three This group, which now includes 46 developing countries, is concerned with food security, and rural development needs. Indonesia and the Philippines organized the group, which first sought to exert influence at the 2003 WTO ministerial in Cancun, Mexico. Members include poor countries in Africa, Asia, and Latin

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America. Among the largest are China, India, Indonesia, South Korea, Nigeria, and the Philippines. The group wants to find solutions to challenges facing small farmers in developing countries. They seek a special products and special security mechanism, which exempts certain products in order to protect food security, to promote rural development.

WTO Dispute Settlement Unlike GATT, its predecessor, the WTO features an effective, legalistic dispute settlement process in which member nations, but not private parties, can file complaints alleging violation of WTO rules. The previous GATT dispute settlement mechanism tended to emphasize diplomatic solutions, in which obligations were not enforced to the letter (Srinivasan 2007, 1039–1041). At the core of the new dispute settlement process is implementation, compensation, or retaliation. If the losing party to a complaint does not implement the decision and make compensation, the party bringing the complaint may retaliate by suspending equivalent concessions. In effect, the dispute settlement process makes the WTO an international regulatory authority, and many of its decisions curtail national economic governance (Van Damme 2008). Since 1995, members had filed 392 complaints (through May 2009). The United States and the European Union brought 171 complaints (44%), and had to respond to 43 percent of the complaints (170). The United States is a party — either a complainant or a respondent — in more than half of all cases (WTO 2009a). In recent years, complaints brought by the United States and the European Union have declined, and increasing numbers have been filed by developing countries — such as Argentina, Brazil, India, Mexico, and Thailand. Developing countries have brought 39 percent of all complaints. Least developed countries, including most of Africa, and other countries classified by the United Nations, seldom have been involved in dispute settlement cases (Leitner and Lester 2008, 180 – 181, 192). They tend to account for a small share of world trade, and lack the resources and experience to utilize dispute settlement successfully. While the dispute settlement system is relatively new, scholarly analysis suggests that it has been relatively successful. The implementation rate of WTO panel decisions is about 75 percent. But there appear to be compliance problems in which remedies

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have been delayed or their implementation has been disputed. The United States, the country that promoted the rules-based approach to trade governance, is alleged to be the “biggest troublemaker” because of its refusal to implement major rulings. The reason given for noncompliance is congressional reluctance to enact implementing legislation. The troublesome U.S. cases involve steel products, copyright law, trademarks, tax law involving foreign sales corporations, and the Byrd amendment case involving distribution of antidumping and countervailing duties collected to petitioning companies. The European Union has also refused to implement WTO decisions in high-profile cases involving bananas and meat hormones (Choi 2007). For U.S. criticisms of the dispute-settlement process, see Chapter 2.

Alternative Trade Strategies— Bilateralism and Regionalism After the failure at Cancun and Hong Kong in 2005 to conclude the Doha Development Round, major trading powers increasingly looked for alternatives to the multilateral system. In place of the many-sided WTO process, major trading nations began to negotiate bilateral and regional agreements with like-minded, or geographically near, partners. As of May 2009, the WTO reported 247 agreements in force, including 148 FTAs (WTO 2009b). At first impression, the regional, bilateral, and multilateral approaches appear contradictory. Bilateral and regional agreements seem to contradict the principle of nondiscrimination that underlies GATT/WTO. Nonetheless, from its origins in 1947, GATT sought to accommodate bilateral and regional trade agreements within the multilateral system. They would be a first step toward the extension of gains from trade to all countries. The General Agreement on Trade in Services (GATS) negotiated during the Uruguay Round for services also envisaged bilateral and regional agreements. Basically, the WTO’s interest is that regional agreements promote trade openness and not lead to greater discrimination against outside parties. Many of the contemporary bilateral and regional agreements strive for deeper degrees of integration than under the WTO, particularly with measures to liberalize and harmonize trade-impeding

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regulatory policies. Others seek to enlarge and integrate regional blocs in Europe, North America, South America, and Asia. Others link countries in different regions and at different levels of development, such as U.S. agreements with Jordan and Chile. In light of these patterns, we need to examine more closely the tradenegotiating strategies of the leading economic powers. For a discussion of U.S. strategies, please see Chapter 2.

European Union (EU) Like U.S. officials, Europe’s leaders have negotiated agreements outside the GATT/WTO multilateral process to advance the interests of European manufacturers, service providers, and investors. They pursued bilateral and regional economic arrangements with neighboring countries, former colonies, and major trading partners in other corners of the world. Some of the EU initiatives are defensive moves intended to preserve access to a market, such as Mexico, where the United States apparently gained an advantage from NAFTA. In 1995, the European Union and 10 Mediterranean governments —Algeria, Egypt, Israel, Jordan, Lebanon, Morocco, Syria, Tunisia, Turkey, and the Palestinian Authority — issued a declaration in Barcelona, Spain, calling for a Euro-Mediterranean Free Trade Area (EMFTA) by 2010. It involved negotiating bilateral association agreements with each country and gradually implementing free trade. EMFTA envisaged free trade in manufactures and the gradual opening of trade in agricultural products. The bilateral agreements have all been concluded with the European Union, and the parties are committed to implementing free trade among themselves. The Euro-Mediterranean Association Agreements differ but have certain common aspects — including respect for human rights and democracy, establishment of WTOcompatible free trade over a 12-year transition period, and provisions relating to intellectual property, services, public procurement, competition, subsidies, and monopolies. The EMFTA initiative reflected Europe’s appreciation that its own economic prosperity and political stability depended on improving economic conditions in North Africa. In 2000, the European Union proposed economic partnership agreements with a number of developing nations: the socalled Asia-Caribbean-Pacific (ACP) group, 79 former colonies with about 12 percent of the world’s population. For decades,

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these countries enjoyed preferential access to Europe’s market, but the preferences violated WTO rules requiring reciprocity, not dependency. The European Union proposed regional partnership arrangements, in which the countries would open their markets to EU businesses, enjoy generous access to the EU market, and trade more freely among themselves. Under the threat of losing preferences on their exports to the European Union, 35 countries conducted initial interim agreements with the European Union by a December 31, 2007, deadline. But the agreements are controversial both in the developing countries and with other members of the WTO. Brazil has complained that these proposed preferential agreements conflict with efforts to promote so-called South-South commerce among developing countries. Governments that have economic partnerships with the European Union are required to extend to the European Union any more advantageous market access terms that they negotiate with other significant economies. That is, the ACP agreements contain a most-favored-nation clause (“Sun Sets on Cotonou,” 2008). After North American countries completed NAFTA, the European Union, not wishing to be excluded from a fortress America, negotiated its own free-trade agreement with Mexico, which took effect in 2000. The European Union feared losing market share to the United States, and Mexico sought to diversify its exports and attract European investment capital so as to create jobs. In 2007, the European Union took 5.3 percent of Mexico’s exports, and supplied 12 percent of Mexico’s imports, making it Mexico’s second-largest trading partner. The European Union also negotiated one with Chile, which went into effect in February 2003, a year before a similar FTA agreement with the United States. The European Union takes 27.5 percent of Chile’s exports, and supplies 15 percent of Chile’s imports, and is Chile’s leading trading partner (WTO 2008 October). More recently, the European Union has turned its attention to other major trading partners in the Americas and Asia. It is negotiating bilateral free-trade agreements with the Association of South East Asian Nations (ASEAN) and the Gulf Cooperation Council (GCC), two regional blocs, and with Canada, Central American countries, India, and South Korea. The European Union expects to conclude bilaterals with South Korea and India. It has also been negotiating a bilateral free-trade agreement with Mercosur in reaction to the U.S. initiative for a free-trade agreement for the Americas. This agreement was scheduled to be completed in

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2004 but differences over Brazilian access to the European agricultural market and EU access to the Brazilian telecommunications sector have stalled negotiations.

Japan After the failure of the Seattle WTO conference to launch a new round of multilateral negotiations, Japan began to follow Europe and the United States along the bilateral-regional path with economic partnership agreements (EPA), its term for FTAs. Japan’s goals included lessening its export dependence on the U.S. market and counterbalancing China’s efforts to expand economic influence in the Asian region. In October 2000, it signed a general framework for bilateral free trade with the Association of South East Asian Nations (ASEAN). The negotiators reached agreement in April 2008, and within 10 years the signatories plan to eliminate tariffs on 90 percent of their imports. The agreement covered trade in goods, services, investments, dispute settlement, sanitary and phytosanitary regulations (such as restrictions on imported food and meat), intellectual property, rules of origin, and technical barriers to trade. Japan thus sought to achieve a stronger trade position in Asia relative to China, South Korea, and the United States. On the bilateral side, Japan signed a free-trade agreement with Singapore in 2001. It did not include agriculture, but focused on liberalizing trade in services, especially finance and telecommunications, investments, the movement of people, and dispute settlement. Other bilaterals signed with Malaysia (2005) and Thailand (2007) are in effect. Other bilaterals with the Brunei, Indonesia, the Philippines, and Vietnam await implementation. While Japan made concessions on admitting some agricultural products, rice is not included. The agreement with the Philippines opens Japan’s nursing care market to Japanese-speaking Filipinos. Japan also made defensive trade moves in the Western hemisphere. It signed a bilateral free-trade agreement with Mexico in September 2004 and with Chile in March 2007. The Mexican FTA was intended to ensure that Japanese corporations had access to NAFTA. Japan established import quotas for Mexican beef, chicken, and oranges, while Mexico agreed to liberalize imports of Japanese automobiles and steel. The agreement also covered dispute settlement, safeguards, competition policy, and investment protections. Japan negotiated a similar pact with Chile after

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that country signed FTAs with the United States and the European Union. Japan has initiated other FTA negotiations, including the Gulf Cooperation Council (GCC) composed of Bahrain, Oman, Qatar, Saudi Arabia, the United Arab Emirates, and Kuwait. It is also negotiating agreements with South Korea, India, Australia, and Switzerland.

Canada While Canada strongly supports multilateral trade liberalization, it was one of the first to play the bilateral card. Fearful of losing access to a fortress Europe and to the United States, it proposed free trade negotiations with the United States in 1985 that led to the Canadian-U.S. Free Trade Agreement (CUSFTA) bilateral and eventually to NAFTA (including Mexico) in 1994. Subsequently, it negotiated bilateral free-trade agreements with Israel (1997), Chile (1997), Costa Rica (2002), and in 2008 with Colombia, Peru, and the European Free Trade Association (EFTA). EFTA includes Iceland, Liechtenstein, Norway, and Switzerland. In October 2008, Canada and the European Union announced their intentions to negotiate a broad economic partnership agreement. Canada also has been negotiating FTAs with Jordan, South Korea, Singapore, and smaller countries in the Caribbean and Central America. Generally, Canada has been slower than the United States to pursue bilateral and regional FTAs — preferring to think that the multilateral WTO negotiating process held the greatest potential for the largest gains. However, Canadian agriculture has expressed fears of falling behind the United States in negotiating FTAs with countries that are important markets.

China Eager first to gain membership in the WTO and eligibility for most-favored-nation treatment, China was slow to jump on the FTA bandwagon, but it did so with a vengeance. China’s goals are to promote East Asian economic integration, tying smaller countries of the region more closely to China; and to promote a Northeast Asian FTA with Japan and South Korea. Using FTAs as a tool of diplomacy, China also seeks to secure access to critical energy and industrial raw materials (Hufbauer, Clyde and Schott 2007).

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It embarked on negotiations first with nations having close political and geographical ties, such as Hong Kong and Macao, ASEAN, Australia, and New Zealand. China also began negotiations in November 2001 with the 10-member ASEAN bloc, and concluded a framework agreement in 2002. The FTA would take effect for 1.7 billion people in 2010 — and for newer members of ASEAN in 2015. The parties had an early harvest of agreements on goods, dispute settlement, and trade in services. China and Thailand concluded a limited FTA in October 2003 removing tariffs for 188 types of fruits and vegetables. The two parties hoped to conclude a comprehensive agreement by 2010. In October 2008, China and Singapore signed a free-trade agreement. China has also used FTAs to strengthen ties to natural resource suppliers such as the GCC, Australia, Chile, and South Africa. Generally, the Chinese agreements are relatively brief and focus on trade in goods. Non-WTO matters such as labor and the environment are not included, nor is dispute settlement (Antkiewicz and Whalley 2004, 17). Chinese agreements typically do not deal with intellectual property rights, investment, and service issues. China and India have been discussing the possibilities of negotiating a bilateral free-trade agreement, and China has proposed similar agreements with Brazil and other Latin American countries.

India Like other major trading powers, India has increasingly turned to regional and bilateral trade agreements, including agreements with Sri Lanka, Bangladesh, Bhutan, Sri Lanka, the Maldives, Nepal, China, and South Korea. There is also an economic cooperation agreement with Singapore and framework agreements with ASEAN and Chile (World Bank-India 2008). India’s policy has emphasized the South Asian region, but its agreements are riddled with exceptions and cover a small share of two-way trade (Hufbauer, Clyde and Schott 2007).

Brazil As the leader of the Mercosur bloc, which includes Argentina, Paraguay, and Uruguay, Brazil is a regional leader determined to

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negotiate with the European Union and the United States as an equal (Klom 2003). It has promoted Venezuela’s full membership in the organization. Mercosur has concluded FTAs with Colombia, Ecuador, Venezuela, and Peru to establish the base for a proposed South American Community of Nations.

Effects of RTAs There is no consensus among economists and policymakers as to whether the proliferation of bilateral and regional arrangements has been generally positive or harmful (Estevadeordal, Shearer, and Suominen 2007, 35 – 36). Defenders of the multilateral WTO system tend to see such preferential agreements as stumbling blocs to global free trade. From the founding of the European Common Market in the 1950s, many economists have insisted that the removal of trade barriers among members of a regional bloc will inevitably divert the trade of outsiders and undermine multilateral efforts to liberalize trade. Jagdish Bhagwati of Columbia University argues that regional arrangements revive discriminatory practices and are thus termites undermining free trade (Bhagwati 2008). There is concern that current world economic conditions may invite a return to the trade policies of the 1930s. During the Great Depression, most major trading nations pursued regional arrangements, and internationalists, like Secretary of State Cordell Hull, claimed the resulting tensions contributed to a break-down of world peace. Instead of strengthening the global system, current trends may reinforce the appeal of regionalism. It is not difficult to imagine China and Japan dominating the economies of East Asia; India, South Asia; Brazil, South America; the European Union, Western and Central Europe; and the United States, North America. But there is another current of thought that RTAs can be inclusive and encourage interactions supportive of global free trade. Some analysts say regional agreements contribute to prosperity and peaceful political relationships by strengthening ties among nearby countries. The World Bank notes that North-South agreements, especially those with the United States, have been effective in liberalizing service trade, in advancing intellectual property protections beyond WTO standards, and in expanding protections

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for foreign investors. They generally contain few provisions liberalizing the flow of temporary workers. South-South agreements among developing countries tend to focus on expanding merchandise trade and lowering border costs, but often experience implementation problems. South-South agreements also seldom provide for the movement of temporary workers ( World Bank 2005).

Conclusion This chapter takes a systemic approach to trade policy, looking at trade policy through the lenses of America’s most important trading partners. After surveying market patterns — particularly the rising influence of East Asia in world trade and the growing power of low-income nations in the World Trade Organization— this section considers the strengths and shortcomings of the GATT/WTO multilateral system. It notes the continuing controversies associated with the WTO’s legalistic dispute-settlement rules. Also, the WTO has increasingly become deadlocked, and as a result major trading nations have turned to bilateral and regional arrangements to secure access to markets and essential raw materials. Whether regionalism and bilateralism are compatible with efforts to expand free trade and strengthen the multilateral system is an issue that divides economists and commentators.

References Antkiewicz, Agata, and John Walley. 2004. “China’s New Regional Trade Agreements” (CATPRN Working Paper 2004 –1). Waterloo: University of Western Ontario. Bank for International Settlements. 2007, December. BIS Quarterly Review, 64. Accessed February 2008 at http://www.bis.org/publ/ qtrpdf/r_qt0712g.htm. Barton, John H., Judith L. Goldstein, Timothy E. Josling, and Richard H. Steinberg. 2006. The Evolution of the Trade Regime: Politics, Law, and Economics of the GATT and the WTO. Princeton, NJ: Princeton University Press. Bethlehem, Daniel, Donald McRae, Rodney Neufeld, and Isabelle Van Damme. 2009. The Oxford Handbook of International Trade Law. New York: Oxford University Press.

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Bhagwati, Jagdish. 2008. Termites in the Trading System: How Preferential Agreements Undermine Free Trade. New York: Oxford University Press. Blustein, Paul. 2006, July 25. “Trade Talks Fail after Stalemate over Farm Issues.” The Washington Post, D1. Chang, Ha-joon, ed. 2003. Rethinking Development Economics. London, England: Anthem Press. Choi, Won-Mog. 2007. “To Comply or Not to Comply? NonImplementation Problems in the WTO Dispute Settlement System.” Journal of World Trade 41 (5): 1043–1071. Cooper, William H. 2008a, January 8. The Jackson-Vanik Amendment and Candidate Countries for WTO Accession: Issues for Congress (Order Code RS22398). Washington, D.C.: Congressional Research Service. Cooper, William H. 2008b, January. Russia’s Accession to the WTO (Order Code RL 31979). Washington, D.C.: Congressional Research Service. Crump, Larry, and S. Javed Maswood. 2007. Developing Countries and Global Trade Negotiations. London: Routledge. Duffy, Gary. 2009, May 19. “Brazil and China Forge Closer Trade Links.” BBC News. Accessed May 2009 at http://news.bbc.co.uk/2/hi/ business/8057048.stm. Eckes, Alfred E., ed. 2000. Revisiting U.S. Trade Policy: Decisions in Perspective. Athens: Ohio University Press. Eichengreen, Barry. 2007. The European Economy Since 1945. Princeton, NJ: Princeton University Press. Engardio, Peter. 2008, June 30. “Can the U.S. Bring Jobs Back from China?” Business Week, 38. Estevadeordal, Antoni, Matthew Shearer, and Kati Suominen. 2007, September 10 –12. “Multilateralizing RTAs in the Americas: State of Play and Ways Forward.” Paper presented at the conference on Multilateralising Regionalism, Geneva, Switzerland. Accessed March 2008 at http://www.wto.org. Fingleton, Eamonn. 2008. In the Jaws of the Dragon: America’s Fate in the Coming Era of Chinese Hegemony. New York: St. Martin’s. Hagstrom, Jerry. 2003, October 15. “Brazilian Ambassador Decries ‘Clubby’ WTO Approach.” CongressDaily, 10 –11. Hale, David. “Brave New Economy.” 2008, February 22. The Wall Street Journal, A14. Hawkins, William. 2005, February 3. “China Pursues ‘Manifest Destiny’ Through Mercantilism and Imperialism.” American Economic Alert. Accessed March 2008 at http://www.americaneconomicalert.org/. Hoekman, Bernard, and Caglar Ozden. 2005, April. “Trade Preferences and Differential Treatment of Developing Countries: A Selective

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Survey.” World Bank Policy Research Working Paper 3566. Accessed March 2008 at http://go.worldbank.org/QSOH03FJMO. Hufbauer, Gary Clyde, and Jeffrey J. Schott. 2007, September 10 –12. “Multilateralizing Regionalism: Fitting Asia-Pacific Agreements into the WTO System.” Geneva: WTO. Accessed March 2008 at http://www. wto.org. International Monetary Fund. 2009, April. World Economic Outlook Database. Accessed May 2009 at http://www.imf.org. Jack, Andrew. 2006, December 1. “The Drug Companies: A New Mood of Cooperation.” Financial Times, 3. “Japan to Set Roadmap for Lifting Food Self-Sufficiency above 50 Pct.” 2008, July 3. Jiji Press Ticker Service. Accessed July 2008 at LexisNexis Academic, http://www.lexisnexis.com/us/lnacademic/. Khor, Martin. 2004, November. “The ‘Singapore Issues’ in the WTO: Implications and Recent Developments.” Singapore: Third World Network. Accessed March 2008 at http://www.twinside.org.sg/pos.htm. Klom, Andy. 2003. “Mercosur and Brazil: A European Perspective.” International Affairs 79 (2): 351 – 368. Leitner, Kara, and Simon Lester. 2008, February. “WTO Dispute Settlement 1995 – 2007: A Statistical Analysis.” Journal of International Economic Law 11 (1): 179 –192. Levinson, Marc. 2006. The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger. Princeton, NJ: Princeton University Press. Lowenfeld, Andreas F. 2002. International Economic Law. New York: Oxford University Press. Macdonald, Don. 2008, June 27. “Will Oil Reverse Globalization?” Montreal Gazette. Morrissy, John. 2008, April 2. “Time to Get Tough on Interprovincial Trade, Coalition Says.” Montreal Gazette, B8. Smith, Patrick. 2003, September 30. “Poor Nations Keep Heat on Trade.” The Christian Science Monitor, 6. Srinivasan, T. N. 2007. “The Dispute Settlement Mechanism of the WTO: A Brief History and an Evaluation from Economic, Contractarian and Legal Perspectives.” The World Economy, 1033 –1068. “Sun Sets on Cotonou.” 2008, January 5. The Economist. Accessed February 2008 at, http://www.lexisnexis.com/us/lnacademic/. United Nations Conference on Trade and Development here (UNCTAD). 2007a. UNCTAD Handbook of Statistics On-line. Accessed February 2008 at http://www.unctad.org/Templates/Page. asp?intItemID=1890&lang=1.

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United Nations Conference on Trade and Development (UNCTAD). 2007b. World Investment Report 2007. Geneva: UNCTAD. United Nations Conference on Trade and Development (UNCTAD). 2008a. World Investment Report 2008. Geneva: UNCTAD. United Nations Conference on Trade and Development (UNCTAD). 2008b, September 1. Recent Developments in International Investment Agreements (2007-June 2008). Geneva: UNCTAD. U.S. Trade Representative (USTR). 2007, April 2. 2007 National Trade Estimate Report on Foreign Trade Barriers. Washington, D.C.: USTR, 41– 48. Accessed February 2008 at http://www.ustr.gov/Document_Library/ Reports_Publications/2007/2007_NTE_Report/Section_Index.html. U.S. Trade Representative (USTR). 2008, March 28. 2008 National Trade Estimate Report on Foreign Trade Barriers. Washington, D.C.: USTR. Accessed March 2008 at http://www.ustr.gov/assets/Document_ Library/Reports_Publications/2008/2008_NTE_Report/asset_ uploaded_file365_14652.pdf. Van Damme, Isabelle. 2008. “Seventh Annual WTO Conference: an Overview.” Journal of International Economic Law 11 (1): 155 –165. Wallach, Lori, and Michelle Sforza. 1999, October. Whose Trade Organization? Washington, D.C.: Public Citizen’s Global Trade Watch. World Bank. 2005. “Regional Trade Agreements and Development: Upside Potential and Downside Risks.” Washington, D.C.: World Bank Group. World Bank. 2007. Agriculture for Development: World Development Report 2008. Washington, D.C.: World Bank. Accessed February 2008 at http:// web.worldbank.org. World Bank. 2008. “India: Foreign Trade Policy.” Washington, D.C.: World Bank Group. Accessed February 2008 at http://go.worldbank. org/RJEB2JGTC0. World Development Indicators (WDI). 2008. Washington, D.C.: World Bank Group. Accessed March 2008 at http://go.worldbank. org/6HAYAHG8H0. World Trade Organization (WTO). 2007a. International Trade Statistics 2007. Geneva: WTO. World Trade Organization (WTO). 2007b. World Trade Report 2007. Geneva: WTO. Accessed February 2008 at http://www.wto.org. World Trade Organization (WTO). 2008a. International Trade Statistics 2008. Geneva: WTO. World Trade Organization (WTO). 2008b, October. Trade Profiles. Accessed November 2008 at http://www.wto.org.

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4 Chronology

1776

Adam Smith authors The Wealth of Nations, one of the classics of economic thought. It attacks the prevailing system of mercantilism and makes the case for free trade and an international division of labor to increase wealth.

1787

U.S. Constitutional Convention creates customs union with internal free trade and a common external tariff. The Constitution specifies a separation of powers between executive and legislative branches. The executive branch gains authority to conduct diplomatic negotiations and to negotiate treaties subject to Senate approval. Congress acquires authority to regulate commerce and levy taxes. Both the legislative and executive branches thus have a legal responsibility for trade policy.

1789

On July 4, the anniversary of Independence, Congress enacts its first law, a revenue tariff — averaging about 8.5 percent ad valorem (as a percentage of value). Many of the actual duties were specific duties (for example, 2 cents per pound of nails). For the purpose of comparing tariff acts, specific duties are usually converted to their ad valorem equivalents.

1791

Secretary of the Treasury Alexander Hamilton’s Report on Manufactures recommends that the national government use subsidies and tariffs to encourage domestic

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manufacturing. Hamilton’s approach, which has roots in European mercantilism, conflicts with Adam Smith’s laissez-faire approach. Hamilton’s thinking about economic development later inspires governments across the developing world to pursue state-interventionist, industrial policies. 1817

English stockbroker David Ricardo advances theory of comparative advantage. He shows how a country can benefit from trade even if it is less efficient in production of products than its trading partner. Ricardo’s theory inspires free traders who seek to remove trade barriers.

1828

U.S. Congress enacts Tariff of 1828, the so-called Tariff of Abominations, with the highest tariff rates in U.S. history. The average rate on dutiable goods climbs to 61.7 percent, higher than the much-reviled SmootHawley Tariff of 1930, and only 8 percent of goods enter duty free. The resulting political controversy— including South Carolina’s nullification — leads Congress to lower the tariff over the next decade to a 20 percent revenue tariff.

1841

Friedrich List’s book The National System of Political Economy appears. Nationalist in tone, it attempts to rebut Adam Smith’s laissez-faire theories and the claims of free traders that the international specialization of production is the path to prosperity. List argues instead that for the national economy temporary protection of domestic industries is needed to facilitate industrialization. List’s thinking draws on former U.S. Secretary of the Treasury Alexander Hamilton. His book influences the protectionist policies of 19thcentury America, and several Asian countries in the 20th century.

1846

British Parliament repeals the Corn Laws, taking a major step toward free trade. The corn laws, enacted during the Napoleonic Wars, protect agriculture and land owners, from cheap imported corn. Manufacturing interests, led by free-trader Richard Cobden, lead the successful effort to repeal the laws, arguing that it

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will benefit consumers of food. After repeal, Cobden and the British free traders embark on a campaign to persuade other European countries to adopt free trade. The Economist, founded in 1843, by anticorn law advocates, becomes a powerful vehicle for the free-trade forces. 1855 –1898 Justin Morrill of Vermont serves in Congress and chairs at different times the House Ways and Means Committee and the Senate Finance Committee, the committees with jurisdiction over trade policy. A strong protectionist and defender of congressional prerogatives, Morrill resists executive-branch efforts to promote exports at the expense of imports. He succeeds in blocking reciprocity agreements and in abrogating the (1866) Canadian reciprocity agreement negotiated under President Franklin Pierce in 1854. 1883

International Convention for the Protection of Industrial Property is negotiated in Paris. Eleven countries sign the first multilateral treaty governing intellectual property—patents, designs, trademarks. By 2008, there will be 178 members, and the World Intellectual Property Organization (WIPO) will administer the revised convention.

1890

Congressman William McKinley (R-OH), chairman of the House Ways and Means Committee, authors the Tariff Act of 1890 (McKinley Tariff). Often described as a high-tariff measure because of the average duty on dutiable imports is 48.4 percent, the McKinley Tariff actually increases substantially the number of items on the free list (that is, with zero duties). The percentage of duty-free imports to total imports climbs to 52.4 percent, far higher than under tariffs enacted during the Civil War (4.3%). The Tariff of 1890 also includes a bargaining provision that permits the Secretary of State to negotiate lower duties with trading partners to expand U.S. exports. Significantly, a Republican Congress delegates to the executive branch authority to negotiate reciprocity agreements and implement them without congressional approval. Democrats claims this delegation of authority is unlawful.

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1894

The Tariff of 1894 (the so-called Wilson-Gorman Tariff named for Congressman William L. Wilson (D-VA), chairman of the Ways and Means Committee, and Senator Arthur Gorman (D-MD) lowers average dutiable rates to 41 percent but reduces slightly the number of items on the free list. It imposes an income tax of two percent to compensate for lost tariff revenue. However, the Supreme Court later declares that income tax unconstitutional in Pollock v. Farmers’ Loan & Trust Co. (157 U.S. 429). Republicans blame the 1894 tariff, enacted by Democratic majorities in Congress, for exacerbating the depression of 1894. Republicans win the 1896 presidential election on a platform promising adequate protection to products of farms, mines, and factories.

1897

Named for Congressman Nelson Dingley (R-ME), chairman of the Ways and Means Committee, the Tariff Act of 1897 reduces the number of items on the free list to 45.2 percent and raises tariffs as Republicans promised in the 1896 presidential campaign. The average dutiable rate is increased from 41 percent to 46.5 percent. The Dingley Tariff also authorizes reciprocity negotiations, but any resulting treaties require Senate approval.

1909

The Payne-Aldrich Tariff, named for Rep. Sereno Payne (R-NY) and Senator Nelson Aldrich (R-RI), represents an attempt to revise the tariff during William Howard Taft’s presidency. The new tariff lowers the average duty to 40.8 percent, and increases the percentage of duty-free imports to 52.6 percent.

1911

The Taft administration negotiates a reciprocity agreement with Canada. It places more than 40 percent of U.S. imports from Canada and 10 percent of Canadian imports from the United States on the nondutiable free list. Taft hopes to improve relations with neighboring Canada, where he frequently spends time during the summer months. Canadian voters, fearing U.S. continental expansionism, reject the plan in the 1911 general election.

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1913

The Underwood Tariff of 1913, named for Congressman Arthur Underwood (D-AL), the chairman of the House Ways and Means Committee, represents an attempt by President Woodrow Wilson and congressional Democrats to lower the tariff. Average duties are lowered to 27 percent, and the percentage of duty-free goods rises to 66.3 percent. Congress enacts Rep. Cordell Hull’s (D-TN) income-tax to compensate for lost revenue.

1922

After World War I, Republicans move to raise the tariff again. The Fordney-McCumber Tariff of 1922 reduces the items on the free list to 63.8 percent and hikes the average duty to 38.5 percent. Act contains provisions permitting unilateral retaliation against foreign trade discrimination. Authors are Rep. Joseph Fordney (R-MI) and Sen. Porter McCumber (R-ND).

1930

The Tariff Act of 1930, widely known as Hawley-Smoot or Smoot-Hawley, is authored by Rep. Willis Hawley (R-OR) and Senator Reed Smoot (R-UT). A comprehensive revision, it increases the percentage of dutyfree items to 69.5 percent and raises the average duty to 44.9 percent based on imports in the last months of 1930. During the depression, the average duty equivalent on dutiable imports rises higher because many items have specific duties (such as 10 cents per pound) and at a time of falling prices this results in higher equivalent tariffs. The act contains a flexible tariff provision that permits the bipartisan Tariff Commission to raise or lower some duties subject to presidential approval. Smoot-Hawley is widely blamed for worsening the depression, and provoking foreign retaliation, although newer studies question that interpretation.

1934

Secretary of State Cordell Hull, a low-tariff Democrat from Tennessee, persuades Congress to authorize a reciprocal trade program to expand U.S. exports during the Great Depression. Congress delegates authority to the executive branch to raise or lower tariffs 50 percent. Between 1934 and 1947, the United States

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concludes 32 reciprocal trade agreements, all being with countries in Western Europe or the Americas, except for a wartime agreement with Iran. Many of the agreements are driven by foreign policy priorities, such as the 1938 pact with the United Kingdom. U.S. negotiators choose not to drive sharp bargains but to lower U.S. tariffs substantially, and by 1947 the average duty on dutiable imports has fallen to under 20 percent. The United States also extends concessions in bilateral agreements to all trading partners on an unconditional most-favored-nation basis. This means that newly industrializing countries will have access to U.S. market without offering reciprocal concessions to U.S. exporters. Reciprocal trade is extended periodically until the Trade Expansion Act of 1962 substantially modifies trade negotiating authority and policy process. 1938

The United States and the United Kingdom conclude reciprocal trade agreement, the most important of the prewar trade pacts. Washington cuts its tariffs 50 percent on many items, but the United Kingdom makes only modest concessions on manufactures and agricultural products. The United States does not dent the British preferential system. Negotiators consider the agreement a success because it reaffirms AngloAmerican cooperation at a time when Nazi Germany threatens European peace and stability.

1944

At Bretton Woods (NH), delegates from 45 countries propose the creation of the International Monetary Fund (IMF) and International Bank for Reconstruction and Development (IBRD, now called World Bank). The United States and the United Kingdom provide leadership to help restore the international financial system. American economist Harry Dexter White and British economist John Maynard Keyes lead respective delegations. They agree to make currencies convertible for trade purposes, based on a system of fixed but adjustable exchange rates, managed by the IMF. Because private capital flows are not expected to revive quickly in a risky environment, delegates propose IBRD to lend

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for reconstruction and development purposes. It has the authority to borrow from private lenders, but not to issue its own currency. 1947

In negotiations at Geneva, Switzerland, negotiators work on plans for an International Trade Organization (ITO). As an interim step, they establish the General Agreement on Tariffs and Trade (GATT), pending establishing of the ITO. It is a contractual arrangement with a set of rules based on the principle of nondiscrimination and offering a forum for trade negotiations. Fifteen countries participate in the first round of multilateral tariff negotiations in Geneva. Results lead to 35 percent average reductions in U.S. tariffs, and promises of similar cuts by other participants. Many war-damaged countries are unable to implement their commitments. Once again, the United States fails to eliminate British commonwealth preferences that discriminate against U.S. exports.

1948

January— GATT takes effect with nine contracting parties: Australia, Belgium, Canada, Cuba, France, Luxembourg, the Netherlands, the United Kingdom, and the United States. Thirteen others —Brazil, Burma, Ceylon, Chile, China, Czechoslovakia, India, Lebanon, New Zealand, Norway, Pakistan, South Africa, and Southern Rhodesia — join later in the inaugural year. Eric Wyndham White of the United Kingdom becomes the first executive secretary and later directorgeneral. March — Delegates from 53 countries, attending the UN Conference on Trade and Employment in Havana, Cuba, draw up a charter for an International Trade Organization. The charter goes beyond trade to include commodity agreements, restrictive business practices, economic development, employment, and the ITO’s structure. The charter is based on the principles of nondiscrimination and trade liberalization, but at the urging of developing nations includes provisions allowing exchange controls and trade restrictions. Investment provisions are weak and do not require

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countries expropriating property to compensate owners. Other countries wait for the United States to approve the charter. But the U.S. business community opposes the charter, and Congress never approves. The Truman administration is more concerned about passage of the Marshall Plan and other foreign policy priorities. 1950

Denmark, the Dominican Republic, Finland, Greece, Haiti, Indonesia, Italy, Liberia, Nicaragua, and Sweden join the General Agreement on Tariffs and Trade (GATT).

1951

Austria, Peru, Turkey, and West Germany enter GATT.

1955

Japan joins GATT.

1957

Treaty of Rome establishes the European Economic Community (EEC) with six members: Belgium, France, Italy, Luxembourg, the Netherlands, and West Germany. It abolishes internal customs duties and establishes a customs union with a common external tariff. A central pillar of the EEC is the Common Agricultural Policy (CAP), which excludes non-EEC products to maintain domestic prices, and involves subsidies to farmers. By the 1990s, agricultural expenditures represent over 60 percent of the EU’s budget.

1961

Dillon Round of GATT negotiations with 26 participants concludes with modest reductions. U.S. negotiators have little bargaining authority, and members of the European Economic Community focus on designing a common agricultural policy. Concerned with regional arrangements, they have little disposition to lower barriers to U.S. farm exports.

1962

Congress approves President Kennedy’s Trade Expansion Act (TEA). President gains five-year mandate for trade negotiations. A Special Trade Representative (STR), reporting directly to the president, will handle trade negotiations. Congress authorizes executive branch to negotiate tariff reductions of up to 50 percent — and to eliminate duties on some items—

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without further approval of Congress. Federal government will provide trade adjustment assistance for workers losing jobs because of tariff concessions. Bill passes the House of Representatives 298 to 125 with Democrats overwhelmingly supporting the measure (218 – 35). Eighty Republicans back the TEA, but a majority of 90 Republicans oppose. In the Senate, the TEA passes 78 – 8 with Senator Prescott Bush (R-CN), father of President George H. W. Bush, leading the opposition. Long-Term Agreement on International Trade in Cotton Textiles (LTA) is signed under GATT auspices allowing textile importers to restrict imports from supplying countries. 1964

United Nations Conference on Trade and Development is established in 1964. Organization seeks to maximize trade, investment, and development opportunities for developing countries. Argentine economist Raul Prebisch becomes the first secretary-general. He urges developed countries to offer preferential access for exports of manufactures from developing countries.

1965

Canada and the United States negotiate automotive trade agreements. It removes tariffs at the manufacturer’s level on autos and auto parts, and envisages full integration of the North American auto industry. Implementing legislation passes the House of Representatives 280 –113 and the Senate 54 –18 with bipartisan majorities.

1967

The Kennedy Round of GATT negotiations concludes. Agreement lowers tariffs an average of 35 percent on 60,000 items — mostly manufactures. Reductions are gradually implemented over a five-year period. Kennedy Round does little to reduce protectionism in agriculture, or to address nontariff barriers. Public opinion polls show rising opposition to trade liberalization. Organized labor and friends in Congress remain critical of Kennedy Round results.

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At year’s end, the U.S. trade balance for goods and services is a positive $2.6 billion. South Korea joins GATT. 1971

Bretton Woods system of fixed exchange rates, and gold convertibility, comes to an end. The United States is unable to maintain its obligations to convert dollars to gold under gold-exchange standard. As a result of the Smithsonian agreement, the dollar is devalued and major currencies soon fluctuate in response to market forces.

1973

The United Kingdom, Ireland, and Denmark join the European Community (EC), formerly known as European Economic Community (EEC).

1974

Congress approves a fast-track negotiating process in the Trade Act of 1974 authorizing U.S. participation in the Tokyo Round of GATT negotiations. Special Trade Representative (STR) becomes accountable to both the president and Congress. The U.S. Tariff Commission is renamed the U.S. International Trade Commission. The Jackson-Vanik amendment, named for Sen. Henry “Scoop” Jackson (D-WA) and Rep. Charles Vanik (D-OH), denies most-favored-nation trade treatment to countries with nonmarket economies that restrict emigration. The Multi Fiber Agreement on Textiles and Apparel replaces Long-Term Agreement on Cotton Textiles. It allows developed countries to regulate by quotas the amount of textiles and apparel imported from developing countries.

1976

Long period of chronic current account deficits begins, as U.S. payments for imports of goods, services, investment income, and other transfers exceed U.S. earnings for the same items. At year’s end, the U.S. trade balance for goods and services is –$6 billion. The net international investment position of the United States is positive $164.8 billion.

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1977

President Jimmy Carter appoints Texas lawyer and political fundraiser Robert Strauss as U.S. Trade Representative.

1979

President Carter approves most-favored-nation treatment for China, allowing it to qualify for tariff rates available to most U.S. trading partners. Tokyo Round ends with modest gains. There is little progress on agricultural trade, but negotiators approve codes dealing with antidumping, subsidies, customs valuation, product standards, government procurement, and related matters. GATT makes permanent Generalized System of Preferences (GSP) for developing countries. Congress approves implementing legislation, Trade Agreements Act of 1979. Section 301 gives the executive branch unilateral enforcement authority. STR is renamed Office of U.S. Trade Representative (USTR). The Trade Agreements Act of 1979 passes Congress with substantial bipartisan majorities. The House approves 395 –7, and the Senate approves 90 –4.

1980

The House and Senate approve joint resolution normalizing trade relations with China. The House vote is 294 to 88; the Senate vote is 74 to 8 with bipartisan majorities.

1981

President Ronald Reagan enters office and selects former Tennessee Senator William Brock as U.S. Trade Representative. Greece joins the European Community. Vigorous enforcement of U.S. countervailing duty and antidumping laws begins, as a result of Tokyo Round trade agreements. U.S. Department of Commerce and U.S. International Trade Commission have responsibility for quasi-judicial decision making. Of 613 antidumping complaints filed under 1979 act, 259 (42%) lead to offsetting duties on foreign goods.

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1984

The United States negotiates with Israel its first bilateral free-trade agreement (FTA). The two countries agree to protect certain agricultural sectors with quotas and other devices.

1985

Clayton Yeutter, an agricultural economist and lawyer, succeeds Brock as U.S. Trade Representative. Israel free-trade pact sails through Congress, passing the House of Representatives 422 –0 and the Senate by voice vote. The pact takes effect September 1. At year’s end, the trade deficit for goods and services is $121.9 billion. U.S. goods deficit with China is $6 billion and with Japan $46.2 billion. Japan’s chronic trade surplus with the United States continues to trouble Congress.

1986

GATT ministerial meeting at Punta del Este, Uruguay, in September launches eighth round of multilateral negotiations, called the Uruguay Round. The Uruguay Round is expected to bring further reductions on industrial tariffs, as well as to liberalize trade in agriculture and textiles, extend the GATT regime intellectual property and services, improve the dispute settlement mechanism, and address a variety of nontariff barriers issues. Spain and Portugal join the European Community. Cairns Group of agricultural exporting nations— including Argentina, Australia, Canada, and New Zealand — organizes to advance agricultural issues in Uruguay Round. Hong Kong and Mexico join GATT.

1987

The Reagan administration negotiates second bilateral FTA— this one with Canada, its largest trading partner. It removes duties over a 10-year period. Canadian duties average 9 percent on U.S. goods, while U.S. duties average 4 percent on Canadian exports. The pact guarantees U.S. access to Canada’s gas, oil, and uranium.

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It ends some restrictions on cross-border investments and trade in services. Pact does not cover such thorny issues as subsidies, intellectual property rights, and cultural issues. Each country retains antidumping and countervailing duty laws, but provides for bi-national panels to settle disputes. Canada gains access to huge American market, but within Canada trade between provinces remains subject to internal barriers. In his seventh State of the Union message, President Reagan proposes to expand the U.S.–Canada FTA to the entire Western hemisphere, uniting people from the tip of Tierra del Fuego to the Arctic Circle. 1988

Congress approves Omnibus Trade Act of 1988. It passes the House of Representatives with a bipartisan 376 –45 majority in July, and the Senate with a bipartisan majority in August by 85 –11. The bill focuses on unfair foreign trade practices and relief for tradeimpacted domestic industries. It also seeks to address currency imbalances, intellectual property issues, and bribery. The Reagan administration gains congressional approval for FTA with Canada. It passes the House of Representatives 366 –40, and the Senate 83 –9 with bipartisan majorities.

1989

The U.S.–Canada FTA takes effect January 1. President George H. W. Bush nominates Carla A. Hills, a lawyer and former cabinet official in the Ford administration, as U.S. Trade Representative.

1990

Germany is reunified. Communist Party of Soviet Union agrees to give up monopoly power. Mexico proposes free-trade agreement with the United States and Canada. At year’s end, the U.S. trade deficit for goods and services is $80.8 billion. The U.S. international investment position is also –$245.3 billion.

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Chronology

Canada, Mexico, and the United States announce plans to negotiate a North American Free Trade Agreement (NAFTA). It would create a large market of 360 million consumers, and provide business with a reliable long-term framework in which to conduct business. Negotiators expect to dismantle trade and investment barriers, and offer greater protections for intellectual property like copyrights and patents. Rules of origin for goods would prevent outside countries, such as Europe and Japan, from benefiting from the agreement. The Soviet Union dissolves in December. Brazil, Argentina, Uruguay, and Paraguay sign the Treaty of Asuncion to create a customs union by December 1994. It is called Mercosur, a shortened version of Mercado Comun del Sur. In Europe, the Maastricht summit in December agrees to establish the European Union and a single market with 12 members. Members commit to creating a single currency and regional central bank by 1999. Another goal is cooperating in defense and foreign policy, harmonizing laws, and removing all types of barriers among members of the union. It takes effect November 1, 1993.

1992

President George H. W. Bush, Canadian Prime Minister Brian Mulroney, and Mexican President Carlos Salinas sign NAFTA agreement in October before the U.S. presidential election.

1993

President Bill Clinton names Mickey Kantor, a ClintonGore campaign official and Los Angeles lawyer, as U.S. Trade Representative. President Bill Clinton’s administration negotiates labor and environmental side agreements to NAFTA, and submits bill to Congress under fast-track authority guaranteeing a vote within 90 legislative days. The House of Representatives passes NAFTA by 234 to 200 votes on November 17 after intense lobbying.

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The winning coalition is composed of 102 Democrats and 132 Republicans. A majority of Democrats (156) oppose the measure, as do 43 Republicans. The Senate approves the measure three days later by a 61 –38 vote. Thirty-four Republicans and 27 Democrats support NAFTA; 28 Democrats and 10 Republicans oppose it. The NAFTA battle thus divides the Democrats in Congress and the Clinton administration, and signals the end of bipartisan majorities in Congress for trade expansion. 1994

Uruguay Round negotiations conclude in April. Trade ministers of 123 countries meet in Marrakech, Morocco, to sign multilateral trade accords, replacing GATT with the World Trade Organization (WTO). Negotiations are said to reduce tariffs worldwide by 40 percent and to end textile restraints (MFA). Agreements also extend GATT regime to intellectual property rights, services, and agriculture. Participants approve a General Agreement on Trade in Services (GATS), and agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). New WTO will have mandatory dispute-settlement, which critics claim jeopardizes U.S. sovereignty. Fast-track trade negotiating authority lapses. Republicans take control of the Senate and the House of Representatives in U.S. elections. Congress approves Uruguay Round implementing legislation in lame-duck session after congressional elections. The House passes legislation 288 –146 with a majority of both Democrats and Republicans supporting. The Senate passes legislation 76 –24. In November, Asia Pacific Economic Cooperation (APEC), a forum for 18 Pacific Rim countries, proposes in Bogor, Indonesia, goals of free and open trade and investment in the Asia-Pacific by 2010 for developed economies and by 2020 for developing economies. President Bill Clinton and leaders of 32 other Western hemisphere governments hold a Summit of the

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Americas in Miami in December. They agree in principle to negotiate a Free Trade Area for the Americas (FTAA) by 2005 with implementation by 2015. Clinton sees it as an expansion of NAFTA to the whole hemisphere. But Brazil, the largest economic power in South America, is cool to the FTAA design. It wants to focus on implementing the Mercosur regional agreement among South American nations. 1995

WTO succeeds GATT in January, and has 81 founding members representing more than 90 percent of world trade. Barcelona Declaration in November calls for EuroMediterranean Free Trade Area by 2010. Representatives of 27 European and Mediterranean countries agree to the vague declaration. It is to be achieved through agreements between the European Union and Mediterranean countries, and FTAs between the Mediterranean partners.

1996

WTO holds its first ministerial summit in Singapore in December. Advanced countries seek to add investments, competition, transparency in government procurement, and trade facilitation to agenda for negotiating round, but developing countries oppose. The latter want improved export opportunities for agriculture and manufactures.

1997

President Clinton selects trade lawyer Charlene Barshefsky as U.S. Trade Representative. Asian economic crisis impacts Thailand, Indonesia, Malaysia, and South Korea among other countries. International Monetary Fund (IMF) provides stabilization loans and structural adjustment programs with tough-conditions for borrowing countries. Pew Research Center survey in September finds more adults think the impact of free-trade agreements on the United States is a good thing (47%) than a bad thing (30%).

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The Kyoto Protocol to UN Framework Convention on Climate Change is adopted on December 11. It strives to reduce greenhouse gases causing climate change. Thirty-six developed countries must reduce greenhouse gas emissions to specified levels. The United States signs but does not ratify protocol. Although not a trade agreement, the Kyoto pact intersects trade issues in a variety of ways. Efforts to limit greenhouse gas emissions require nations to take actions that favor domestic over foreign producers, apparently contradicting WTO commitments to nondiscrimination and national treatment. The Association of South East Asian Nations (ASEAN), which includes Indonesia, Malaysia, the Philippines, Singapore, and Thailand, releases Vision 2020 proposing free trade area by 2020. Members also seek to achieve the free flow of investments, and intensify and expand economic cooperation among members with 500 million people. 1999

A coalition of antiglobalization activists, organized by Lori Wallach of Citizen Trade Watch, disrupt the WTO ministerial in Seattle. Trade ministers fail to launch a new multilateral negotiating round, as differences between developing and developed nations flare. Developing countries, led by India and Brazil, demand improved access for their exports of agricultural products and manufactures. Advanced countries seek greater protection for intellectual property and market access for services.

2000

Congress approves permanent normal trade relations for China (PNTR), as China joins the WTO. Bill passes House 237 – 197: 164 Republicans and 73 Democrats vote in favor; 57 Republicans, 138 Democrats, and 2 independents vote against. A majority of Democrats vote against President Clinton’s position, further evidence that bipartisanship congressional support for trade expansion has ended. Senate passes bill 83–15 with seven Democrats and eight Republicans opposing.

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EU proposes partnership agreements with AsiaCaribbean-Pacific (ACP) group of former European colonies, further signaling that another of the world’s leading trading powers is giving priority to regional and bilateral trading arrangements while doubts grow about the prospects for successful multilateral negotiations under the auspices of the WTO. European (EU) Free Trade Agreement with Mexico takes effect. Japan signs framework agreement for bilateral freetrade agreements with ASEAN. A long-time supporter of multilateral commercial diplomacy, Japan, the most advanced economy of East Asia, is one of the last trading powers to pursue to bilateral and regional arrangements. Jordan and the United States agree to FTA in October. Both governments pledge to eliminate tariffs on virtually all trade between the two countries over a 10-year period. Agreement is first bilateral FTA to contain environmental protection and labor standards. The United States becomes increasingly dependent on foreign manufactures, energy, and raw materials, while borrowing from abroad to finance this trade. At year end, the U.S. trade deficit for goods and services is $379.8 billion. Goods deficit with China is $83.8 billion and with Japan $81.6 billion. Net U.S. international investment position for U.S. is now –$1.381 trillion. 2001

Incoming U.S. President George W. Bush appoints Robert Zoellick, a lawyer and State Department official in the previous Bush administration, to the position of U.S. Trade Representative. Arab terrorists attack the World Trade Center in New York City and the Pentagon in Washington D.C., on September 11, killing more than 3,000 people. Two months later, members of the WTO launch the Doha Development Round of multilateral negotiations in Doha, Qatar, a Middle East country.

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Pew Research Center survey in September reports that American adults by 49 –29 plurality think free-trade agreements are good for the country. The House of Representatives approves presidential trade promotion authority by 215 –214 vote in December with Rep. Jim DeMint (R-SC) casting the deciding vote. The Senate postpones action. A majority of Republicans support trade negotiating authority; a majority of House Democrats oppose. Congress approves FTA with Jordan. House and Senate approve by voice votes — meaning individual members are not required to cast a potentially controversial recorded vote. 2002

On January 1, the euro becomes legal tender in 12 of 15 European Union member countries, replacing national currencies. Participating members are Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, and Spain. Fast-track trade negotiating authority, now called trade promotion authority, is extended for five years. Under provisions, Congress must vote on trade agreements without amendments within 90 days of receiving a pact from the president. Trade adjustment assistance for workers who lost jobs or wages because of increased imports is extended for five years. Act also sets overall objectives for U.S. trade negotiators, including reciprocal market access, and commitments not to weaken labor or environmental laws to promote trade. House approves conference report by 215 –212 on July 27 at 3:30 a.m. after arm-twisting by leaders and the White House. Republicans favor the bill by 190 to 27, while the Democrats oppose it by 183 to 25. Two independents vote against the bill. The Senate approves the bill 64 – 34. Those in favor include 43 Republicans, 20 Democrats, and one independent. The opposition includes 29 Democrats and five Republicans. Once again, those favoring trade negotiations prevail but only by a narrow margin.

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China concludes framework free-trade agreement with ASEAN, evidence of its enthusiasm for regional agreements. President George W. Bush announces plan to negotiate the Central American Free Trade Agreement with Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua. Dominican Republic joins in 2004. It is part of the broad plan originally proposed by President Ronald Reagan, and sustained in the first Bush and Clinton administrations, to extend NAFTA to the rest of the Western hemisphere. U.S. and Chile reach agreement on bilateral free trade. 2003

Antigua complains that U.S. action to regulate Internet gambling violates WTO’s General Agreement on Trade in Services (GATS). “Exporting America” series begins in May on CNN news commentator Lou Dobbs’s nightly newscast. It emphasizes the broken promises of international trade and the threat to the middle class from jobs and plants being exported overseas. The United States and Southern African Customs Union (SACU) launch regional FTA negotiations in June, as Bush seeks to extend free trade to Africa. The United States and Chile sign FTA on June 6. The House of Representatives approves FTA with Singapore by vote of 272 to 155, and with Chile by a vote of 270 to 156 on July 23. Group of Twenty developing nations, led by Brazil, India, and South Africa, organizes to press developing world agenda in WTO negotiations. The Senate approves FTAs on August 1 with Singapore (66 –32) and Chile (66 –31). The European Union, Japan, Canada, and other countries win WTO decision holding as illegal the U.S. Byrd

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Amendment (named for Sen. Robert Byrd — D-WV). Under the Byrd amendment, the U.S. government pays companies from duties collected for prevailing in antidumping cases against foreign competitors. Ministerial summit of WTO in Cancun, Mexico, ends in September without agreement on Doha Round negotiations. Developing countries led by India, China, and Brazil vehemently object to inclusion of the so-called Singapore issues — rules for competition, government procurement, investment and trade facilitation. They demand improved access for agricultural exports in developed markets. The impasse at Cancun indicates that developed countries do not control the WTO, as they did GATT. The European Free Trade Agreement with Chile takes effect. 2004

Bush administration pushes forward with bilateral and regional FTAs. It concludes the bilateral agreement with Australia, an ally in the war against terrorism. It also signs FTAs with the governments of Morocco and Bahrain, as part of Bush’s initiative to promote free trade in the Middle East. USTR announces intent to negotiate an FTA with the United Arab Emirates. One of the most significant negotiations is the Dominican Republic-Central American Free Trade Agreement (DR-CAFTA). The Bush administration considers DRCAFTA an expansion of NAFTA and a significant step toward the Free Trade Agreement of the Americas. Because a large quantity of DR-CAFTA imports enter the United States duty-free as a result of U.S. preferences to developing areas, DR-CAFTA is driven by Washington’s desire to gain lower duties for its exports and to improve the climate for foreign investors. DR-CAFTA countries favor the agreement because it would make permanent their access to the large U.S. market. The House of Representatives passes Australia FTA by 314 to 109 margin in July.

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The House approves Morocco FTA by 323 –99 vote on July 22. The Senate passes it 85 –13 on July 21. Japan continues its pursuit of bilateral and regional agreements, signing a free-trade agreement with Mexico in September. European Union adds 10 more members: Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, and Slovenia. U.S. trading partners win major decisions against the United States from WTO dispute settlement panels. Brazil successfully challenges U.S. government payments to cotton farmers as unlawful subsidies. Antigua wins WTO decision holding that U.S. efforts to prohibit online gambling violated Antigua’s rights as a member of the WTO. Antigua files claim for $3.4 billion in compensation. 2005

The U.S.–Australia FTA implemented on January 1. Multi Fiber Arrangement (MFA) on textiles and apparel ends on January 1. Developed countries no longer use quotas to limit amounts of textiles and apparel imported from developing countries. End of agreement benefits low-cost producers like China, and harms high-cost producers. President George W. Bush nominates congressman Rob Portman (R-OH) as U.S. Trade Representative on April 29. U.S. Senate approves DR-CAFTA by 54 –45 vote on June 30. Voting in support are 43 Republicans, 10 Democrats, and one independent. Voting against are 12 Republicans and 33 Democrats. A majority of Democrats oppose the agreement, which is vigorously opposed by the AFL-CIO. The House of Representatives approves DR-CAFTA on July 28 by a vote of 217 –215. House Republican leaders extend the voting period to over one hour to round

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up votes. In all, 15 of 202 House Democrats support accord; 27 of 232 Republicans vote against it. A majority of House Democrats thus vote against a significant trade liberalization agreement, continuing a pattern of opposing FTAs with cheap labor countries. Pascal Lamy, a French bureaucrat, becomes directorgeneral of the WTO in September. The House of Representatives approves Bahrain FTA by 327 votes to 95 on December 7. A majority (115) of Democrats support the bill. Bahrain is a minor trading partner, and the agreement poses no threat to U.S. agricultural and manufacturing interests. Hong Kong ministerial summit of the WTO in December ends with members announcing determination to conclude Doha Development Round in 2006. At end of the year, the U.S. trade deficit for goods and services is $714.3 billion. U.S. current account trade deficit is $805 billion, amounting to 7 percent of gross domestic product, a record share. The net international investment position is –$2.2 trillion. 2006

President George W. Bush nominates Susan Schwab, a former congressional staffer and University of Maryland official, as U.S. Trade Representative in April. In November, U.S. congressional elections, supporters of free trade lose 7 Senate seats and 30 House seats. The United States and Colombia sign FTA on November 22. For the United States, it marks an extension of NAFTA to one of the larger South American markets. The United States has worked closely with the Colombian government to stem the flow of illegal drugs and to promote stability in the region. U.S. labor unions raise human rights objections, relating to deaths of Colombian labor leaders, and fear Colombia may become another base for offshore production to serve the U.S. market.

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Congress clears legislation in December to normalize trade relations with Vietnam. House approves by 212 –184 margins. Republicans favor 120 –87, while a majority of Democrats oppose 92 –96. Senate clears bill by 79 –9 margin. Huge imbalances distort global economy. America’s current account deficit is 6.2 percent of GDP, while China (11.7%), Germany (5.4%), Japan (4.5%), and Saudi Arabia (11.7%) have huge surpluses. At the end of the year, the U.S. trade deficit for goods and services is $758.5 billion. Goods deficit with China is $232.6; goods deficit with Japan is $88.6 billion. Net international investment position of the United States is –$2.5 trillion. The United States continues to consume more goods than it produces, and borrows $2 billion per month to sustain its dependence on imports. 2007

Canada and 32 other countries file WTO complaint challenging U.S. farm subsidies. U.S. industry claims 3.4 million manufacturing jobs lost since January 2001. More than 1.3 million jobs lost in the textile and apparel industry since the implementation of NAFTA. Japan signs free-trade agreement with Chile in March. Fast-track trade negotiating authority expires on July 1. The House of Representatives approves the Peru FTA by 285 votes to 132 on November 8. The agreement is opposed by 116 of 225 Democrats, and supported by 176 of 192 Republicans. The Senate approves the Peru FTA on December 4 by 77 –18 votes. On the controversial trade bills, the House of Representatives continues to divide along partisan lines with a majority of Republicans supporting the Bush administration, and a majority of Democrats opposing. The European Union continues regional expansion as Romania and Bulgaria become members.

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Public opinion polls show growing opposition to free trade and globalization in high-income countries. The Pew Research Center finds in November that American adults are now evenly divided on whether free trade is a good thing for the country (40 –40). Survey for German Marshall Fund of U.S. opinion finds in December that a growing number of Americans (57%) believe free trade deals cost more jobs than they create. In Europe, 46% say trade costs jobs. Global imbalances continue to widen. At end of the year, the U.S. trade deficit for goods and services is $700.3 billion. Merchandise trade deficit with China is $256.3 billion. The United States runs a deficit with China of $67.7 billion on advanced technology items. 2008

Trade becomes an issue in the U.S. presidential campaign. GOP nominee John McCain backs NAFTA, and free trade. He travels to Canada, Mexico, and Colombia to give speeches backing free trade and globalization. Democratic candidates Hillary Clinton and Barack Obama oppose bilateral FTAs with Colombia and South Korea, and urge renegotiation of NAFTA. China reports $1.68 trillion in foreign reserves in April, up 40 percent from a year earlier. The U.S. dollar falls against major currencies boosting U.S. exports. Oil exporting countries push price of oil upward to nearly $150 per barrel as commodity prices peak. Pew survey finds public support for free trade continuing to decline. A 48 percent plurality think free-trade agreements a bad thing, while 35 percent say they are good. Disagreements over agricultural trade lead to a breakdown of the Doha Development Round of WTO negotiations. India and China seek to protect domestic farmers from international competition. The United States and other major agricultural exporters demand improved market access.

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In the United States, Barack Obama is elected president. Fair traders and critics of NAFTA gain 37 seats net in Congress (7 in Senate, 30 House). Global economy enters severe recession. The U.S. trade deficit on goods and services is $677.1 billion, or 4.7 percent of GDP. 2009

President Barack Obama nominates ex-Dallas mayor Ron Kirk as the U.S. Trade Representative. Pascal Lamy of WTO warns of rising protectionism and economic instability. World trade declines for the first time since 1982.

5 Biographical Sketches

I

t is important to remember that people make trade policy and negotiate trade agreements. In this chapter, we meet some of the individuals who have had a lasting influence on the subject, as well as some of the contemporary decision-makers involved in shaping the future. Some are elected officials, such as the congressional leaders directly responsible for trade policy, others are presidential appointees. Some are lawyers, economists, lobbyists, commentators, and activists. The sketches also include some of the economists who shaped the intellectual underpinnings of trade policy—individuals like Adam Smith, David Ricardo, and Friedrich List. In this chapter, we have endeavored to include both supporters of current policies and critics of it.

Max Baucus (1941–) A six-term senator from Montana, Democrat Max Baucus is chairman of the powerful Committee on Finance that has jurisdiction over all legislation relating to trade and taxes. Baucus is a native of Helena, Montana, and a graduate of Stanford University and its law school. A moderate who votes with fellow Democrats about 86 percent of the time, Baucus is sensitive to the concerns of his conservative constituents. Baucus usually looks at trade issues through the lenses of Montana interests, especially its exporters. While he has joined prolabor Democrats in calling for stronger environmental and labor standards in trade agreements, he has also supported freetrade agreements and the WTO negotiations. Baucus backed

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PNTR with China and Vietnam, and bilateral FTAs with Australia and Oman. But he opposed CAFTA and criticized the Bush administration’s decision to push forward on approval of the FTA with Colombia. Baucus wanted the Bush administration to extend trade adjustment assistance to cover service workers before the Senate took up the Colombia pact. On issues of importance to Montana, Baucus can be tenacious. He pushed hard to open the Japanese market for U.S. beef. As chairman of the powerful Finance Committee, he threatened to block Senate consideration of the pending South Korean FTA until South Korea agreed to remove import barriers to U.S. beef. On sensitive Canadian trade issues — such as softwood lumber, durum wheat, and beef — Baucus has pushed hard for his state’s interests, much to the discomfort of Canadians. One Canadian ambassador to the United States described the senior senator from Montana as “the scourge of Canada” (Cole 2008). In 2009 Chairman Baucus pushed for passage of new trade adjustment legislation, the Panama FTA, and better enforcement of existing agreements.

Further Reading His official Web site: http://baucus.senate.gov/. Cole, Trevor. 2008, April 25. “Blame Canada.” The (Toronto) Globe and Mail, 82. “Max Baucus.” Almanac of American Politics 2008. Accessed April 2008 at http://www.NationalJournal.com. “Max Baucus.” OpenCongress.org. Accessed May 2008 at http://www. opencongress.org/.

Kevin Brady (1955 –) As the ranking Republican member of the House Ways and Means Trade Subcommittee, the seven-term congressman from East Texas is the GOP point person on all legislation dealing with trade and tariffs. A native of South Dakota, Brady graduated from the University of South Dakota and then migrated to Texas. He served 20 years as a local Chamber of Commerce executive before entering state politics. After six years in the Texas legislature, Brady ran successfully for Congress in 1996. He is a strong voice for business and trade in the 111th Congress. During the Bush

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administration, Brady led efforts to win support for CAFTA/Dominican Republic. While Brady thinks the United States should press China on intellectual property protection and on export subsidies, he has opposed efforts to brand China as a currency manipulator. He backs Bush-era free-trade agreements with Colombia and Panama.

Further Reading His official Web site: http://www.house.gov/brady/. Neumann, Dan. 2009, January 14. “New Republican Trade Panel Chief Warns China Bill Could Backfire.” Inside US-China Trade. “Rep. Kevin Brady (R).” 2008. Almanac of American Politics. Accessed January 2009 at LexisNexis Academic, http://www.lexisnexis.com/us/ lnacademic/.

Sherrod C. Brown (1952 –) The junior senator from Ohio (elected in 2006), Sherrod Brown reflects the more combative mood of Senate Democrats on trade issues. Running for election in a state devastated by the loss of industrial jobs, Brown sought to appeal to middle-class voters facing job insecurity. His “Change is Coming” campaign hammered away on trade issues. He accused the Republican incumbent of supporting corporate-backed free trade deals that sent Ohio jobs overseas. Brown, a graduate of Yale, entered politics during the Vietnam War as an antiestablishment candidate. He served 14 years in the U.S. House of Representatives before running for the Senate. Brown has close ties to organized labor, and received a 100 percent rating from AFL-CIO in 2007. In the House, he voted against NAFTA as a freshman, against permanent trade relations with China in 2000, and then helped lead the fight against CAFTA in 2005. Brown correctly predicted that if CAFTA passed the House it would take place in the middle of the night, with the leadership extending the 15-minute roll call so as to twist arms. Later, as a member of the Senate, he voted against the Peruvian FTA, calling it another job-killing pact that would result in more unsafe food in family kitchens and consumer products in children’s playrooms. Brown urges a “strategic pause” in NAFTA-like free-trade agreements. He wants a new

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model for trade agreements that gives greater attention to labor, food, and environmental standards.

Further Reading His official Web site: http://brown.senate.gov/. Brown, Sherrod. 2004. Myths of Free Trade: Why American Trade Policy Has Failed. New York: New Press. Hayes, Christopher. 2005, November 21. “Who is Sherrod Brown?” In These Times. Accessed April 2008 at http://www.chrishayes.org/ articles/who-is-sherrod-brown/. “Sherrod Brown.” 2008. Almanac of American Politics 2008. Accessed May 2008 at http://www.NationalJournal.com. “Sherrod Brown.” 2008. OpenCongress.org. Accessed May 2008 at http://www.opencongress.org/.

Dave Camp (1953 –) As the senior Republican on the House Ways and Means Committee, Dave Camp from Midland, Michigan, is a key legislator on all matters passing through the powerful committee, including taxation, health care, and trade. Camp is considered a hardworking legislator, not a publicity hound. Since joining the House in 1990, this lawyer has focused on welfare and family issues. In the 111th Congress, he will also be an important voice on trade policy. A free trader who has supported NAFTA and CAFTA, as well as bilateral agreements with Colombia and Peru, among others, Camp is considered a pragmatist. In supporting CAFTA he called himself a strong believer in fair trade and a level playing field for American business, farmers, and workers. He has urged a special trade prosecutor to argue cases before the WTO against countries violating international trade laws. He has supported a continuation of tariff-quotas for import-sensitive sugar beet farmers in his district, and urged Republicans to back a bail-out for the Michigan auto industry.

Further Reading His official Web site: http://camp.house.gov/. “David ‘Dave’ Camp.” 2009, January 22. Associated Press Candidate Biographies. Accessed January 2009 at LexisNexis Academic, http:// www.lexisnexis.com/us/lnacademic/

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Miller, John J. 2007, December 3. “Republican from Michigan—Dave Camp —Is a Quiet But Effective Congressman.” National Review. Accessed January 2009 at LexisNexis Academic, http://www.lexisnexis. com/us/lnacademic/. “Rep. Dave Camp (R).” 2008. Almanac of American Politics. Accessed January 2009 at LexisNexis Academic, http://www.lexisnexis.com/us/ lnacademic/.

Lou Dobbs (1945–) As host of Lou Dobbs Tonight, a program of news, debate, and opinion on CNN, Dobbs revels in turning the spotlight on trade and immigration issues. His program has some of the highest viewer ratings on CNN. In a regular segment labeled “Exporting America” Dobbs exposes companies that have moved jobs offshore to other countries and criticizes U.S. trade policy for failing to protect the jobs of American workers. Another segment, “Broken Borders”, calls attention to illegal immigration and perceived flaws in the administration of U.S. immigration policies. Dobbs also emphasizes how politicians, reliant on campaign contributions from large corporations, make war on the middle class. In 2009, he was an enthusiastic backer of “Buy-American” provisions in the Obama financial stimulus plan. A native of Texas who grew up in rural Rupert, Idaho, Dobbs is a registered Republican. He has a bachelor’s degree from Harvard University, where he majored in economics, and belongs to the prestigious American Economic Association. On television, and in life, he comes across as a raving populist certain of his position and intolerant of any opposition. Dobbs rails at exorbitant CEO pay, incompetent public officials, and faith-based economic policies. He dismisses free-market economists as idiots and jackasses (Dobbs 2007). He delights in thundering at visitors who have the temerity to back opposing policies. Described by the free-trade-oriented Economist as a “globophobic blowhard,” Dobbs insists that he favors balanced trade (Fanfare 2006). Protrade spokesmen claim that through misinformation and demagoguery, Dobbs is reshaping public opinion on trade and immigration issues. Members of Congress say his opinions are increasingly influential on Capitol Hill. Sometimes legislators attempt to calculate how their votes with play on Lou Dobbs’

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program. Love him or hate him, Lou Dobbs is shaping the great trade debate while boosting his ratings.

Further Reading Dobbs, Lou. 2004. Exporting America: Why Corporate Greed is Shipping American Jobs Overseas. New York: Warner Books. Dobbs, Lou. 2006. War on the Middle Class: How the Government, Big Business, and Special Interest Groups are Waging War on the American Dream and How to Fight Back. New York: Viking Press. “Fanfare for the Common Man.” 2006, November 25. The Economist. “Lou Dobbs Tonight.” 2007, August 13. CNN Transcript. Accessed April 2008 at LexisNexis Academic, http://www.lexisnexis.com/us/ lnacademic/. “Lou Dobbs.” 2007. Contemporary Authors Online. Farmington Hills, MI.: Thomson Gale. Mullins, Luke. 2006, November 28. “The Secret Life of Lou Dobbs.” The American. Accessed April 2008 at http://www.american.com/ archive/2006/november/lou-dobbs.

Timothy Geithner (1961–) As Secretary of the Treasury, Tim Geithner has broad responsibilities that impact trade. At his confirmation hearings, Geithner made headlines when he said that President Obama believed China manipulates its currency. This statement, which appeared to signal a policy shift from the Bush administration’s policy, angered Chinese leaders and pleased some members of Congress who want the Treasury to declare officially that China manipulates the value of its currency. Such a finding could trigger sanctions against Chinese imports into the United States. The key official on currency and financial issues, Geithner is a former president of the New York Federal Reserve Bank, the second most important position in the Federal Reserve System. In that post, he worked closely with Treasury officials, such as Henry Paulson, to fix credit markets and bolster financial institutions. Geithner grew up in Africa and Asia, attending high school in Bangkok, Thailand. His father was an official with the U.S. Agency for International Development and the Ford Foundation. A graduate of Dartmouth College and the School for Advanced International Studies at Johns Hopkins, Geithner has studied

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Chinese and Japanese languages. During the Clinton administration, he worked closely with Treasury secretaries Robert Rubin and Lawrence Summers. As a Treasury official, he traveled the globe and negotiated financial aid packages. Unlike many who have held the Treasury post, Geithner has little experience in commercial banking or the private sector, having held a series of positions with the Treasury and the International Monetary Fund.

Further Reading Mooney, Brian C. “N.Y. Fed Chief an Unconventional, but Compatible, Choice.” The Boston Globe, A 14. Accessed February 2009 at LexisNexis Academic, http://www.lexisnexis.com/us/lnacademic/. Simon, Ellen, and Madlen Read. 2008, November 24. “Obama’s Pick for Treasury Has Had Hand in Bailouts.” Associated Press. Accessed February 2009 at LexisNexis Academic, http://www.lexisnexis.com/us/ lnacademic/.

Charles (Chuck) Grassley (1933 –) As the senior, or ranking, Republican on the Senate Finance Committee, Chuck Grassley is a key senator on trade issues. When the GOP controlled the Senate (during the first half of 2001 and from January 2003 to December 2006), Grassley chaired the committee and frequently represented President Bush’s position. A popular legislator from Iowa, Grassley graduated from the University of Northern Iowa and was an assembly-line worker and a farmer before entering politics. He served three terms in the U.S. House of Representatives before being elected in 1980 to his present Senate seat. Grassley cultivates a penny-pincher image in a state that dislikes extravagance. He exposed examples of Pentagon waste, such as spending $7,200 for coffee pots and $600 for toilet seats. He champions the causes of government whistle blowers, the elderly, and farmers. On trade issues, Grassley has worked to promote agricultural interests in trade agreements and to fight foreign trade barriers on farm exports, such as South Korean and European restrictions on U.S. beef exports. As a conservative and a free-trader, he has sought to limit agricultural subsidies. He and Democrat Max Baucus have worked together to achieve greater market access for American farmers in multilateral trade negotiations under the WTO. Grassley also backs regional and bilateral initiatives—including

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NAFTA, CAFTA, and the Australian FTA. When Iowa farm interests are jeopardized, Grassley puts local concerns first. He is an enthusiastic backer of ethanol production, which benefits Iowa corn farmers, and has worked to keep out competitive sugarbased ethanol from Brazil.

Further Reading His official Web site: http://grassley.senate.gov/. Anderson, Curt. 2001, January 29. “Two Senators Control Key Parts of Bush Agenda.” Associated Press. Accessed April 2008 at LexisNexis, http://www.lexisnexis.com/us/lnacademic/. “Charles Grassley.” 2008. Almanac of American Politics 2008. Accessed April 2008 at http://www.NationalJournal.com. “Charles Grassley.” OpenCongress.org. Accessed May 2008 at http:// www.opencongress.org/. Norman, Jane. 2007, January 14. “Grassley Gracefully Hands over Chairmanship.” The Des Moines Register. Accessed 04/08 at News Bank America’s Newspapers

Alexander Hamilton (1757–1804) For countries seeking advice on how to achieve economic development and high incomes, Alexander Hamilton’s thinking remains relevant. The illegitimate son of a Scottish trader and a French mother, Hamilton was born in the West Indies, but came to the American colonies for a college education. During the Revolution, he served as an aide to General George Washington, and displayed extraordinary intelligence and energy. As Secretary of the Treasury in President George Washington’s administration, Hamilton developed plans for financing the new government. As part of his proposals to Congress, he recommended in his famous Report on Manufactures (1791) that the new government intervene to support infant industries and reduce dependence on British imports. Hamilton also sought to rebut Adam Smith’s free-trade theories. Smith observed in The Wealth of Nations that America’s focus on agriculture was a principal cause of rapid progress. He warned that stopping the importation of European manufactures would obstruct efforts to promote America’s wealth and greatness. Hamilton retorted that in the absence of equal treatment and reciprocal access to the British

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market, an America reliant on trade in agricultural products could become a victim of foreign interests and be impoverished. He favored a program of low tariffs and subsidies to encourage infant domestic manufactures. Others such as Hamilton’s assistant Tench Coxe and domestic manufactures favored higher protective tariffs, but Hamilton wanted only revenue tariffs to fund the new government. Hamilton’s enthusiasm for tariff protectionism was restrained, but economic historians credit him with the origins of the infant industry argument for protection that was elaborated by Friedrich List and others.

Further Reading Cooke, Jacob E. 1978. Tench Coxe and the Early Republic. Chapel Hill: University of North Carolina Press, 1978. McDonald, Forrest. 1979. Alexander Hamilton: A Biography. New York: Norton. Peskin, Laurence A. 2003. Manufacturing Revolution: The Intellectual Origins of Early American Industry. Baltimore, MD: Johns Hopkins.

Cordell Hull (1871–1955) The official to serve longest as Secretary of State (1933 –1944), Cordell Hull is remembered in trade policy circles as the architect of the reciprocal trade agreements program during the administrations of President Franklin D. Roosevelt. A low-tariff Democrat from Tennessee, who served in Congress for 24 years, Hull believed fervently that trade promoted world peace. He associated high tariffs and trade barriers with war. Hull was also a pragmatic politician who as chairman of the Democratic Party in the early 1920s fretted at how high-tariff manufacturing interests funded rival Republicans. Anticipating that good policy could also be good politics, Hull saw the opportunity to create a new tradeoriented coalition based in southern agriculture and northern mass-production industries and unionized labor. In 1934, Hull persuaded Congress to enact his reciprocal trade program, advertised as an emergency initiative to open foreign markets to U.S. exports in exchange for lowering U.S. tariffs. Congress authorized the administration to cut duties as much as 50 percent. In Hull’s hands, the program quickly lowered the U.S. tariff from its depression-era high of nearly 60 percent ad valorem

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equivalent on dutiable items. A generation later, the average U.S. duty had fallen to 12 percent. Hull and his associates concluded 32 bilateral reciprocal trade agreements between 1934 and 1947, all with nations in the Americas or Western Europe. Hull’s program would be the foundation for the proposed International Trade Organization and GATT. As administered by the State Department, the reciprocal trade program was a device to reward friends and allies, and to help them resist economic pressures from Nazi Germany. While congressional critics grumbled the administration was surrendering American markets for illusory gains in foreign markets, the concessions made during Hull’s tenure appear to have had little immediate adverse impact on U.S. industries.

Further Reading Butler, Michael. 1998. Cautious Visionary: Cordell Hull and Trade Reform, 1933 –1937. Kent, OH: Kent State University Press. Eckes, Alfred Eckes. 1995. Opening America’s Market: U.S. Foreign Trade Policy since 1776 Chapel Hill: University of North Carolina Press. Zeiler, Thomas. 1999. Free Trade, Free World: The Advent of GATT. Chapel Hill: University of North Carolina Press.

Ron Kirk (1954 –) A former mayor of Dallas, Texas, and partner in the prestigious Texas law firm of Vinson & Elkins, Ron Kirk is the first African American to hold the position of U.S. Trade Representative. He and President Barack Obama bonded in 2002. They shared the common experience of running as voices of unity in state-wide elections for the U.S. Senate. Both have professional wives and two small daughters. Kirk has little federal experience, or familiarity with trade policy. In Texas, he served as Secretary of State and later had lobbied the legislature for corporate and governmental entities, experience that may serve him well as he negotiates with Congress over trade issues. Corporate interests are pleased that Kirk boosted NAFTA, free trade, and China’s membership in the WTO, while serving as mayor of Dallas. But Kirk is no free-trade ideologue. As U.S. trade representative he pledged to promote President Obama’s

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trade agenda. Obama explained that this involves assuring there is reciprocity in trade agreements, and seeing that they contain enforceable labor and environmental provisions so that “we don’t have a race to the bottom” (Federal News). Labor and consumer groups are wary of Kirk’s commitment to reform trade policy and make it more responsive to public opinion. He was not their first choice. They were more enthusiastic when Obama first indicated a desire to nominate California U.S. Rep. Xavier Becerra. Although voting for NAFTA, Becerra became a vigorous opponent of CAFTA and renewed trade negotiating authority for the Bush administration. However, he chose not to accept the appointment in the apparent belief that trade policy would not be a high priority for the Obama administration (Schatz 2008).

Further Reading Federal News Service. December 19, 2008. President-elect Obama’s News Conference. Accessed December 2008 on LexisNexis Academic, http://www.lexisnexis.com/us/lnacademic/. Gilliam, Todd J. December 20, 2008. “Ron Kirk Says Free Trade Key to Economic Recovery.” Dallas Morning News. Accessed December 2008 at LexisNexis Academic, http://www.lexisnexis.com/us/lnacademic/. Jeffers Jr., Gromer. December 20, 2008. “Shared Paths to History Brought Obama, Ron Kirk together.” The Dallas Morning News. Accessed December 2008 at LexisNexis Academic, http://www.lexisnexis.com/ us/lnacademic/. Schatz, Joseph J. December 6, 2008. “Drawing a Fine Line on Trade.” Congressional Quarterly Weekly.

Pascal Lamy (1947–) The director-general of the World Trade Organization since September 2005, Pascal Lamy is a French economist who graduated second in his class at the prestigious Ecole Nationale d’Administration, and then held a number of government posts. A socialist, he advised Finance Minister Jacques Delors and then served as chief of staff when Delors served as president of the European Commission. He helped rescue Credit Lyonnais and then served as the bank’s CEO. From 1999 to 2004, Lamy was the commissioner responsible for external trade relations at the European Commission. In that role, he negotiated a number of high-profile

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disputes with the United States, involving steel, geneticallymodified crops, and aviation subsidies. He developed a reputation as a tough, pragmatic, and focused negotiator. The energetic Lamy and his U.S. negotiator counterpart Robert Zoellick sometimes jogged together after a day of negotiations. Lamy favors rules-based, or managed, globalization. He believes that market-opening strategies can be insufficient unless someone pushes for the full benefit of all nations. Appreciating the rising influence and concerns of developing nations, Lamy has sought to make the WTO system more equitable and relevant to the needs of emerging countries. While promoting the integration of developing countries, he has also attempted to make the WTO more sensitive to environmental and aid-related issues. As leader of the WTO, Lamy sought to bring the Doha Round of multilateral negotiations to a successful close in 2008, but an impasse over agricultural issues led to a break-down in negotiations. Appreciative of Lamy’s efforts in a difficult world economic conditions, members of the WTO gave him a new four-year term as director-general in 2009 so that Lamy might continue to press the case for multilateral trade liberalization.

Further Reading “A Blunt, Tough and Focused Horse Trader. . . .” 2005, December 14. South China Morning Post, 8. Becker, Elizabeth. 2005, May 14. “French Economist to Lead World Trade Organization.” New York Times, 3. “Expected WTO Head Lamy Veteran of World Trade Disputes.” 2005, May 13. Dow Jones International News. Wright, Tom. 2005, September 2. “Lamy Takes WTO Helm as Trade Deal Hopes Wane,” International Herald Tribune, 16.

Sander (Sandy) Levin (1931–) As the chairman of the Ways and Means Subcommittee on International Trade, Congressman Sander Levin from Michigan is a key legislator on all trade issues. A liberal Democrat from Detroit’s northern suburbs, Levin earned college degrees at the University of Chicago, Colombia University, and the Harvard University Law School. A friend of organized labor (with a 96% rating), he was first elected to Congress in 1982. On the powerful Ways and Means

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Committee, he has exhibited a special interest in trade and social security issues. A self-described internationalist, Levin opposed NAFTA in 1993, but in 2000 he offered the Clinton administration a monitoring plan that enabled some Democrats, concerned about labor and human rights issues, including himself, to support permanent normal trade relations with China. Levin has a reputation as an intelligent, hardworking legislator interested in solving problems. He says he is trying to change U.S. trade policy dramatically to shape globalization. Insisting that all trade agreements have workers rights and environmental standards, he, and Chairman Charles Rangel, forced the Bush administration to insert such provisions in the Peru FTA, which Congress then approved in 2007. Levin wants to improve enforcement of existing trade agreements to address China’s persistent currency manipulation, and distortions from unfair trade subsidies. He proposes an office of the Congressional Trade Enforcer to prepare unfair trade cases to be filed by USTR. He exhorts the administration to vigorously oppose efforts to weaken U.S. trade remedy laws in multilateral negotiations. And, as becomes a representative from Michigan, a center of automotive manufacture, Levin complains that the FTA negotiated with South Korea does not eliminate trade barriers on auto trade.

Further Reading His official Web site: http://www.house.gov/levin/. Homan, Timothy R. 2008, February 11. “A Party Adrift in Still Trade Winds,” CQ Weekly: 346 – 348. “Sander Levin.” 2008. Almanac of American Politics 2008. Accessed May 2008 at http://www.NationalJournal.com. Schmitt, Eric. 2000. 2000, April 17. “An Unlikely Champion of a New Trade Pact with China.” New York Times, 12.

Friedrich List (1789 –1846) Like his contemporaries Adam Smith and Karl Marx, Friedrich List, a native of Wurttemberg in Germany, had a great influence on government officials and policymakers outside his native land. Drawing on the thinking of Alexander Hamilton and those he encountered in America during the 1820s, List developed a

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systematic theory for using the tools of economic nationalism— tariffs, subsidies, and industrial policy—to promote economic development. Relatively little is known about List’s career and the factors that motivated his travels and writings. After escaping from prison in Germany, he accompanied Baron Lafayette, a hero of the Revolution, to America in 1825. List resided briefly in Pennsylvania where he invested in railroads and coal mines. His writings influenced Henry Clay’s American System. In 1828, he supported Andrew Jackson for president, and later became U.S. consul in Leipzig. He committed suicide in 1846. In the National System of Political Economy (1841), List distinguished his emphasis on the national economy from the classical economists, like Adam Smith. They seemed preoccupied with the welfare of individuals and “cosmopolitan” welfare of humankind. However, List argued that adoption of global free trade would benefit those countries that industrialized first and hamper the development of poor nations. He warned that selfinterest drove England’s promotion of free trade. He accused the British of kicking away the ladder so as to deprive other countries of the trade restrictions and subsidies that enabled Great Britain to develop first. Standard histories of economic thought have long neglected List. Economists have viewed him as more of a journalist wedded to economic nationalism than a sophisticated analyst who understood the theory underlying the doctrine of free trade. But Alfred Marshall, one of the most important neo-classical economists, recognized List as a “brilliant genius” who challenged the self-confident followers of David Ricardo and called attention to the harmful indirect effects of free trade (Marshall 1948). In fact, List was no knee-jerk protectionist. He argued that free trade was advantageous for countries at similar levels of development, and even advocated a customs union for the German states. List was more interested in economic development than international trade. During the 19th century, his thinking most influenced policymakers in the United States and Germany. Later in the 20th century, Japan, South Korea, and other East Asians would discover and practice his interventionist recommendations. List’s thinking was the forerunner of the East Asian industrialization model, and may have influenced the export-oriented development policies of mainland China.

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Further Reading Chang, Ha-joon. 2002. Kicking Away the Ladder: Development Strategy in Historical Perspective. London, England: Anthem Press. Henderson, William O. 1983. Friedrich List: Economist and Visionary, 1789 –1846. London, England: F. Cass. Ho, P. Sai-wing. 2005. “Distortions in the Trade Policy for Development Debate: A Re-examination of Friedrich List.” Cambridge Journal of Economics 29: 729– 45. List, Friedrich. 1841. The National System of Political Economy. London: Longmans, Green, Chapter 33. Accessed March 2008 at http://oll. libertyfund.org/. Marshall, Alfred. 1948. Principles of Economics. 8th ed., New York: Macmillan, Appendix B33, para 1864.

Gary Locke (1950 –) As Secretary of Commerce in the Obama administration, Gary Locke, the former governor of the state of Washington, has an important role in the administration of trade policy. The Department of Commerce has 36,000 employees and a budget of $10 billion. It has a wide range of trade-related responsibilities — including collecting and reporting statistics, promoting exports, administering import remedies and export controls, and protecting intellectual property rights. Locke, a third-generation American of Chinese ancestry, graduated from Yale University and Boston University School of Law. During his two terms as governor, he led efforts among U.S. governors to gain support for China’s membership in the WTO. He enthusiastically promoted trade with China on behalf of Washington state business interests, such as Boeing and Microsoft, and gained the ear of Hu Jintao, China’s leader. Locke left public office in 2005 to practice with an international law firm, representing multinational firms doing business in China and Chinese firms eager to invest in the United States. As a result of his close ties with China, President Obama is optimistic that Locke can be an effective ambassador for American industry. Obama’s two previous nominees to the Commerce post, New Mexico governor Bill Richardson and New Hampshire senator Judd Gregg, withdrew from consideration. Locke’s predecessor as secretary of Commerce was Carlos Gutierrez, a

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Cuban-born business executive who had served as the chief executive of Kellogg’s.

Further Reading Heim, Kristi. 2009, February 26. “Many Believe China Ties Were Big Plus for Locke.” The Seattle Times, A1. Accessed March 2009 at LexisNexis Academic, http://www.lexisnexis.com/us/lnacademic/. Kammerer, Peter. 2005, September 28. “Locke’s Stock.” South China Morning Post. Accessed February 2009 on LexisNexis Academic, http:// www.lexisnexis.com/us/lnacademic/. Neumann, Dan, and Luke Engan. 2009, March 4. “Questions Raised Over Locke’s Representation of Chinese Firm.” Inside US-China Trade. Zajac, Andrew. 2009, March 1. “Locke’s Ties to China May Be A Selling Point.” Los Angeles Times.

William McKinley (1843 –1901) The former Ohio governor and Republican legislator who became the 25th president (1897–1901) was one chief executive who had an active interest in trade and tariff issues. McKinley, a native of Niles, Ohio, fought with the Union Army in the Civil War, and served six terms in the U.S. House of Representatives. He chaired the prestigious Ways and Means Committee, which writes tax and tariff legislation, and wrote the highly protective McKinley Tariff of 1890. McKinley, sometimes called the Napoleon of protectionism for the way he mobilized support for tariff legislation in the House, warned that free trade would give American money, manufactures, and markets to foreign nations. He preached class harmony and argued that high tariffs would benefit American manufacturers with high profits and workers with high wages, while providing an expanded market for the products of agriculture. Fearful that imports made by cheap foreign labor would displace American workers and close plants, McKinley was cool initially to reciprocity proposals. But, as U.S. industry grew and developed new products with international sales potential, it became more supportive of market-opening initiatives. In writing the 1890 tariff, McKinley agreed to a compromise with Secretary of State James Blaine involving use of a bargaining tariff to open some Latin American markets.

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Later, as president, McKinley became a strong advocate of reciprocity. Understanding that the telegraph and the steam ship were binding national markets, McKinley supported opening the American market to gain improved access abroad. Still, until his death at the hands of an assassin in 1901, McKinley assigned priority to producer and worker interests, not to the consumer’s freedom to buy cheap imports.

Further Reading Eckes, Alfred E., Jr. 1995. Opening America’s Market: U.S. Foreign Trade Policy since 1776. Chapel Hill: University of North Carolina Press. Morgan, H. Wayne. 1963. William McKinley and His America. Syracuse, NY: Syracuse University Press. Skrabec, Quentin R., Jr. 2008. William McKinley: Apostle of Protectionism. New York: Algora Publishing.

Justin Smith Morrill (1810 –1898) No elected official did more in the late 19th century to defend the American System of high-tariff protection than Justin S. Morrill of Vermont. Morrill, a prosperous merchant in his home state who entered elective politics at age 44, he served the next 44 years (from 1854 until his death in 1898) in Congress, first as a Whig and then as a Republican. During that period, he chaired both the House Ways and Means Committee (1865 – 1867) and the Senate Finance Committee (1877– 1879, 1881– 1893, 1895 – 1898) — the two congressional committees with jurisdiction over tax and trade issues. He presided over the Finance Committee a record 17 years. In the 1890s, his colleagues respectfully referred to him as “Father of the Senate.” In Congress, Morrill was a Republican moderate, an abolitionist, an opponent of polygamy, and a tireless advocate of sound money and conservative fiscal policies. He is best remembered for the Morrill Land Grant Act of 1862 granting federal lands to the states for the establishment of colleges of agricultural and mechanical arts. On tariff matters, Morrill was a vigorous protectionist determined to protect American industry and preserve congressional tariff-writing prerogatives. He criticized free-trade theories for abjuring patriotism, and for treating labor no better than the

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“barbarian on the Danube or the cooly on the Ganges” (Morrill 1860). Morrill was suspicious of the State Department’s interest in negotiating reciprocity treaties, and feared the executive branch was using treaties and foreign agreements, ostensibly to promote export opportunities, to trade off domestic manufacturing interests and to modify the Constitution. He anticipated that nations eligible for most-favored-nation treatment, such as Great Britain, might request the same treatment, thus using reciprocity treaties to undermine the American protective system. The senator from Vermont was especially critical of proposed trade agreements with poorer countries like Mexico, for these had small markets for U.S. exports but gained access to the much larger and prosperous U.S. market. On trade issues, Morrill reflected the thinking of U.S. industry, which in the post–Civil War period sought primarily to expand and serve the growing continental market.

Further Reading Andrews, William G. “Justin Smith Morrill,” American National Biography. Baker, Richard A. “April 14, 1810: Justin S. Morrill” The Hill (April 21, 2004), 20. Eckes, Alfred E., Jr., Opening America’s Market: U.S. Foreign Trade Policy since 1776. Chapel Hill: University of North Carolina Press, 1995. Morrill, Justin S. 1860, April 23. Congressional Globe, 1832. Parker, William Belmont. 1924. The Life and Public Services of Justin Smith Morrill. Boston: Houghton Mifflin.

Henry (Hank) Paulson (1946 –) The third, and final, Treasury secretary to serve President George W. Bush, Henry (Hank) Paulson emerged as a major player in trade, usually not the province of a financial leader. Paulson is the former CEO of Goldman Sachs, a pillar of the Wall Street investment community. At Goldman he accumulated a net worth of $700 million, and gained the private sector experience the Bush administration hoped would inspire confidence in financial markets and foreign lenders. Bush made Paulson an active participant in the formulation of economic policy, and assigned him special responsibility for dealing with the Chinese. The United States depends on China, and other creditors, to supply more than $1.8 billion per

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day to finance its current-account trade deficit. In 2008 that deficit was $673 billion. With China running huge trade surpluses with the United States and maintaining what many observers believe is an undervalued currency, Congress and the Bush administration wanted to place greater pressure on China to crack down on unfair currency and trade policies. With his close contacts in China’s finance sector and government, Paulson seemed the ideal candidate to take on the China account. On Wall Street he had a reputation as a tenacious and effective salesman. Soon after taking office in the Treasury, Paulson announced a semi-annual “strategic economic dialogue” with top Chinese policymakers to convince them that appreciation of the currency was in their best interest. Paulson’s dialogues initially left the American side and Congress grumbling. He preached patience but produced few results. The bilateral merchandise deficit, which reached $256 billion in 2007, rose to $266 billion in 2008. But there were some indications of change. By 2008, the Chinese currency was more flexible — it had appreciated 15 percent since July 2005. However, some economists in the United States said a 40 to 50 percent appreciation of the yuan would be necessary to achieve better balance in the international accounts.

Further Reading Bartiromo, Maria. 2006. 2006, December 25. “Hank Paulson on China and the Year Ahead,” Business Week, 162. Blustein, Paul, and Peter S. Goodman. 2006, September 29. “Paulson Wins Friends, but Can He Influence the People’s Republic?” The Washington Post, D1. Mandel, Michael. 2006, June 12. “Mr. Risk Goes to Washington.” Business Week, 46. Thomas, Landon Jr. 2006, May 31. “Paulson Comes Full Circle,” New York Times, C1.

Nancy Pelosi (1940 –) The first woman and first Californian to preside over the House of Representatives as Speaker, Nancy Pelosi has a significant role in trade policy matters. She appoints committee chairmen, such as Charles Rangel of Ways and Means, and controls the scheduling

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of legislation. Thus, in April 2008 when President Bush sent forward a proposed free-trade agreement with Colombia on a 90day fast-track timetable previously agreed with Congress, Pelosi opted to change the rules; she delayed the vote until an undetermined time. Bush, congressional Republicans, and the Colombian government protested the move. Editorial writers compared the speaker to Smoot and Hawley, authors of the 1930 tariff that many think ignited a wave of tariff retaliation. From Pelosi’s point of view, the delaying tactic avoided a controversial vote during the presidential campaign, when trade issues loomed large in public discussions, and it gave her a big bargaining chip with the Bush administration. Pelosi said the free-trade bill would fail if brought to a vote immediately under the 90-day timetable. Pelosi’s willingness to play hardball politics with the White House was no surprise to those who knew the 68 year old grandmother who stands next to the Vice President in the line of succession to the presidency. She grew up in a political family. Her father, Thomas D’Alesandro, Jr., served five terms in Congress from Maryland and later was elected mayor of Baltimore. Married to Paul Pelosi, a California real estate developer, the speaker is ranked as the ninth richest member of the House with assets estimated at $38.5 million. Elected to Congress in 1987 to fill an unexpired term, she has represented the liberal fifth district of California for over 20 years. Pelosi has close ties to the AFL-CIO, one of her largest contributors. The AFL-CIO rated her 100 percent in 2007 for her votes on legislation of interest to working families. On trade issues, Pelosi has often supported union positions. She opposed CAFTA, WTO-membership for China, and an extension of presidential trade negotiating authority in 2002. But she supported President Clinton on NAFTA in 1993 and voted to approve President George W. Bush’s bilateral free-trade agreements with Australia, Chile, Morocco, Peru, and Singapore.

Further Reading Barshay, Jill. 2006, November 13. “Woman of the House Brings a Sense of Power,” CQ Weekly Online, 2970 – 2973. Homan, Timothy R. 2008, February 11. “A Party Adrift in Still Trade Winds,” CQ Weekly Online, 346 – 348. “Nancy Pelosi.” 2008. Almanac of American Politics 2008. Accessed May 2008 at http://www.NationalJournal.com. “Nancy Pelosi.” OpenCongress.org Accessed May 2008 at http://www. opencongress.org/.

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Sandalow, Marc. 2008. Madam Speaker: Nancy Pelosi’s Life, Times, and Rise to Power. New York: Rodale Books.

Raul Prebisch (1901–1986) As the long time leader of the UN Economic Commission for Latin America and the first secretary-general of the United Nations Conference on Trade and Development (UNCTAD), Prebisch was an influential advocate for the developing world. As a development economist, he is most remembered for contributions to the Prebisch-Singer thesis that the secular terms of trade (export prices/import prices) tended to move against countries exporting primary products. Both he and Hans Singer of the United Nations concluded that this occurred because primary products were sold in competitive markets. However, big corporations in the rich countries produced industrial products and had the power to administer prices and pass along higher costs. Prebisch argued that Latin America and developing countries should promote their own industrialization, substituting domestic production for goods previously imported. In advocating active government involvement through tariffs and exchange controls to facilitate development, Prebisch’s protectionist advice echoed the teachings of Alexander Hamilton and Friedrich List in earlier times. It conflicted with the advice of free-trade oriented economists in the United States and the United Kingdom who argued that governments should dismantle trade and exchange barriers, and allow trade to serve as the engine of growth. Over the longer term, Prebisch’s work shaped the thinking of Latin American dependency theorists, like Andre Gunder Frank. Born in Tucuman, Argentina, Prebisch studied economics at the University of Buenos Aires and held a number of posts in the Argentine government, including director-general of the Argentine Central Bank (1935 to 1948). He achieved his greatest fame as head of the Economic Commission for Latin America, and as secretary-general of UNCTAD, where he was a vigorous critic of GATT and a tireless advocate for the third world.

Further Reading Di Marco, Luis E., ed. 1972. International Economics and Development; Essays in Honor of Raul Prebisch. New York: Academic Press.

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Klein, Naomi. 2007. The Shock Doctrine: The Rise of Disaster Capitalism. New York: Metropolitan Books. “Raul Prebisch,” 1998. Encyclopedia of World Biography. 2nd ed, Detroit, MI: Gale Research. Toye, John and Richard. 2004. The UN and Global Political Economy: Trade, Finance and Development. Bloomington: Indiana University Press.

Charles Rangel (1930 –) As chairman of the Committee on Ways and Means, Rep. Charley Rangel is a practical liberal and wily dealmaker. A free trader, friendly to the business community, he is the most powerful member of the House of Representatives on trade issues. He has represented Upper Manhattan, including Harlem, since 1971. During the Korean War, Rangel served with distinction in the Army. The first African American to chair the prestigious trade and tax committee, Rangel cultivates close ties with Wall Street and corporate America while representing a low-income district. By early 2008, Rangel had raised a staggering $5 million — mostly from lobbyists who took the pragmatic view that they could work with Rangel. The chairman has been involved in several ethics controversies, including one involving failure to pay taxes on rental property in the Dominican Republic. He declined to step down from his chairmanship of the tax-writing committee during the investigation (Kocieniewski 2009). On trade issues, Rangel promoted the African Growth and Opportunity Act (AGOA) in 2000 to provide one-way trade preferences to African countries even though critics thought it would benefit multinational corporations and African elites. He has also called for an end to the embargo on trade with Cuba. On CAFTA, Rangel maneuvered to see that the Dominican Republic was included, although he opposed it on final passage. During 2007, he sought to broker a deal between House Democrats and the Bush administration that would facilitate passage of certain bilateral free-trade agreements. Some members saw it as an effort by congressional Democrats to curry favor with Wall Street and corporate interests. In return for moving the Peruvian FTA, Rangel demanded improved environmental and labor clauses inserted in the treaty that would appease fellow Democrats. But Speaker Nancy Pelosi, and other Democrats more sensitive to

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the concerns of organized labor and constituent discontent, refused to move forward on FTAs involving Colombia and South Korea.

Further Reading Homan, Timothy R. 2008, February 11. “A Party Adrift in Still Trade Winds,” CQ Weekly, 346 – 348. Kocieniewski, David. 2009. February 5. “Rangel’s Financial Disclosures Omitted Data over 30 Years, A Reports Says.” New York Times, 25. Ota, Alan K. 2007, March 26. “Rangel Sets Out on a ‘Middle Road’ ” CQ Weekly, 868 – 869 “Rep. Charles Rangel (D).” 2005. Almanac of American Politics. Accessed April 2008 at http://www.NationalJournal.com.

David Ricardo (1772–1823) Among economists, Ricardo is remembered as the father of comparative advantage. His theory has enduring significance in shaping thought on international economics. The third son of a Jewish stockbroker, whose ancestors had migrated from Spain and Portugal to the United Kingdom, David Ricardo entered his father’s stock business. Upon marrying a Quaker and becoming a Unitarian, young Ricardo was disinherited, and forced out of the family business. But he remained active in the stock market and accumulated a substantial fortune, so that by 1815 he could retire from business and concentrate on political economy and politics. In 1819, he bought a seat in Parliament and for four years until his death used the position to argue for free-trade. Ricardo had no university degrees, but his interest in economics emerged from reading Adam Smith’s The Wealth of Nations in 1799. Smith had posited trade on the basis of absolute advantage, that is, each nation was more efficient in the production of a good, and therefore they exchanged. In such a situation, what would happen to the country that was less efficient in the production of both products? Could it still benefit from trade? Ricardo’s theory of comparative advantage held that both could benefit because of opportunity costs. If one country could produce shoes more efficiently than it could produce textiles, it would benefit that country to specialize in shoe production and import textiles.

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However, as development economists have pointed out, this theory has static assumptions. It does not take into account that a backward country might absorb new technologies, and in a market sheltered from international competition develop even greater cost advantages. As a result, many latecomer countries have rejected Ricardo’s thinking as free-trade imperialism, and used industrial policies, such as tariffs, to develop competitive advantages.

Further Reading Chang, Ha-joon. 2008. Bad Samaritans: The Myth of Free-Trade and the Secret History of Capitalism. London: Bloomsbury Press. Henderson, John P. 1997. The Life and Economics of David Ricardo. Boston, MA: Kluwer. Irwin, Douglas. 1996. Against the Tide. Princeton, NJ: Princeton University Press. Lovett, William, Alfred E. Eckes, and Richard L. Brinkman. 2004. U.S. Trade Policy: History, Theory and the WTO. 2nd ed., Armonk, NY: M.E. Sharpe. Peach, Terry. 2006, October. “Ricardo, David (172–1823).” Oxford Dictionary of National Biography. Oxford University Press, online ed. Weatherall, David. 1976. David Ricardo: A Biography. The Hague, Netherlands: Martinus Nijhoff.

Susan Schwab (1955 –) As U.S. Trade Representative during the final two years of President George W. Bush’s second term, Susan Schwab inherited the difficult task of winning congressional support for bilateral free trade pacts with Colombia, Panama, Peru, and South Korea, and on bringing the Doha Development Round of WTO negotiations to a successful close. In dealing with Congress, Schwab had excellent preparation. During the 1980s as a trade policy staffer working for Senator Jack Danforth of Missouri, who chaired the international trade subcommittee of Senate Finance, she gained experience drafting trade legislation and working with congressional leaders. During the presidency of George H. W. Bush, she held a senior position in the Commerce Department as head of the United States and Foreign Commercial Service. Later, she served as dean of the University of Maryland School of Public Policy before joining USTR

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as a deputy to USTR Rob Portman. As a child, Schwab grew up in Africa, Europe, and Asia, where her father, a German immigrant, served with the foreign service. A policy expert with extensive experience in government, business, and academics, Schwab had not been active in Republican politics. But she knew the trade-policy process and she worked in Congress at a time of bipartisan cooperation. Although the chief trade advocate for a president renowned for his free-trade enthusiasm, Schwab knew the other side of the argument equally well. As an aide to Danforth, she occasionally urged protectionist solutions on trade administrators responsible for deciding delicate import-remedy cases involving Danforth’s constituents. Despite her superior knowledge of trade politics, Schwab was unable to win congressional approval of Bush’s FTAs, or to conclude the Doha Round.

Further Reading Clark, Evan. 2006, July 21. “Bush Trade Chief Schwab: Persistent, Persuasive and Pragmatic.” WWD. Schwab, Susan C. 1994. Trade-offs: Negotiating the Omnibus Trade and Competitiveness Act Boston, MA: Harvard Business School Press.

Adam Smith (1723 –1790) This world famous economic theorist, born in Kirkcaldy, Scotland, initially gained recognition as a professor of logic and moral philosophy at the University of Glasgow (1751–64), where he lectured on ethics and jurisprudence, before turning his attention to economics. For two years in 1764 – 66, he traveled in France and Switzerland, meeting prominent intellectuals like Voltaire and Jean-Jacques Rousseau, while he tutored the young duke of Buccleuch. Smith’s most famous book, The Wealth of Nations (1776), the foundation for modern economic thought, is both a critique of mercantilism and a guidebook to economic liberalism and freedom from government interference. International economists often credit Smith with the origins of the theory of free trade. He wrote that if a foreign country can supply a commodity cheaper than our nation can produce it, it is advantageous to obtain the import with some of the product of domestic industry. Some economists long claimed that Smith based his case for trade on

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static absolute advantage and on the exchange of surpluses. More recently, scholars have expressed greater respect for Smith. They note his argument for commercial openness and economic growth rests on dynamic assumptions, and offers a foundation for modern economic development thought. Adam Smith was more than an academic theorist. He advised the Chancellor of the Exchequer on tax policy, and spent 12 years as a commissioner of Scottish customs in Edinburgh. Ironically, the individual most identified with the origins of free-trade theory earned a living regulating the mercantile system. He administered customs duties that raised money for government and education. As a bureaucrat, Smith was no zealous deregulatory reformer. Rather, he sought to crack down on unlawful free-trade, otherwise known as smuggling. Smith’s record as a customs commissioner indicates that the great economist had a pragmatic streak as well as an academic enthusiasm for free-trade principles.

Further Reading Anderson, Gary M., William F. Shughart II, and Robert D. Tollison. 1985. “Adam Smith in the Customhouse,” Journal of Political Economy 93:4, 740 – 59. Blecker, Robert A. 1997, August. “The ‘Unnatural and Retrograde Order’: Adam Smith’s Theories of Trade and Development Reconsidered.” Economica, New Series, 64:255, 527– 37. Brinkman, Richard. 2004. “Free Trade: Static Comparative Advantage,” in William Lovett, Alfred Eckes, and Richard Brinkman, U.S. Trade Policy: History, Theory, and the WTO. 2nd ed., Armonk, NY, M.E. Sharpe, 93 –110. Razeen, Sally. 1998. Classical Liberalism and International Economic Order: Studies in Theory and Intellectual History. London, England: Routledge. Ross, Ian Simpson. The Life of Adam Smith (Oxford, U.K.: Clarendon Press, 1995). Smith, Adam. The Wealth of Nations (New York: Modern Library, 1937). Winch, Donald. 2004 – 2008. “Adam Smith.” Oxford Dictionary of National Biography. Oxford, UK: Oxford University Press.

Reed Smoot (1862 –1941) As coauthor of the Tariff Act of 1930, commonly called the SmootHawley Tariff, Senator Reed Smoot, Republican from Idaho, is

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one of the 20th-century legislators most often associated with protectionism. Indeed, Smoot wore the protectionist label proudly, as did most Republicans of his era. A Mormon, Smoot was born in Salt Lake City, Utah, and attended Brigham Young University. He was a successful businessman, and leader of the Mormon Church. Indeed, during his Senate years he was one of the Council of Twelve Apostles, responsible for the affairs of the church. Intelligent and articulate, Smoot rose to leadership in the Senate, chairing the Committee on Finance, responsible for tax and tariff legislation. He was renowned for his hard work and mastery of legislative details. During the sweeping revision of 1930, he took personal charge of the legislation, determined to carry out the Republican pledge of tariff reform to protect industry. Smoot was especially sensitive to the need for protecting beet sugar producers and processors, important to his constituents in Utah and the Mormon Church, which had investments. But he also sought to achieve President Hoover’s goal of a flexible-tariff provision whereby a reorganized and independent Tariff Commission could review individual tariff rates and propose changes subject to the president’s approval. Ironically, Smoot was defeated in the Roosevelt landslide of 1932, but his defeat was not directly attributable to dissatisfaction with the tariff. His Democratic opponent also ran on a protectionist platform. As a senator, Smoot was pragmatic and highly competent. After his defeat, the free-trade oriented New York Times called Smoot’s defeat “a loss to the Senate and the country” and lauded his industry, integrity, and ability.

Further Reading Eckes, Alfred E., Jr. 1995. Opening America’s Market: U.S. Foreign Trade Policy since 1776. Chapel Hill: University of North Carolina Press, 100–139. Merrill, Milton R. 1990. Reed Smoot, Apostle in Politics. Logan: Utah State University, 1990. “Old Familiar Faces.” 1932, November 10. New York Times, 20.

Robert S. Strauss (1918 –) During the Tokyo Round of GATT negotiations, Robert S. Strauss, an experienced lawyer and political operative, served as U.S. Trade Representative, and brought negotiations to a successful close.

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A native of Texas, Strauss cut his political teeth in state politics, and became a prodigious fundraiser. A close friend of Texas Governor John Connally, and through him President Lyndon Johnson, Strauss headed the Democratic Party after the 1972 election disaster. He rebuilt the party, and helped manage Jimmy Carter’s election. A grateful Carter appointed him U.S. Trade Representative. Strauss had little knowledge of trade details, but he understood people, negotiations, and the need to be flexible. When he arrived at USTR, the Tokyo Round negotiations were dead in the water. The United States and the European Community were deadlocked over agricultural trade, with the U.S. Department of Agriculture pushing hard to destroy Europe’s Common Agricultural Policy (CAP). To salvage the talks, Strauss visited Brussels and indicated that the United States did not want to eliminate the CAP, and that opened the way for joint leadership to conclude the Tokyo Round. To reduce domestic opposition, he and his aides exempted certain import-sensitive industries, such as steel and textiles, from the negotiations. In dealing with Congress, Strauss also displayed his dealmaking skills. Key members of Congress and staff were invited to observe the negotiations, and USTR sought the advice of lobbyists for industry, labor, and agriculture. Strauss also stressed bipartisan cooperation with the minority Republicans, and involved the lobbyists in efforts to win the votes of individual members of Congress. Unlike the results of the Kennedy Round, or later negotiations involving NAFTA, CAFTA, and China, implementing legislation for the Tokyo Round sailed through Congress with virtually no opposition. It passed the House of Representatives 395 to 7, and the Senate 90 to 4. After the Carter administration, Strauss remained active in Washington as a lawyer and lobbyist. He would serve as Ambassador to the Soviet Union under President George H. W. Bush.

Further Reading Dryden, Steve. 1995. Trade Warriors: USTR and the American Crusade for Free Trade. New York: Oxford University Press, 1995. Eckes, Alfred E., Jr., ed. 2000. Revisiting U.S. Trade Policy. Athens: Ohio University Press. Twiggs, Joan E. 1987. The Tokyo Round of Multilateral Trade Negotiations: A Case Study in Building Domestic Support for Diplomacy. Lanham, MD: University Press of America, 1987.

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Winham, Gilbert R. 1986. International Trade and the Tokyo Round Negotiation. Princeton, NJ: Princeton University Press.

Lori Wallach (1964 –) Renowned as the chief strategist of the fair-trade movement, Lori Wallach of Citizen Trade Watch (CTW), organized the Seattle protests against the World Trade Organization in 1999. Since the founding in 1995 of CTW, an affiliate of Ralph Nader’s Public Citizen, she has put together a large network of grassroots activists in the United States and other countries to oppose the WTO and various free-trade initiatives. A classmate of President Barack Obama at Harvard Law School, Wallach grew up in northern Wisconsin and attended Wellesley College. Described by a reporter as Ralph Nader with a sense of humor, Wallach is a progressive activist who seeks to make a difference (Davis 1998). Her focus is the proglobalization agenda of large multinational corporations. When governments sought to secretly negotiate the Multilateral Agreement on Investments, Wallach obtained a copy and published it on the Internet, effectively torpedoing the initiative. Calling it a “coup d’etat against democratic governance,” she argued the pact would allow transnational corporations to trump national labor, health, and environmental rules (Wallach 2005). From offices near the Capitol, Wallach and her gang of activists have proven a formidable match for highly-paid corporate lobbyists for free trade. She testifies regularly before Congress, appears regularly on television shows such as Lou Dobbs Tonight, and travels to far corners of the world to communicate with likeminded activists.

Further Reading Davis, Bob. 1998, April 6. “Free-Trade Foe, Stymied on IMF, Shifts to Other Fights.” The Wall Street Journal, A26. Magnusson, Paul. 2000, March 20. “Meet Free Traders’ Worst Nightmare,” Business Week, 113. Naim, Moises. 2000, March 22. “Lori’s War,” Foreign Policy. Wallach, Lori. 2005, January/February. “Slow Motion Coup d’Etat.” Multinational Monitor, 26.

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Sir Eric Wyndham White (1913 –1980) The first leader of GATT, Eric Wyndham White presided over that organization for 20 years from 1948 to 1968. His tenure included six rounds of multilateral negotiations —including the Kennedy Round —which cut tariffs on industrial goods sharply. During the 1960s, he encouraged GATT to expand and include many newly independent nations. Those who worked with him say that Wyndham White had vision, extraordinary negotiating skills, and diplomatic finesse. His most controversial action at GATT involved doubling GATT’s membership during the 1960s with the addition of many newly-independent countries. To undercut the appeal of UNCTAD, he permitted the new members to join without binding or liberalizing their tariffs, in effect creating asymmetries that would plague the GATT system for years afterward. A native of the United Kingdom, Wyndham White graduated from the London School of Economics and then became a lawyer. During World War II he worked in the British government, first in the Ministry of Economic Warfare, and then in the diplomatic service with appointments in Washington, D.C., and Paris. He established the secretariat for the proposed International Trade Organization, and when GATT was established became its first executive-secretary and later its director-general. For his service to international trade, Wyndham White was appointed KCMG in 1968, an honor to individuals who have served the British government. After the Kennedy Round, he resigned from GATT to take a position with Bernard Cornfeld’s Investors Overseas Service. Cornfeld sold mutual fund shares to small-time investors, especially U.S. expatriates and servicemen, and promised riches. His pyramid scheme collapsed when stock markets declined. In 1970, Cornfeld resigned and was charged with fraud. Wyndham White took over the company and supervised its liquidation and sale to another swindler, Robert Vesco. Association with Cornfeld tarnished Wyndham White’s otherwise outstanding public career.

Further Reading Eckes, Alfred. 2000, October. “In Globalization, People Matter: Eight Who Shaped the World Trading System.” Global Economy Journal 1(4): 309.

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“Obituary: Sir Eric Wyndham White —Notable Role in World Commerce.” 1980, January 29. The Times, 14.

Robert Zoellick (1953 –) President George W. Bush’s first U.S. Trade Representative, Robert Zoellick was the architect of the competitive liberalization strategy that led the United States to conduct multilateral, regional, and bilateral trade negotiations simultaneously. During his tenure at USTR (2001–2005), Zoellick succeeded in gaining renewed fast-track trade negotiating authority, and in helping to launch the Doha Development Round of WTO multilateral negotiations. He completed negotiations to bring China and Taiwan into the WTO. He also aggressively pursued bilateral and regional agreements — including those with Jordan, Chile, Singapore, Morocco, Bahrain, Australia, and the Central American Free Trade Agreement. Despite his substantive accomplishments, Zoellick at first received little respect. He was described as the Rodney Dangerfield of the Bush Cabinet. Hard-driving and focused on the president’s goal of negotiating free-trade pacts, Zoellick did not enjoy warm relationships with members of Congress. A bright policy professional, familiar with details, some on Capitol Hill thought him arrogant and manipulative. Zoellick later defended his negotiating strategy from multilateral critics like Jagdish Bhagwati as offering leverage and incentives to build coalitions in the multilateral negotiations. Zoellick left USTR during Bush’s second term to become Deputy Secretary of State under Condoleezza Rice. He departed State after one year to join Goldman Sachs, the Wall Street investment banking firm as vice chairman international, but returned to government in 2007. President Bush nominated him to succeed Paul Wolfowitz as president of the World Bank. At that time, the press described him as able, experienced, and widely respected in many countries where he has negotiated. A native of Naperville, Illinois, Zoellick attended Swarthmore College and Harvard Law School. He served in the administration of President George H. W. Bush as an undersecretary of state and as deputy White House chief of staff. As president of the World Bank, he has used his position to promote the liberalization of world agriculture as part of a

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package to conclude the Doha Development Round of WTO negotiations.

Further Reading “A Clean Start at the World Bank.” 2007, May 31. New York Times, 18. Hitt, Greg. 2007, May 30. “Zoellick Could Close Divide at World Bank,” The Wall Street Journal, A2. Kahn, Joseph. 2001, January 12. “Man in the News; A Washington Veteran for Labor; a Tested Negotiator for Trade,” New York Times, A 17. Pearlstein, Steven. 2001, January 13. “Bush Selection Zoellick Is a FreeTrader on a Mission,” The Washington Post, A2. “U.S. Trade Representative: A Strong Performance, but Only a Little Respect.” 2003, January 25. National Journal 35 (4). Zoellick, Robert. 2007, April 12. “Free Trade Deals Strengthen US International Ties and Political Capital,” The Wall Street Journal.

6 Data and Documents

R

eaders interested in data and statistics relating to trade policy issues can access a wealth of free information from online sources. The U.S. government and certain private groups collect, process, analyze, and disseminate data relating to flows of goods, services, money, and information. Among the best Web sites are several in the U.S. Department of Commerce. Its Bureau of the Census (http://www.census.gov/) tabulates customs data and reports monthly on merchandise trade and services. Another unit of the Department of Commerce, the Bureau of Economic Analysis (http://www.bea.gov/), provides estimates for balance of payments, investments, trade in goods and services, and on the operations of multinational corporations. The Department of Commerce’s International Trade Administration also provides an important gateway to a variety of trade and industry information (http://ita.doc.gov/td/industry/otea/ref-room.html). Other U.S. government agencies post relevant data on Web sites. The U.S. Department of Labor’s Bureau of Labor Statistics collects, analyzes, and publishes data about international labor issues (http://www.bls.gov/). For financial data relating to investment holdings and exchange rates, readers should access the U.S. Treasury’s Web site at http://www.treasury.gov/). The U.S. Department of Agriculture reports on food and commodities (http://www.usda.gov/); and the U.S. Department of Energy on petroleum and natural gas (http://www.doe.gov/). An independent government agency, the U.S. International Trade Commission offers an interactive tariff and trade dataweb that permits users to integrate trade statistics with tariff and customs treatment issues (http://www.usitc.gov/). Its research units—the

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Office of Economics and the Office of Industries—prepare studies for Congress and the executive, most of them available to the public. Especially valuable are annual reports on The Year in Trade: Operations of the Trade Agreements Program, and Recent Trends in U.S. Services Trade. There are two popular compendia of general statistics: the Statistical Abstract of the United States, prepared by the U.S. Bureau of the Census, and the U.S. Central Intelligence Agency’s The World Factbook. The annual Statistical Abstract of the United States offers statistics on social and economic conditions in the United States (http://www.census.gov/compendia/statab/). It contains a section with international statistics, and offers some comparisons to the United States. The World Factbook has been published in unclassified form since 1971. It provides information on land, water, people, government, economy, communications, and defenses forces of other countries. It also contains a number of lists ranking countries by various measures—such as trade, investments, currency reserves, energy reserves, and so forth. (http://www.cia. gov/library/publications/the-world-factbook/) Interest groups and consultants with a stake in the trade policy debate frequently analyze and publish official date or private information sources. Some of the best are the Economic Policy Institute (http://www.epi.org/), the American Manufacturing Trade Action Coalition (http://www.amtacdc.org/), economist Charles McMillion’s Web site http://www.mbginfosvcs.com/, the Federation of International Trade Associations (http://fita. org/), which provides links to statistics from most non-U.S. governments; the National Association of Manufacturers (http:// www.nam.org/) and the US-China Business Council (http:// www.uschina.org/). Some of the best Web sites for trade data are those of international organizations, like the United Nations Conference on Trade and Development (http://www.unctad.org/), the World Bank (http://www.worldbank.org/), and, of course, the World Trade Organization (http://www.wto.org/). Other international organizations collect and disseminate a broad range of economic and financial data, much of it relevant to trade debates. These include the Bank for International Settlements (http://www.bis.org/), the International Monetary Fund (http://www.imf.org/), Organization for Economic Cooperation and Development (OECD) (http://www.oecd.org/), the UN Food and Agricultural Organization (http://www.fao.org/), the International Energy Agency

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(http://www.iea.org/), and various regional development banks. Among these are the African Development Bank (http://www. afdb.org/), the Asian Development Bank (http://www.adb.org/), the European Bank for Reconstruction and Development (http:// www.ebrd.org/), and the Inter-American Development Bank Group (http://www.iadb.org/). It is worth remembering that international agencies typically rely on member governments for data collection, and the quality of national data collection efforts vary widely. In poor countries, for example, national statistical offices often have high staff turnover and inadequate funding. The data produced is frequently unreliable and lacking in timeliness. Merchandise trade statistics tend to be a fairly reliable indicator of trade trends, because the goods move physically through a limited number of ports where customs officials collection data. But there is always the problem of smuggling, nonreporting, and fluctuating exchange rates. Detailed statistics are not available for trade in services, and some of these data are only estimates based on sampling techniques. For information on infrastructure services, such as telecommunications, transportation, finance, and insurance, see the World Trade Organization’s service profiles at http://stat.wto.org/ServiceProfile/WSDBServicePFHome.aspx? Language=E.

International Comparisons To understand America’s place in the trading world, it is useful to begin with a comparison of the world’s 20 most populous countries or economic units. Except for the 27-member European Union, Japan, and the United States, the others are all relatively underdeveloped and account for a small share of world trade. Table 6.1 shows that the European Union, Japan, and the United States account for more than half of the world’s merchandise exports (including intra-European trade), while the other most populous countries have a little more than 20 percent. It is evident that the rich industrial countries have the greatest stake in world trade, although emerging powers such as Brazil, China, and India have a growing interest. But many poor countries—such as the Congo, Ethiopia, and Pakistan—have very little stake in the international trading system, and little prospect for becoming active in the next decade.

Data and Documents

190

TABLE 6.1 The 20 Most Populous Countries Compared

Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Country China India European Union United States Indonesia Brazil Pakistan Bangladesh Nigeria Russia Japan Mexico Philippines Vietnam Ethiopia Egypt Turkey Congo, Democratic Republic of Iran Thailand

Population

GDP (Billion$)

Per capita GDP (Dollars)

Share of World Exports

1,330 million 1,148 491 304 238 196 173 154 146 141 127 110 96 86 83 82 72 67

7,800 3,319 14,960 14,580 932 2,030 454 228 328 2,225 4,487 1,578 327 247 63 453 931 21

6,100 2,900 33,800 48,000 3,900 10,300 2,600 1,500 2,200 15,800 35,300 14,400 3,400 2,900 800 5,500 12,900 300

8.8 1.1 38.2 8.4 0.9 1.2 0.1 0.1 0.3 2.6 5.1 2.0 0.4 0.3 0.0 0.1 0.8 0.0

860 570

13,100 8,700

0.6 1.1

66 65

GDP in column 4 calculated on purchasing-power-parity basis. Sources: Central Intelligence Agency. “The World Factbook,” http://www.cia.gov/library/ publications/the-world-factbook/rankorder/2119rank.html; http://www.cia.gov/library/ publications/the-world-factbook/rankorder/2001rank.html; http://www.cia.gov/library/ publications/the-world-factbook/rankorder/2004rank.html; (accessed May 2009). Trade percentages from United Nations Conference on Trade and Development, “Handbook of Statistics 2008,” http://stats.unctad.org; (accessed May 2009).

Another useful way to look at world trade patterns is to examine shifts in shares of world exports and imports over an extended period. Tables 6.2 and 6.3 show changing export and import trends since 1950. Among the key points, the U.S. share of world exports has fallen sharply, while its share of world imports has remained relatively constant. The developed countries of Europe continue to hold about 40 percent of world exports and imports. It is important to remember that while Europe is a leading exporter of goods, about half of this trade is intra-bloc trade

International Comparisons

191

TABLE 6.2 Shares of World Exports of Merchandise (%) Countries

1950

1970

2000

2007

United States Canada Japan Developed Europe France Germany Netherlands United Kingdom Developing Economies excluding China India Brazil South Africa Mexico Saudi Arabia China Hong Kong Taiwan Russia (formerly USSR) Developing Countries—Africa Developing Countries—Asia Developing Countries—Americas

16.2 4.9 1.3 36.8 5.1 3.9 2.6 10.2 33.1

13.6 5.3 6.1 47.9 5.7 11.2 4.2 6.1 18.4

12.1 4.3 7.4 40.0 5.1 8.6 3.6 4.4 28.0

8.4 3.0 5.1 40.5 4.0 9.5 4.0 3.1 28.7

— 2.2 1.9 0.9 0.5 0.9 1.1 0.1 2.9 7.2 15.2 11.6

— 0.9 1.1 0.4 0.8 0.7 0.8 0.5 4.0 5.0 8.5 5.5

0.7 0.9 0.5 2.6 1.2 3.9 3.1 2.3 1.6 2.4 23.8 4.1

1.1 1.2 0.5 2.0 1.8 8.8 2.5 1.8 2.6 2.9 29.1 5.5

Source: United Nations Commission on Trade and Development. Handbook of Statistics 2008, http://stats. unctad.org/Handbook/ (accessed May 2009).

with other European nations. Much of the real growth in world trade has come from the emerging countries of Asia. Developing countries in Asia have doubled their shares of world exports and imports, much of this the result of China’s phenomenal growth and integration into the world economy. In Africa and the Americas, while individual countries such as Brazil and Mexico have prospered, many countries have lost export share, and some have suffered falling per capita incomes as a result of adverse internal and external circumstances. Oil exporting countries such as Saudi Arabia have succeeded in boosting their share of world trade, but many low-income exporters of traditional commodities have done poorly. The developing countries of Africa and the Americas as a group have experienced declining shares of world exports and imports.

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TABLE 6.3 Shares of World Imports of Merchandise (%) Country

1950

1970

2000

2007

United States Japan Developed Europe France Germany Netherlands United Kingdom Developing Economies excluding China India Brazil South Africa Mexico Saudi Arabia China Hong Kong Taiwan Russia Developing Countries—Africa Developing Countries—Asia Developing Countries— Latin America

15.0 1.5 42.7 4.9 4.2 3.8 11.4 28.7

12.9 5.7 50.3 6.0 9.1 4.8 6.6 17.9

18.9 5.7 39.3 5.1 7.5 3.3 5.2 25.4

14.4 4.4 40.4 4.3 7.5 3.5 4.4 26.2

— 1.7 1.4 0.9 0.2 0.9 1.0 0.2 — 7.1 12.5 9.9

— 0.9 1.2 0.7 0.2 0.7 0.9 0.5 — 4.4 8.4 5.5

0.8 0.9 0.4 2.7 0.5 3.4 3.1 2.1 0.7 2.0 20.8 5.9

1.5 0.9 0.6 2.1 0.6 6.8 2.6 1.6 1.7 2.4 25.1 5.3

Source: United Nations Commission on Trade and Development. Handbook of Statistics 2008, http:// stats.unctad.org /Handbook/ (accessed May 2009).

Trade and finance are intimately related. When U.S. investors build a factory in a developing country, there is likely to be a shortterm boost in U.S. exports, as machinery and equipment are exported to the new facility. Over a longer period of time, if the plant makes goods for the American market, the result may be higher U.S. imports. Tables 6.4 and 6.5 show world direct investment patterns—using the accumulated stock of investments. Until the 1980s, private foreign investment remained relatively small, but subsequently it grew fast as governments reduced regulatory barriers and developing countries became more receptive to private capital. Generally, developed countries are the principal sources of investment capital—with more than half coming from members of the European Union. The U.S. share of outbound world

TABLE 6.4 Shares of World Foreign Direct Investment Outward FDI Stock (in %) Country

1980

1990

2000

2007

Developed Developing Canada China Hong Kong Europe France Germany Netherlands United Kingdom Japan Russia United States

87.0 13.0 4.3 0 0 38.9 5.0 7.9 7.6 14.7 3.6 0 39.3

91.9 8.1 4.8 0.3 0.7 49.7 6.3 8.5 6.0 12.8 11.3 0 24.1

85.6 14.0 3.9 0.5 6.3 54.5 7.2 8.8 5.0 14.6 4.5 0.3 21.4

83.6 14.7 3.3 0.6 6.6 58.1 9.0 8.0 5.5 10.9 3.6 1.4 21.1

Source: United Nations Commission on Trade and Development. “FDISTAT,” http://stats.unctad. org /FDI/ (accessed May 2009).

TABLE 6.5 Shares of World Foreign Direct Investment Inward FDI Stock Country

1980

1990

2000

2007

Developed Developing Canada China Hong Kong European Union France Germany Netherlands United Kingdom Japan Russia United States

57.3 43 7.7 0.2 3.8 31.8 4.5 5.2 2.7 8.9 0.5 0 11.8

72.7 27.2 5.8 1.1 2.5 39.2 5.0 5.7 3.5 10.5 0.5 0 20.3

68.9 30.0 3.7 3.3 7.8 37.9 4.5 4.7 4.2 7.6 0.9 0.6 21.7

68.8 27.9 3.4 2.2 7.8 45.2 6.7 4.1 4.4 8.7 0.9 2.1 13.8

Source: United Nations Commission on Trade and Development. “FDISTAT,” http://stats. unctad.org/FDI/ (accessed May 2009).

194

Data and Documents

direct investments has fallen sharply over the last 25 years, but the United States has remained an attractive destination for foreign investments. The share of direct investment going to developing countries has not changed much over the period—although individual countries such as Brazil, China, India, and Russia have become more attractive to investors. Indeed, these four countries and others have become significant overseas investors with major acquisitions in developed countries like the United States. As a result of inflows of foreign investment and net earnings on trade and services, some countries have accumulated large reserves of foreign currencies and gold. In the 18th century, nations that accumulated gold and bullion were said to practice mercantilism. Mercantilist nations sought to manage trade so that exports exceeded imports. The resulting trade surplus generated an inflow of gold and hard currencies, thus augmenting the power of the state. In the 21st century, mercantilism is sometimes used to describe Japanese and Chinese policies. Japan has had a current account surplus every year since 1981 and China since 1994 (IMF 2008). The United States, on the other hand, has run current account deficits in every year since 1982, except for 1991 when foreign payments for the Persian Gulf War produced a surplus (IMF 2008). As Table 6.6 shows, the United States has relatively small holdings of foreign currencies and gold. The U.S. dollar, the world’s leading reserve currency, is widely accepted by other countries. If declining confidence in the dollar were to erode the U.S. dollar’s international appeal, U.S. reserves of foreign currencies might prove inadequate for sustaining the U.S. position in global finance. When smaller countries have inadequate reserves, they sometimes face the unpleasant choice of devaluing their currency and borrowing from the International Monetary Fund under austere conditions. Another measure of a country’s overall economic health relative to its international competitors is its current account surplus, or deficit. The current account measures the flows of goods, services, payments, and transfers between one country and all other nations. A country with a current account deficit, such as the United States, must import capital from other countries to finance the current account deficit. Some economists say that accumulating a large foreign debt to pay for a current account deficit is dangerous to the nation, because it leads to the sale of assets (such as real estate, factories, and ownership of plants and facilities), and reduces the freedom of action of the borrowing

International Comparisons

195

TABLE 6.6 Reserves of Foreign Exchange and Gold Rank

Country

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23

China Japan Russia Taiwan India France S. Korea Brazil Singapore Hong Kong Algeria Germany Thailand Malaysia Italy Libya Iran Mexico Poland Turkey Switzerland Nigeria United States

Reserves of Foreign Exchange and Gold

Date of Information

$2,033,000,000,000 954,100,000,000 435,400,000,000 296,400,000,000 250,000,000,000 204,400,000,000 201,200,000,000 197,400,000,000 168,800,000,000 165,900,000,000 150,500,000,000 136,200,000,000 106,300,000,000 104,400,000,000 104,000,000,000 99,450,000,000 96,560,000,000 91,990,000,000 84,480,000,000 82,820,000,000 75,370,000,000 72,040,000,000 70,570,000,000

Dec. 31, 2008 est. Dec. 31, 2007 est. Dec. 12, 2008 Dec. 31, 2008 Dec. 31, 2008 est. 2008 Dec. 31, 2008 est. Dec. 31, 2008 est. Dec. 31, 2008 est. Dec. 31, 2008 est. Dec. 31, 2008 est. Dec. 31, 2007 est. Dec. 31, 2008 est. Dec. 31, 2008 est. Dec. 31, 2008 est. Dec. 31, 2008 est. Dec. 31, 2008 est. Dec. 31, 2008 est. Dec. 31, 2008 est. Dec. 31, 2008 est. 2008 est. Dec. 31, 2008 est. Dec. 31, 2007 est.

Source: Central Intelligence Agency. “The World Factbook,” http://www.cia.gov/ library/publications/the-worldfactbook /rankorder/2188.rank.html (accessed May 2009).

country. Table 6.7 shows the current account position of leading trading nations and presents it as a share of gross domestic product. In 2007, the United States had to borrow over $2 billion per day to finance its $738.7 billion current account deficit, which exceeded 5 percent of gross domestic product. In 2008, a recession year, the U.S. deficit declined to $673.3 billion, or 4.7 percent of gross domestic product. Because the United States has experienced chronic current account deficits in 26 of the last 27 years (a small surplus in 1991 when it received payments from foreign governments for its participation in the Persian Gulf War), it is not surprising that the United States has become the world’s largest debtor. Table 6.8 ranks the world’s leading trading nations according to their external debts.

196

Data and Documents

TABLE 6.7 Current Account Deficits and Surpluses (in U.S. Dollars) Country Brazil Canada China France Germany India Japan Mexico Russia Switzerland United Kingdom United States

Subject

1990

2000

Current Account $ % of GDP Current Account $ % of GDP Current Account $ % of GDP Current Account $ % of GDP Current Account $ % of GDP Current Account $ % of GDP Current Account $ % of GDP Current Account $ % of GDP Current Account $ % of GDP Current Account $ % of GDP Current Account $ % of GDP Current Account $ % of GDP

−3.79 billion −0.7% −19.8 billion −3.4% 12.0 billion 3.1% −9.9 billion −0.8% 45.3 billion 2.9% −7.9 billion −2.5% 43.9 billion 1.4% −7.45 billion −2.8% n/a n/a 8.7 billion 3.6% −38.5 billion −3.8% −79.0 billion −1.4%

−24.2 billion −3.8% 19.7 billion 2.7% 20.5 billion 1.7% 22 billion 1.6% −32.6 billion −1.7% −4.6 billion −1.0% 119.6 billion 2.6% −18.7 billion −3.0% 46.8 billion 18.0% 30.7 billion 12.3% −39.1 billion −2.6% −417.4 billion −4.3%

2005 14 billion 1.6% 21.8 billion 1.9% 160.8 billion 7.2% −13.6 billion −0.6% 143.8 billion 5.1% −10.3 billion −1.3% 165.7 billion 3.6% −4.4 billion −0.5% 84.4 billion 11% 50.7 billion 13.6% −59.5 billion −2.6% −729 billion −5.9%

2008 −28.3 billion −1.8% 9.7 billion 0.6% 440 billion 10% −45.3 billion −1.6% 235.3 billion 6.4% −33.3 billion −2.8% 157.1 billion 3.2% −15.5 billion −1.4% 102.3 billion 6.1% 44.8 billion 9.1% −45.4 billion −1.7% −673.3 billion −4.7%

Source: International Monetary Fund. “World Economic Outlook Database,” http://www.imf.org/external/pubs/ft/ weo/2008/02/weodata/index.aspx (accessed May 2009).

Another factor impacting international trade is the dependence of most major trading nations on foreign energy supplies, especially oil and gas. Table 6.9 shows the largest consumers of oil. The United States consumes more than 25 percent of the world’s oil, followed by the European Union, China, and Japan. With automobile ownership expanding rapidly in China and India, those two emerging economic giants are competing actively for world oil supplies. Table 6.10 presents the world’s proved oil reserves. Eight of the top ten nations are developing countries. Most have authoritarian governments and are located in Asia, the Middle East, and Africa. Because of its vast supplies of high-cost oil sands, Canada is now ranked second to Saudi Arabia. Table 6.11 presents data on world oil production. The United States, which ranks 12th

International Comparisons

197

TABLE 6.8 Country Comparisons: External Debt Rank

Country

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

World United States United Kingdom Germany France Netherlands Ireland Japan Switzerland Belgium Spain Italy Australia Canada Austria Sweden Russia Denmark Norway Portugal China

Debt—External $52,150,000,000,000 12,250,000,000,000 10,450,000,000,000 4,489,000,000,000 4,396,000,000,000 2,277,000,000,000 1,841,000,000,000 1,492,000,000,000 1,340,000,000,000 1,313,000,000,000 1,084,000,000,000 1,060,000,000,000 1,032,000,000,000 758,600,000,000 752,500,000,000 598,200,000,000 527,100,000,000 492,600,000,000 469,100,000,000 461,200,000,000 420,800,000,000

Date of Information Dec. 31, 2008 est. June 30, 2007 June 30, 2007 June 30, 2007 June 30, 2007 June 30, 2007 June 30, 2007 June 30, 2007 June 30, 2007 June 30, 2007 June 30, 2007 est. Dec. 31, 2008 est. Dec. 31, 2008 est. June 30, 2007 June 30, 2007 June 30, 2006 June 2008 est. June 30, 2007 June 30, 2007 Dec. 31, 2007 Dec. 31, 2008 est.

Source: Central Intelligence Agency. “The World Factbook,” http://www.cia.gov/library/publications/ the-world-factbook/rankorder/2079rank.html (accessed January 2009).

in terms of total proved reserves, places third behind Russia and Saudi Arabia as an oil producer. Finally, the international comparisons section of this chapter presents comparative data on another key trade factor—labor costs. Table 6.12 compares hourly compensation costs for production workers. While transportation costs (reflecting higher oil prices) are a factor in decisions about where to manufacture products, one of the most important is the price of labor. The table shows that high-income countries tend to have high labor costs. Labor in Western Europe is generally more expensive than in North America, helping to explain why European automobile makers are assembling cars in the United States. Mexico, with compensation costs of $2.92 per hour, has succeeded in luring many manufacturing plants from the United States, but China and other areas of East and Southeast Asia are even cheaper with

TABLE 6.9 World Oil Consumption (Barrels per Day) Rank

Country

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

World United States European Union China Japan Russia India Germany Brazil Canada Saudi Arabia S. Korea Mexico France United Kingdom Italy

Oil—Consumption

Percent of Total (%)

Date of Information

85,220,000 20,680,000 14,390,000 7,880,000 5,007,000 2,858,000 2,722,000 2,456,000 2,372,000 2,371,000 2,311,000 2,214,000 2,119,000 1,950,000 1,763,000 1,702,000

100 24.3 16.9 9.2 5.9 3.4 3.2 2.9 2.8 2.8 2.7 2.6 2.5 2.3 2.1 2.0

2007 estimate 2007 estimate 2007 estimate 2007 estimate 2007 estimate 2007 estimate 2007 estimate 2007 estimate 2007 estimate 2007 estimate 2007 estimate 2007 estimate 2007 estimate 2007 estimate 2007 estimate 2007 estimate

Source: Central Intelligence Agency. “The World Factbook,” http://www.cia.gov/library/publications/the-worldfactbook/rankorder/2174/rank.html (accessed January 2009).

TABLE 6.10 World Oil Proved Reserves Rank

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Country World Saudi Arabia Canada Iran Iraq Kuwait United Arab Emirates Venezuela Russia Libya Nigeria Kazakhstan United States China Qatar Algeria

Oil—Proved Reserves (Barrels)

Share of Total (%)

Date of Information

1,332,000,000,000 266,800,000,000 178,600,000,000 138,400,000,000 115,000,000,000 104,000,000,000 97,800,000,000

100 20 13.4 10.4 8.6 7.8 7.3

2008 estimate 2008 estimate 2008 estimate 2008 estimate 2008 estimate 2008 estimate 2008 estimate

87,040,000,000 79,000,000,000 41,460,000,000 36,220,000,000 30,000,000,000 20,970,000,000 16,000,000,000 15,210,000,000 12,200,000,000

6.5 5.9 3.1 2.7 2.3 1.6 1.2 1.1 0.9

2008 estimate 2008 estimate 2008 estimate 2008 estimate 2008 estimate 2008 estimate 2008 estimate 2008 estimate 2008 estimate

Source: Central Intelligence Agency. “The World Factbook,” http://www.cia.gov/library/publications/the-worldfactbook/rankorder/2178/rank.html (accessed January 2009).

TABLE 6.11 World Oil Production (Barrels per Day) Rank

Country

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

World Russia Saudi Arabia United States Iran China Mexico Canada United Arab Emirates European Union Venezuela Kuwait Norway Iraq Nigeria Brazil

Oil—Production

Share of Total

Date of Information

85,540,000 9,980,000 9,200,000 8,457,000 4,700,000 3,725,000 3,501,000 3,425,000 2,948,000 2,676,000 2,667,000 2,613,000 2,565,000 2,420,000 2,352,000 2,277,000

100 11.7 10.8 9.9 5.5 4.4 4.1 4.0 3.5 3.1 3.1 3.1 3.0 2.8 2.7 2.7

2007 estimate 2007 estimate 2008 estimate 2007 estimate 2007 estimate 2008 estimate 2007 estimate 2007 estimate 2007 estimate 2007 estimate 2007 estimate 2007 estimate 2007 estimate 2008 estimate 2007 estimate 2007 estimate

Source: Central Intelligence Agency. “The World Factbook,” http://www.cia.gov/library/publications/the-worldfactbook/rankorder/2174/rank.html (accessed May 2009).

TABLE 6.12 Hourly Compensation Costs for Production Workers: In U.S. Dollars Country

1975

2000

2007

United States Brazil Canada Mexico Hong Kong Japan Korea Philippines Taiwan Europe France Germany Hungary Poland Spain United Kingdom

6.24 — 6.40 1.43 0.75 2.95 0.31 — 0.39 5.11 5.61 — — — 2.47 3.21

19.88 3.50 16.78 2.07 5.45 21.69 8.08 0.73 6.19 17.83 15.98 22.66 2.78 2.81 10.46 16.31

24.59 5.96 28.91 2.92 5.78 19.75 16.02 1.10 6.58 32.12 28.57 37.66 7.91 6.17 20.98 29.73

Source: U.S. Department of Labor, Bureau of Labor Statistics. “Production Workers: Hourly Compensation Costs in U.S. Dollars,” http://www.bls.gov/news.release/ichcc.t08.htm (accessed May 2009).

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costs running under $1 per hour in some countries. Comparable data from China and many other developing countries are not yet available.

U.S. Trade Indicators The United States is a diversified exporter of agricultural products, manufactured goods, and services. But over the past quarter century, the United States has become a net importer of raw materials (especially petroleum) and manufactured goods, as big business has increasingly moved factories and assembly facilities abroad to take advantage of less expensive labor. Table 6.13 offers a perspective on U.S. trade in goods and services. The United States has been running strong surpluses on services, but trade in services is less than one-third of trade in goods, and thus does not offset the huge merchandise deficit growing out of imports of petroleum and consumer goods. In services, the United States generates strong surpluses from its licensing of intellectual property and from “other” private services, a broad category that includes business, professional, and technical services, including insurance and financial services. It also benefits from large numbers of foreign visitors traveling to the United States and from large numbers of foreign students enrolled in American colleges and universities. But, as Table 6.14 shows, the United States is less competitive in shipping. The

TABLE 6.13 U.S. International Trade in Goods and Services (in Billions of U.S. Dollars) Balance

Exports

Imports

Year

Goods

Services

Goods

Services

Goods

Services

2008 2007 2000 1995

–821.2 –819.4 –452.2 –173.4

144.1 119.1 76.5 68.4

1,291.3 1,148.5 772.2 575.9

551.6 497.2 293.5 210.6

2,112.5 1,967.9 1,224.4 749.4

407.6 378.1 217.0 142.2

Source: U.S. Bureau of the Census. “FT900: U.S. International Trade in Goods and Services,” http://www.census. gov/foreign-trade/Press-Release/2008pr/12/; (http://www.census.gov/foreign-trade/Press-Release/2000pr/ Final_Revisions_2000/exh1.pdf; http://www.census.gov/foreign-trade/Press-Release/2005/95_press_releases/ Final_Revisions_1995/exh1.fin (accessed February 2009).

TABLE 6.14 U.S. Trade in Services by Major Category (in Billions of U.S. Dollars) Year 2008 Exports 2008 Imports Surplus or Deficit 2000 Exports 2000 Imports Surplus or Deficit 1995 Exports 1995 Imports Surplus or Deficit

Total

Travel

Passenger Fares

$551.6 407.6 144.0 293.5 217.0 76.5 210.6 142.2 68.4

$111.5 80.4 31.1 82.0 64.5 17.5 61.1 45.9 15.2

$31.4 32.2 −0.8 20.7 24.2 −3.5 18.5 14.3 4.2

Other Transport $60.2 72.8 −12.6 30.2 41.1 −10.9 28.1 29.2 −1.1

Royalties & License Fees

Other Private Services

$91.1 27.9 63.2 38.0 16.1 21.9 27.0 6.3 20.7

$241.0 154.1 86.9 107.6 54.7 52.9 61.7 34.0 27.7

Transfers under Military Sales Contract $15.1 35.8 −20.7 14.1 13.66 0.5 13.4 9.8 3.6

U.S. Gov’t Misc. $1.2 4.4 −3.2 0.86 2.9 −2.04 0.78 2.8 −2.02

Source: U.S. Bureau of the Census. “FT900: U.S. International Trade in Goods and Services,” http://www.census.gov/foreign-trade/Press-Release/2008pr/12/; http://www.census.gov/foreign-trade/PressRelease/2000pr/Final_Revisions_2000/; http://www.census.gov/foreign-trade/Press-Release/95_press_releases/Final_Revisions_1995 (accessed February 2009).

202

Data and Documents

international activities of the U.S. government, including the overseas projection of military power, also reduces the positive balance in services. For further information on trade in services, see the October issue of the U.S. Department of Commerce’s Survey of Current Business. http://www.bea.gov/scb/date_guide.asp. Until the last quarter of the 20th century, the bulk of U.S. trade was with nations adjoining the Atlantic Ocean. But, with the phenomenal growth of East Asia, especially China and Japan, Asia has grown markedly in significance. China has surpassed Mexico and Japan, and become the United States’ second leading trading partner. Table 6.15 ranks America’s fifteen leading trading partners, and shows the United States running merchandise deficits with all but three: Belgium, Brazil, and the Netherlands. Tables 6.16 and 6.17 rank the 10 countries with which the United States had its leading trade surpluses and deficits in goods. The deficits far exceed the surpluses, and are with each of the 10 leading trading partners. One reason for the persistent merchandise trade deficit is America’s appetite for foreign oil. Table 6.18 shows that America’s TABLE 6.15 Top 15 Trading Partners of U.S., 2008 in Billions of U.S. Dollars (Goods) Rank

Country

Exports

Imports

Total Trade

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Total All Countries Total, Top15 Canada China Mexico Japan Germany United Kingdom South Korea France Saudi Arabia Venezuela Brazil Taiwan Netherlands Italy Belgium

1,300.5 891.5 261.4 71.5 151.5 66.6 54.7 53.8 34.8 29.2 12.5 12.6 32.9 25.3 40.2 15.5 29.0

2,100.4 1,524.4 335.6 337.8 215.9 139.2 97.6 58.6 48.1 44.0 54.8 51.4 30.5 36.3 21.1 36.1 17.4

3,400.9 (100%) 2,415.8 (71%) 596.9 (17.6%) 409.2 (12.0%) 367.5 (10.8%) 205.8 (6.1%) 152.3 (4.5%) 112.4 (3.3%) 82.9 (2.4%) 73.2 (2.2%) 67.3 (2.0%) 64.0 (1.9%) 63.4 (1.9%) 61.6 (1.8%) 61.4 (1.8%) 51.6 (1.5%) 46.4 (1.4%)

Source: U.S. Bureau of the Census. “Top Trading Partners–Total Trade, Exports, Imports,” http://www.census.gov/ foreign-trade/statistics/highlights/top/top0812yr.html (accessed February 2009).

U.S. Trade Indicators

203

TABLE 6.16 Top 10 Countries with Which the U.S. Had a Trade Surplus in Goods, 2008 Rank

Country

1 2 3 4 5 6 7 8 9 10

Netherlands Hong Kong United Arab Emirates Singapore Australia Belgium Turkey Switzerland Chile Egypt

Surplus in Millions of U.S. $ 19,083 15,149 14,455 12,925 11,874 11,666 5,798 4,237 3,905 3,660

Source: U.S. Bureau of the Census. “FT900: U.S. International Trade in Goods and Services, December 2008), http://www.census.gov/foreign-trade/PressRelease/2008pr/12/exh14.pdf (accessed February 2009).

TABLE 6.17 Top 10 Countries with Which the U.S. Had a Trade Deficit in Goods, 2008 Rank

Country

1 2 3 4 5 6 7 8 9 10

China Canada Japan Mexico Germany Saudi Arabia Venezuela Nigeria Ireland Italy

Deficit in Millions of U.S. $ −266,333 −74,174 −72,669 −64,376 −42,821 −42,308 −38,790 −33,966 −22,915 −20,665

Source: U.S. Bureau of the Census. “Exports, Imports, and Balance of Goods By Selected Countries and Areas—2008,” http://www.census.gov/foreigntrade/Press-Release/2008pr/12/exh14.pdf (accessed February 2009).

net imports of oil on a daily basis have more than doubled from levels reached in the mid-1970s. Until the mid-1990s, the United States obtained a majority of its imported oil from members of the Organization of Petroleum Exporting Countries (OPEC), of which

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TABLE 6.18 U.S. Crude Oil and Petroleum Products Net Imports (Thousands of Barrels per Day) Decade Year-0 Year-1 Year-2 Year-3 Year-4 Year-5 Year-6 Year-7 Year-8 Year-9

1970s

1980s

1990s

2000s

6,025 5,892 5,846 7,090 8,565 8,002 7,985

6,365 5,401 4,298 4,312 4,715 4,286 5,439 5,914 6,587 7,202

7,161 6,626 6,938 7,618 8,054 7,886 8,498 9,158 9,764 9,912

10,419 10,900 10,546 11,238 12,097 12,549 12,390 12,036

Source: U.S. Energy Information Administration. “U.S. Crude Oil and Petroleum Products Net Imports,” http:/ tonto.eia.doe/gov/dnav/pet/hist/mttntus2a.htm (accessed February 2009).

TABLE 6.19 U.S. Crude Oil and Petroleum Products Imports by Leading Suppliers (Thousands of Barrels per Day) Year

OPEC

Non-OPEC

Canada

Mexico

Saudi Arabia

Venezuela

1975 1980 1985 1990 1995 2000 2005 2006 2007 2008

3,601 4,300 1,830 4,296 4,002 5,203 5,587 5,517 5,980 5,958

2,454 2,609 3,237 3,721 4,833 6,257 8,127 8,190 7,489 6,914

846 455 770 934 1,332 1,807 2,181 2,353 2,455 2,544

71 533 816 755 1,068 1,373 1,662 1,705 1,532 1,430

715 1,261 168 1,339 1,344 1,572 1,537 1,463 1,485 1,532

702 481 605 1,025 1,480 1,546 1,529 1,419 1,361 1,191

Source: U.S. Energy Information Administration. 2009, April. Monthly Energy Review, pp. 44–45.

Saudi Arabia is the most important supplier. By the beginning of the 21st century, as Table 6.19 indicates, Canada, not a member of OPEC, had become the largest oil exporter to the United States. Another NAFTA partner, Mexico, was the third largest supplier. Table 6.20 shows how America’s huge appetite for imported oil impacts the trade balance. In 2008, the petroleum deficit amounted to 48 percent of the total merchandise trade deficit up from 25 percent in 2000, but lower than the 54 percent in 1990.

U.S. Trade Indicators

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TABLE 6.20 Petroleum as a Share of Merchandise Trade Deficit (in Millions of Dollars)

2008 2005 2000 1995 1990

Petroleum Balance

Non-Petroleum Balance

−386,313 −229,191 −108,266 −46,982 −54,513

−413,621 −538,286 −327,839 −111,721 −47,205

Source: U.S. Bureau of the Census, Report FT900. Accessed 02/2009 at http://www.census.gov/foreign-trade/PressRelease/2008pr/12/exh9.pdf; http://www.census.gov/foreign-trade/Press-Release/2005pr/final_revisions/exh8. pdf; http://www.census.gov/foreign-trade/Press-Release/2000pr/Final_Revisions_2000/exh8.pdf; http://www. census.gov/foreign-trade/Press-Release/95_press_releases/Final_Revisions_1995/exh8.fin; http://www.census.gov/ foreign-trade/Press-Release/91_press_releases/Final_Revisions_1991/ft900_91.txt.

Over half of the U.S. merchandise trade deficit stems from the American consumer’s desire for foreign-made automobiles, electronics, and other manufactures. Table 6.21 shows while the United States is a net exporter of food and agricultural products, it is highly dependent on foreign suppliers for raw materials (especially oil) and a wide range of consumer goods. Nonetheless, large American manufacturers like Boeing and Caterpillar remain highly competitive in world markets, but increasingly these exports contain significant quantities of imported components. While international trade involves transactions among nations, individual states and municipalities are actively involved in export promotion activities. Table 6.22 shows that the most successful exporting states are Texas, California, New York, Illinois, and Michigan. They are all populous states with major manufacturing and service providers, as well as agriculture. Tables 6.23 and 6.24 address the issue of wage stagnation and manufacturing job losses. Table 6.23 shows that real (adjusted for inflation) average weekly earnings for production workers rose steadily from 1950 to the mid-1970s, and then began to stagnate. Real average weekly earnings rose sharply in the 30-year period from 1945 to 1975 before import competition became a significant factor in most manufacturing-product markets. During the next 30 years, however, weekly earnings for production workers declined slightly when adjusted for inflation. Table 6.24 focuses on the U.S. job market. Critics of trade agreements note that the United States has lost more than 3 million

TABLE 6.21 U.S. Exports and Imports on a Principal End-Use Basis (in Billions of U.S. Dollars) (Not Seasonally Adjusted) Year 2008 Exports 2008 Imports Surplus or Deficit 2000 Exports 2000 Imports Surplus or Deficit 1995 Exports 1995 Imports Surplus or Deficit

Total

Food, Feed & Beverage

Industrial Supplies

Capital Goods

Automotive & Parts

Consumer Goods

Other

1,300.5 2,100.4 –799.5 781.9 1,218.0 –436.1 584.7 743.4 –158.7

108.4 89.0 19.4 47.5 46.0 1.5 50.5 33.2 17.3

387.3 775.5 –388.2 171.9 299.8 –127.9 146.3 180.7 –34.4

469.5 453.8 15.7 357.0 346.7 10.3 233.0 221.4 11.6

120.9 233.6 –112.7 80.2 195.9 –115.7 61.8 124.8 –63.0

161.2 482.5 –321.3 90.6 281.4 –190.8 64.4 160.0 –95.6

53.2 66.0 –12.8 34.8 48.3 –13.5 28.7 23.4 5.3

Source: U.S. Bureau of the Census, Report FT 900, http://www.census.gov/foreign-trade/Press-Release/2008pr/12/exh13.pdf; http://www.census.gov/foreign-trade/Press-Release/2000pr/Final_ Revisions_2000/exh12.pdf http://www.census.gov/foreign-trade/Press-Release/2000pr/Final_Revisions_2000/exh12a.pdf http://www.census.gov/foreign-trade/PressRelease/95_press_releases/ Final_Revisions_1995/exh12.fin (accessed February 2009).

TABLE 6.22 State Merchandise Exports to the World, 2008 (in Millions of U.S. Dollars) Ranking

State

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46

Texas California New York Illinois Michigan Washington Florida Ohio New Jersey Pennsylvania Minnesota Massachusetts Georgia Indiana North Carolina Tennessee Louisiana Wisconsin Connecticut Oregon Kentucky South Carolina Arizona Missouri Virginia Alabama Kansas Utah Colorado Maryland Iowa Mississippi Oklahoma Nebraska Arkansas Delaware Idaho Nevada New Hampshire West Virginia Vermont Maine North Dakota Alaska Rhode Island South Dakota

Total Exports 153,002 152,295 85,393 72,668 64,430 56,878 51,773 48,342 42,637 40,334 31,053 29,856 25,357 24,227 24,080 23,299 22,409 21,986 21,170 19,754 19,668 19,096 17,771 17,416 17,209 13,779 13,322 11,507 9,866 8,846 7,950 6,209 5,630 4,926 4,831 4,749 4,704 4,693 4,167 3,949 3,472 2,511 2,137 1,874 1,828 1,590 (continued )

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TABLE 6.22 State Merchandise Exports to the World, 2008 (in Millions of U.S. Dollars) (continued ) Ranking

State

47 48 49 50

New Mexico Montana Hawaii Wyoming

Total Exports 1,460 1,387 614 360

Source: U.S. Bureau of the Census. FT900: U.S. International Trade in Goods and Services (December 2008), Exhibit 2, http://www.census.gov/foreign-trade/statistics/state/zip/2008/12/zipstate.pdf (accessed February 2009).

TABLE 6.23 Weekly Earnings of Production Workers, 1945–2008 Year

Average Weekly Earnings ($)

Average Weekly Earnings (2008 U.S. $)

1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2008

39.24 53.59 70.99 85.57 102.59 128.55 186.05 283.86 380.70 436.16 509.26 590.77 673.30 724.23

463.09 472.36 562.69 614.09 691.83 703.79 734.60 731.78 751.58 708.89 709.84 728.77 732.34 724.23

Source: U.S. Bureau of Labor Statistics. Current Employment Statistics. (Data Retrieval: Employment, Hours, and Earnings from the Current Employment Statistics Survey (Not Seasonally Adjusted), http://data.bls.gov/PDQ/serlet/ SurveyOutputServlet (accessed March 2009). Adjusted for inflation using CPI calculator, http://www.bls.gov/data/ inflation_calculator.htm.

manufacturing jobs, which they attribute to competition from China and flawed trade agreements. According to statistics from the U.S. Bureau of Labor Statistics, the United States lost 2.8 million manufacturing production jobs from 2000 to 2008. These jobs paid in 2008 an average weekly wage of $724. During that period of time, the United States created 6.8 million production-type jobs in services that paid an average weekly wage of $574. This may

National Labor Committee Testimony on “Sweatshop” Practices 209

TABLE 6.24 Employment and Earnings in U.S. Year

Total Private

Manufacturing Production

Average Weekly Wages

Services (Private)

Average Weekly Wages

1964 1970 1975 1980 1985 1990 1995 2000 2005 2007 2008

48,680,000 58,318,000 62,250,000 74,154,000 80,978,000 91,072,000 97,865,000 110,995,000 111,899,000 115,380,000 114,566,000

12,298,000 13,490,000 12,576,000 13,667,000 12,648,000 12,669,000 12,567,000 12,428,000 10,060,000 9,977,000 9,649,000

$98.33 $128.55 $186.05 $283.86 $380.70 $436.16 $509.26 $590.77 $673.30 $711.56 $724.23

28,947,000 36,139,000 40,932,000 49,891,000 57,393,000 67,349,000 74,710,000 86,346,000 89,709,000 93,147,000 93,146,000

$94.88 $118.57 $156.98 $214.76 $269.94 $316.03 $364.80 $445.74 $509.58 $554.89 $574.31

Source: U.S. Bureau of Labor Statistics. “Current Employment Statistics.” (Data Retrieval: Employment, Hours, and Earnings from the Current Employment Statistics Survey (Not Seasonally Adjusted), http://data.bls.gov/PDQ/serlet/ SurveyOutputServlet (accessed March 2009).

suggest that the United States economy is shedding high-paying manufacturing jobs for lower-paying service jobs. Of course, service workers typically work shorter work weeks, averaging 32.3 hours in 2008 compared to 40.8 hours for manufacturing workers. Many service workers hold multiple jobs and lack health care and retirement benefits.

National Labor Committee Testimony on “Sweatshop” Practices Many of the goods imported into the U.S. from developing countries are produced, or assembled, in conditions that labor activists consider unfair working conditions. Charles Kernaghan of the National Labor Committee has conducted a series of campaigns to expose “sweatshop” practices. His targets have been some of the biggest corporate targets—Nike, Liz Claiborne, Disney, the Gap, and Kathie Lee Gifford. In congressional testimony, excerpted below, he focuses on Chinese toymakers. I want to thank you for holding this very important hearing investigating illegal sweatshop conditions under which our children’s toys are made. In 2006, the American people spent $22.3 billion purchasing

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over three billion toys and sporting goods. Last year, China accounted for over 86 percent of all toy imports into the U.S., and today in 2007, China’s toy imports have surged another 16 percent. The timing of your hearings could not have been more appropriate, as the last three months of the year typically account for almost 80 percent of all toy sales. Last year, holiday sales in the U.S. reached a total of $457.4 billion. This year, each consumer is expected to spend $791 on holiday purchases, including toys and sporting goods. Many parents in America would be shocked and disturbed if they knew of the abusive sweatshop conditions under which their children’s toys are being made in China. Parents, however, have no way of knowing, as toy companies like Mattel (which is the largest in the world) hide their 40 or so contract plants in China, refusing to provide the American people with even the names and addresses of their plants. Mattel’s Barbie toys, along with Thomas & Friends toys for the RC2 Corporation and Wal-Mart are made at the large Xin Yi factory in Shenzhen. The 5,000 workers there are stripped of their rights, forced to sign mostly-blank temporary contracts lasting anywhere from just 10 days to a maximum of three months. At management’s discretion, “new” temporary contracts can be renewed every two to three months. Workers can be employed full time for a year or more, but always remain temporary workers with no legal rights. Temporary workers can be easily fired for being “inattentive” at work, or for “speaking during working hours.” Temporary workers have no right to participate in the mandatory national Social Security program which provides health care, no right to paid holidays, vacation, sick days, maternity leave, or severance pay. The routine shift is 141/2 hours a day, from 7:30 a.m. to 10:00 p.m., six days a week. Workers are typically at the factory 87 hours a week, while toiling 70 hours, including 30 hours of forced overtime, which exceeds China’s legal limit by 260 percent! In 2006, it was even worse, as the young toy workers were routinely kept at the factory 15 hours a day, from 7:30 a.m. to 10:30 p.m., seven days a week, going for months without a single day off. The workers were typically at the factory 105 hours a week, while forced to work 50 overtime hours a week, which exceeds China’s legal limit by 530 percent! The factory is excessively hot and everyone is drenched in their own sweat. Workers are prohibited from standing up during working hours, and cannot leave their hard wooden benches, which do not have back rests. The workers say that after several hours, their legs become numb. It is routine for the supervisors to yell and curse at the workers and every day, the workers say, you can see young women crying. Workers have but two choices: to bow their heads and remain silent despite the humiliation, or speak up and be immediately fired without receiving their back wages. Independent unions are, of course, prohibited in China, leaving the workers with no voice. Workers who fall behind in their assigned production goal are docked five hour’s wages.

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The base wage in Shenzhen is just 53 cents an hour, $4.27 a day, and $21.34 a week. Despite being forced to work a 70-hour week, workers report being routinely cheated of nearly 20 percent ($8.31) in overtime wages legally due them each week. This is the equivalent of being cheated out of two day’s wages each week. For working 70 hours, the workers earn just $39.79 while they should have been paid $48.60. In 2006, this too was even worse, since the Xin Yi factory illegally paid no overtime premium at all, robbing the workers of 40 percent of the wages legally due them! Workers are housed in primitive dorms, 12 people crowded into each room, sleeping on double-level metal bunk beds and fed company food the workers describe as “awful.” Every morning workers have to cue up to wait their turn to brush their teeth and use the toilet. After deductions for room and board, the workers’ take-home pay drops to just 46 cents an hour. It does not have to be this way! As an example, Mattel’s “Barbie Hug ‘N Heal Pet Doctor” set costs just $9.00 to make in China, yet— even on sale—it retails for $29.99 in the United States This means that the price of the Mattel toy is being marked up an astonishing $20.99—or 233 percent. So there is clearly sufficient money around both to make safe toys and to treat the toy workers as human beings, respecting their most basic legal rights. Mattel spent nearly $2 billion in advertising over the last three years, which amounts to 111/2 percent of its revenues. This means that Mattel spent $3.45 to advertise the Barbie Pet Doctor toy—more than 18 times the 19 cents they paid the workers in China to make it! There is absolutely no need for toxic and hazardous toys, as one industry estimate puts the price of thoroughly screening toys at just 10 cents per toy. Further, with a 233 percent ($20.99) markup on each toy, it is clear that Mattel could afford to assure respect for worker rights in China and pay the workers a fair wage so they could climb out of misery and at least into poverty. After all, Mattel’s CEO paid himself $7.3 million last year, 6,533 times more than he paid his toy workers in China. It is important to note that while Mattel’s Barbie brand is fiercely protected by all sorts of enforceable laws backed up by sanctions— (Mattel sues an average of once a month to protect Barbie and its other toys)—there are no similar laws to prevent toxic toys from reaching our children, and certainly no laws to protect the fundamental human and worker rights of the young toy worker who makes Barbie. To legally protect the rights of the human being—according to Mattel and the other corporations—would be “an impediment to free trade.” So Barbie is fiercely protected, but not the human being who made Barbie. Like many Americans, I was embarrassed and angered when Mattel’s vice president apologized to a Chinese government official for the

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massive toxic toy recalls. Mattel apologized after the official pointed out that Mattel makes a large proportion of its profits from its Chinese manufacturers and that Mattel ought to appreciate China’s “cooperation.” This is the sort of cooperation they meant: As late as 2005, Mattel sought and won special “waivers” so they could pay their workers less than the already-below-subsistence legal minimum wage. And to this day, Mattel has additional special “waivers” allowing its toy workers to toil 77 hours a week—including 32 hours of forced overtime—which just happens to exceed China’s legal limit by 295 percent! Corporations say there is no need for laws to protect our children against toxic or sweatshop toys, as they can regulate themselves through voluntary codes of conduct and private monitoring schemes. However, this summer’s massive recall of toxic and hazardous toys— made under abusive sweatshop conditions in China—clearly demonstrates that corporate self-regulation is not enough. Toxic and sweatshop toys are two sides of the same coin, and need to be regulated by enforceable laws. Charles Kernaghan, Director, National Labor Committee. Testimony before the U.S. Senate, Committee on Commerce, Science & Transportation, October 25, 2007. http://commerce.senate.gov/public/_files/ CharlesKernaghanTestimony_SenateTestimony071025ChinaToys.pdf (accessed October 2008):

U.S.– China Economic and Security Review Commission Report Established in 2000, the twelve-member U.S.– China Economic and Security Review Commission conducts hearings and reports its findings annually to Congress. In its annual report, the bi-partisan commission, appointed by leaders of Congress, offers a hard-nosed assessment of the bilateral trading relationship. This report criticizes China for manipulating its currency and using subsidies to run up large surpluses in trade with the U.S. In a case study involving seafood imports from China, the commission also found that the U.S. Food and Drug Administration lacked personnel and authority to protect U.S. consumers from contaminated seafood imports.

The U.S.–China Trade and Economic Relationship China held to its hybrid model of a state-directed economic system throughout 2008 as it consolidated its position as one of the world’s

U.S.–China Economic and Security Review Commission Report 213

fastest-growing countries. Alone among the world’s major economies, China refuses to allow the renminbi (RMB), its currency, to respond to free market movements. China’s leaders instead keep the currency trading at an artificially low level in order to suppress export prices—a deliberate violation of the rules of the International Monetary Fund, of which it is a member. As a result of this and other factors, China’s current account surplus with the United States and the rest of the world soared and added to China’s record foreign exchange reserves of nearly $2 trillion when this Report was completed, up from $1.43 trillion at the publication of the Commission’s Report a year ago. China began employing this foreign exchange in new ways. Rather than using it to improve the standard of living for the Chinese people through education, health care, or pension systems, China began investing the money through new overseas investment vehicles, including an official sovereign wealth fund, the China Investment Corporation. Despite statements by Chinese leaders that they seek only financial gain from diversifying their investments into equity stakes in western companies, there are increasing suspicions that China intends to use its cash to gain political advantage globally and to lock up supplies of scarce resources around the world. Other Chinese government economic policies harmed the United States, China’s trading partners, and its own citizens. China made scant progress in reining in the rampant counterfeiting and piracy that deprive legitimate foreign businesses operating in China of their intellectual property, while they provide an effective subsidy to Chinese companies that make use of stolen software and other advanced technology. Chinese regulators failed to prevent the domestic sale and export of consumer goods tainted with industrial chemicals and fraudulent ingredients. In one case examined by the Commission, China’s lax controls on the production and handling of its seafood exports led to a partial U.S. ban for health reasons on imported Chinese seafood. Yet, thanks to artificially low prices partly resulting from an array of subsidies to its seafood industry, China has become the largest exporter of seafood to the United States.

Conclusions The U.S.–China Trade and Economic Relationship’s Current Status and Significant Changes During 2008 • China’s trade surplus with the United States remains large, despite the global economic slowdown. The U.S. trade deficit in goods with China through August 2008 was $167.7 billion, which represents an increase of

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2.4 percent over the same period in 2007. Since China joined the WTO in 2001, the United States has accumulated a $1.16 trillion goods deficit with China and, as a result of the persistent trade imbalance, by August 2008 China had accumulated nearly $2 trillion in foreign currency reserves. China’s trade relationship with the United States continues to be severely unbalanced. The U.S. current account deficit causes considerable anxiety among both economists and foreign investors who worry that future taxpayers will find it increasingly difficult to meet both principal and interest payments on such a large debt. The total debt burden already is having a significant impact on economic growth, which will only increase in severity. China’s currency has strengthened against the U.S. dollar by more than 18.5 percent since the government announced in July 2005 it was transitioning from a hard peg to the dollar to a “managed float.” Starting in July 2008, however, the rate of the RMB’s appreciation has slowed, and there are some indications this may be due to the Chinese government’s fear that a strong RMB will damage China’s exports. China’s RMB remains significantly undervalued. China continues to violate its WTO commitments to avoid trade distorting measures. Among the traderelated situations in China that are counter to those commitments are restricted market access for foreign financial news services, books, films, and other media; weak intellectual property protection; sustained use of domestic and export subsidies; lack of transparency in regulatory processes; continued emphasis on implementing policies that protect and promote domestic industries to the disadvantage of foreign competition; import barriers and export preferences; and limitations on foreign investment or ownership in certain sectors of the economy. Over the past year, China has adopted a battery of new laws and policies that may restrict foreign access to China’s markets and protect and assist domestic producers. These measures include new antimonopoly and patent laws, and increased tax rebates to textile manufacturers. The full impact of these laws is not yet

U.S.–China Economic and Security Review Commission Report 215

known, particularly whether they will help or hinder fair trade and investment. • In 2008, China emerged as a stronger power within the WTO as it took a more assertive role in the Doha Round of multilateral trade talks, working with India and other less-developed nations to insist on protection for subsistence farmers. Research and Development, Technological Advances in Some Key Industries, and Changing Trade Flows with China. Foreign technology companies, such as U.S. and European computer, aerospace, and automotive firms, have invested heavily in research and development and production facilities in China, sharing or losing technology and other know-how. Chinese manufacturers have benefited from this investment. • The U.S. government has not established any effective policies or mechanisms at the federal level to retain research and development facilities within its borders. • China’s trade surplus in advanced technology products is growing rapidly, while the United States is running an ever-larger deficit in technology trade. China also is pursuing a strategy of creating an integrated technology sector to reduce its dependence on manufacturing inputs. • China seeks to become a global power in aerospace and join the United States and Europe in producing large passenger aircraft. China also seeks to join the United States, Germany, and Japan as major global automobile producers. So far as China competes fairly with other nations, this need not be a concern. But China’s penchant for using currency manipulation, industrial subsidies, and intellectual property theft to gain an advantage violates international norms. A Case Study of the Local Impact of Trade with China: Seafood Imports from China into Louisiana and the U.S. Gulf Coast, and Related Safety Issues • Many fish imports from Chinese aquaculture pose a health risk because of the unsanitary conditions of some Chinese fish farms, including water polluted by

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untreated sewage; fish contaminated by bacteria, viruses, and parasites; and fish treated with antibiotics and other veterinary medicines that are banned in the United States as dangerous to human health. Since 2001, China has become the world’s dominant seafood exporter, due in large part to the government’s promotion of industrial fish farming and the application of extensive government subsidies to the industry, including cheap fuel, outright construction grants, and free use of reservoirs and rivers. China is building an industrialized aquaculture sector through the use of extensive subsidies. In addition to producing food for domestic consumption, China has succeeded in creating a large aquaculture export industry as part of the government’s overall industrial policy. As a result, China now is the largest volume exporter of fish to the United States, shipping more than one billion pounds annually, or one in five pounds of seafood eaten by Americans. Import-sensitive seafood product lines in the Gulf of Mexico region of the United States, such as shrimp, crawfish, and catfish, have suffered significant declines as a result of Chinese imports. Predicted long-term trends for the Gulf seafood industry are for flat or lower sales. Antidumping penalties imposed by the United States on Chinese shrimp and crawfish exports sold at below market value accomplished little of their intended effect. This appears to be due in part to transshipment by China through ports of other Asian nations in order to avoid the penalty tariffs and in part to the failure to collect the penalty tariffs. The U.S. Food and Drug Administration (FDA), with responsibility for monitoring imports of fish, does not yet have the authority or the personnel to inspect fish farms or processors in China nor to require and enforce regulation of Chinese aquaculture by the Chinese government equivalent to U.S. Department of Agriculture requirements for foreign meat and poultry producers. The European Union, Japan, Canada, and even Hong Kong have more rigorous inspection regimes.

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• The FDA lacks the authority to seize and destroy seafood shipments it has rejected for import into the United States. In some cases, the FDA must relinquish the fish to the shipper, which has led to a practice known as “port shopping” in which importers try to bring seafood rejected at one U.S. port through another one. The situation is exacerbated by the fact that it takes the FDA, on average, a year to notify U.S. ports of the potential for a banned shipment to attempt to enter at another port. The FDA also lacks the authority to order a mandatory recall of seafood or even to block imports of Chinese seafood at the request of Chinese officials. • In an effort to forestall epidemic diseases due to overcrowding and to compensate for the use of water polluted by agricultural fertilizers, industrial wastes, and partially treated sewage, Chinese fish farmers, acting on unscientific advice, often add chemicals and pharmaceuticals to the water of their farms. • The challenge of assuring that Chinese-produced seafood meets minimal quality standards is exacerbated by the fact that there is little traceability or accountability of the products of China’s 4.5 million fish farms and one million processors, most of them small operations whose products are aggregated by wholesalers and processors. • The current form of a memorandum of agreement addressing seafood safety and related procedures that is being negotiated by the United States and the People’s Republic of China governments would allow the U.S. Food and Drug Administration to monitor the performance of various Chinese government agencies in ensuring the safety of China’s seafood exports but would not provide the FDA with the authority to conduct its own inspections in China. • The current Country of Origin Label regulations pertaining to imported fish are ineffective because of the many exemptions the law provides. U.S.–China Economic and Security Review Commission. 2008, October 27. Annual Report 2008, pp. 2–6, http://www.uscc.gov/annual_ report/2008/EXECUTIVE%20SUMMARY.pdf (accessed March 2009):

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Ambassador Carla Hills on the Future of U.S. Trade Policy Ambassador Carla Hills handled trade policy for President George H. W. Bush, a Republican. In that role she was actively involved in NAFTA and the Uruguay Round/WTO negotiations. In this testimony, she suggests ways to restore the bipartisan consensus that shaped U.S. trade policy and supported open markets for much of the post-World War II period. For more than 60 years, under both Democratic and Republican administrations, the United States has led the world in opening global markets. The results to date have been spectacular. World trade has exploded and standards of living have soared at home and abroad. Economist Dr. Gary Hufbauer in a comprehensive study published in 2005 by the Institute for International Economics, now the Peterson Institute for International Economics, calculated that the opening of markets since World War II has increased our nation’s GDP by roughly $1 trillion per year, thus raising the average American household yearly income by $9,500. Trade and investment with partners in every region of the world have contributed to this very positive result. For example Canada and Mexico, our partners in the North American Free Trade Agreement, account for 25 percent of the gain; 15 members of the Europe Union for about 31 percent; Japan and China for about 8 percent each. . . .

Erosion of the Bipartisan Consensus Supporting Open Trade Notwithstanding the proven benefits that our trade agreements deliver, in recent years we have seen a sharp reversal of the bipartisan consensus favoring the free flow of goods, services, capital, and ideas that has guided our nation for the past 60 years, and the election debates have polarized the trade debate even more. It is hard to believe that just over a decade ago the United States, led by a Democratic administration, was celebrating the passage of the North American Free Trade Agreement, pledging with 33 other democratically elected leaders of the Western Hemisphere to negotiate a Free Trade Area of the Americas, and endorsing an agreement reached among the 21 economies of the Asia Pacific region to liberalize trade throughout that region.

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Since then we have been drifting toward what Robert Samuelson calls “a new mercantilism,” which he defines as “policy intended to advance [one country’s] own economic and political interest at other countries expense.” Mercantilism is in stark contrast to David Ricardo’s theory of comparative advantage that argues that all countries benefit if global markets are kept open and each country sells what it produces best. That theory has successfully guided our bipartisan trade policy for more than six decades. Yet the polls of today reflect that a majority of Americans of both political parties are skeptical about the value of trade agreements. In order to maintain an open trade policy that is proven to advance very significant national interests, we need to understand and respond to what is causing the disconnect between its documented benefits and the declining support it receives from the American public. I believe there are two basic causes. One is lack of information, and the other is economic anxiety.

Making the Case for Trade One factor contributing to the decline in public support for trade is that Americans are uninformed about the economic, humanitarian, and security benefits that our nation derives from our agreements that open foreign markets to trade and investment. Most Americans have not thought about what would happen to our economy if we did not have access to global markets. With less than 5 percent of the world’s population, our nation produces roughly 20 percent of the world’s output, we need customers beyond our borders to buy our computers, machine tools, aircraft, soybeans, construction equipment, flat glass, and so much more. Few know that international trade has made the average American household richer by $9,500 per year or that an agreement in the Doha Round that reduced trade barriers by just one-third would increase the average American’s annual income by $2,000. They are unaware that the Bureau of Labor Statistics has documented that trade has helped Americans of modest means lower their costs for what they must spend for the necessities of food and clothes from 27 cents of every dollar in 1973 to less than 17 cents today. They hear repeatedly that the North American Free Trade Agreement (NAFTA) has cost our nation “millions of jobs.” They do not know that studies by the nonpartisan Congressional Research Service document that NAFTA has resulted in “little or no impact” on aggregate employment in the United States; instead according to careful economic analysis by Dr. Hufbauer at the Peterson Institute for International Economics the payoff to the average American household from the NAFTA is roughly $600.

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Most Americans are unaware that jobs connected to international activity earn on average 13 to 18 percent more than jobs in the overall economy. They hear that imports costs jobs, when in fact studies show that there is a high correlation between an increase in imports and job creation. (See for example Karmin, Doug, The Facts on Trade Deficits and Jobs, Progressive Policy Institute, Policy Report.) They do not know that 97 percent of our exporters are small and medium size businesses that account for one-third of our sales abroad and need foreign markets to prosper so that they can continue to be the backbone of job creation in this country. They are unaware that the bulk of the foreign investment by U.S. multinationals is to secure market access not to secure lower wages. A full 80 percent of the overseas production by our manufacturing affiliates occurs in high-wage countries. Nor do they know that investments by foreign companies in the United States create over 5 million highpaying jobs. Very few Americans know that opening of global markets and expanding trade opportunities help to alleviate the poverty that puts weak states at risk. They are unaware that wealthy governments, including our own, pay their farmers huge subsidies that force more efficient farmers in poor countries out of the market or that 80 percent of the subsidies we pay go to large agribusinesses not to small family farmers. They would be surprised to learn that the United States, Europe, and Japan spend over $7 billion each year to subsidize their less competitive sugar farmers, which is a sum greater than the total exports of more efficient sugar producers in very poor countries in Africa. Political leaders should make it a priority to educate Americans about such facts so that our citizens understand why open trade and investment are among the most effective tools our government has to generate economic growth, alleviate poverty, and encourage global stability. They could encourage universities, think-tanks, business, and the media to better inform Americans about what they gain from opening world markets. All these groups could do more. Universities could offer more classes on international economics and trade, and think-tanks could publish more articles on those subjects. And businesses could do more. It would make a huge difference if the CEO of every U.S. business with any international activity would tell his/her employees, whether they number five or 5,000, the percentage of revenues the company derives from its foreign trade and investment and the percentage of the employee’s paycheck that can be traced to the company’s international activities. Depending on their size, companies could inform their employees about how foreign trade and investment boost America’s prosperity, alleviate grinding global poverty, and strengthen our nation’s security in a variety of ways—-from posting relevant facts on wall posters, blackboards, closed-circuit TVs, websites, and company newsletters, to enclosing information with the W-2 forms and in pay envelops.

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Reducing Job Anxiety While educating Americans about the benefits of open trade is necessary, it will not be sufficient to turn the political tide. Making the case that the opening of markets expands choice, lowers costs, and creates opportunity will not persuade the textile worker in South Carolina who has lost his job and blames Chinese imports or the telephone operator in Ohio who learns that her job has been shipped to a call center in India. And we will not win support for trade from a laid-off manufacturing worker by pointing out that the United States is still the world’s largest producer of manufacturing goods and that technology, not trade, has transformed the manufacturing sector over the past decade, enabling us to produce 30 percent more goods with 20 percent fewer workers. To be credible, we must admit that the gains from trade do not make every citizen a winner. To preserve the benefits we gain from open global markets, we need to do a better job of helping those who are displaced by the rapid changes driven by technology and globalization. We can do this—not by closing down trade—but rather by allocating some of the very substantial yearly gains we derive from trade to fund programs to help those who are adversely affected get back on their feet. Polls show that workers’ anxiety is substantially reduced when they are told that free trade is accompanied by programs that help displaced workers. Increasingly, policy analysts are looking at wage insurance, a program that supplements the income of a displaced worker who takes an entry-level job in a new sector at lower pay. Reducing the income gap encourages the worker to stay in the workforce, and importantly secures for that worker the most effective training there is, which is training connected to an actual job. The Alternative Trade Adjustment Act (ATAA) adopted by Congress in 2002 was a step in the right direction, but it is quite limited: it applies only to manufacturing workers who are 50 years of age or older earning less than $50,000, and covers only half the pay gap between the old and new job, in an amount not to exceed $10,000 over a two-year period. These limits on age, earnings, and insurance coverage coupled with the exclusion of service workers who currently constitute eight out of ten of those in our workforce, make the program inadequate. There are a number of thoughtful studies suggesting constructive changes in the program. (See for example Howard F. Rosen, Strengthening Trade Assistance, Policy Brief 08–2, Peterson Institute for International Economics (2008). Polls also show that making health care benefits portable and providing a tax credit to help fund health premiums during the period of unemployment help to reduce worker anxiety. Although the Health Coverage Tax Credit included in the Trade Act of 2002 was another step

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in the right direction, the Government Accountability Office recently found that the tax credit at its current 65 percent level is insufficient to offset the high cost of maintaining health insurance during unemployment. As a result, usage has been extremely low. It is important to consider the costs of such programs. Significantly, the same studies that calculate the U.S. economic gain from foreign trade to be $1 trillion per year, calculate that the annual costs of funding wage insurance and transitional health care assistance for all dislocated workers, regardless of whether trade is the cause of the job loss, to be about $12 to $15 billion annually. Our government currently spends less than $3 billion on programs to help displaced workers adjust. To rebuild public confidence in open markets, we need to do more. . . Growing income inequality is another factor contributing to Americans’ anxiety. They are worried that the shift in earnings away from unskilled workers in favor of higher skilled workers will enable countries with large pools of unskilled workers to destroy the American dream. It is true that the pay gap is widening between those who are educated and those who are not. As Nobel Prize winning economist Dr. Gary Becker has pointed out, the earnings differential of those with a college degree over those with a high school diploma has jumped from 30 percent in 1980 to 70 percent today, while the premium over that for graduate degrees is up from 50 percent to well over 100 percent. If the United States is to remain super-competitive in the 21st century, we will need a workforce that is the best trained and most productive in the world. That will require us to improve education at the K through 12 levels.

We Must Learn from History As Norman Cousins once said: “History is a vast early warning system.” There are some eerie similarities between circumstances that prevailed last century and those that currently exist. Remember that from 1860 to 1914 we enjoyed a remarkable period of global growth that was cut off by World War I. This earlier period was characterized by relatively open trade, limited capital regulation, tremendous technological innovation with the introduction of the radio, telephone, and internal combustion engine, and a robust global economy where America was the largest contributor. After World War I, we failed to muster the political will to reopen the global economy. The decade that followed the end of hostilities saw tensions grow among the great powers, an unstable alliance system, and the spreading influence of the Bolsheviks, who were hostile to capitalism and dedicated to using violence to change the world in accordance with their ideology.

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In the face of a slowing economy, candidate Herbert Hoover pledged in the 1928 Presidential campaign to help American farmers by raising tariffs on agricultural goods. Domestic anxieties soared with the 1929 banking crisis, and on June 17, 1930, Congress sent to the President the Smoot-Hawley Act, raising tariffs to record highs on over 20,000 imported goods. President Hoover said he disapproved of the Act, but signed it notwithstanding a petition sent to him by 1,008 economists urging him to veto. Before the ink dried on his signature, our trading partners began the retaliation that helped to bring the global economy and our own to a standstill, contributing to the frictions that once again brought the world to war. Today, by comparison, after six decades of stunning growth and truly extraordinary technological achievement, tensions are increasing as the world seeks to adjust to the rise of China and India. Alliances at the Security Council and NATO have weakened. Al Qaeda and other Jihadist groups hostile to Western values seek through violence to change the world according to their ideology, our financial institutions are again under stress, and high energy costs and the credit squeeze have slowed our economy, causing steady lay-offs. Against this backdrop, elected representatives are claiming that open trade is costing our nation millions of jobs, and are pledging to vote against trade agreements already negotiated and to pull out of others. Restrictive legislation has been introduced in the 110th Congress ranging from penalizing outsourcing to curtailing Chinese imports, and members have passed a farm bill that has increased subsidies in the face of record commodity prices. Efforts to limit trade as well as inward and outward investment because of a fear of foreign competition risk repeating the policy mistakes that have cost us so dearly in the past. And failure to integrate developing nations into the global trading system will not only limit our own future economic opportunities, but risks alienating large numbers of the excluded populations, encouraging them to side with those who would do us harm. Looking forward, our great country must marshal the political will to lead the world in lowering global trade barriers to create new economic opportunity for all nations, including our own. That will require our public and private sectors to work hard to rebuild a domestic constituency that understands what is at stake and to take the steps necessary to ensure that our nation can and will compete vigorously and effectively in the 21st century. Carla A. Hills, Chair and CEO of Hills & Company, International Consultants, U.S. Trade Representative 1989–1993. Statement before the U.S. Senate, Committee on Finance concerning “The Future of U.S. Trade Policy,” July 29, 2008. http://finance.senate.gov/hearings/ testimony/2008test/072908chtest.pdf (accessed August 2008):

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Ambassador Charlene Barshefsky on the Future of U.S. Trade Policy Ambassador Charlene Barshefsky supervised trade policy during President Bill Clinton’s second term. In this testimony, she suggests ways to update U.S. policies for the new challenges of globalization. She says the “comprehensive round” WTO negotiating process and fast-track trade negotiating authority may have outlived their usefulness.

The Trade Agenda What then should be the aim of trade policy? We can begin with first principles:

• It should create economic opportunities by opening markets and establishing fair rules in the major overseas economies and industry sectors which are likely to grow fastest in the coming years. • It should support national security in the areas where economics and foreign policy intersect—strengthening our strategic alliances, smoothing great-power relationships where we do not have alliances, and promoting the growth and development that ease political challenges in troubled regions. • It should create an efficient, innovative domestic economy and boost living standards by maintaining open U.S. markets, while also providing the public with confidence that agreements are enforced and make sure competitors play by the rules. • And it should mesh rather than clash with policy in other major areas, in particular poverty reduction, worker rights, response to climate change, preserving free flows of information. The basic tools of trade policy remains appropriate for these goals. Since the Committee considered the first Reciprocal Trade Agreements Act in 1934, American presidents of both parties have used a combination of international trade agreements that lower barriers to trade, investment, and information flows; enforcement at the WTO and through domestic law; tariff preferences for low-income regions; trade remedies; and consumer protection policies. This approach has been fundamentally consistent across 12 multilateral trade agreements at the GATT and

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WTO between 1947 and 1998; the “accession” agreements of 130 countries to the trading system, led in recent years by China, Taiwan, Vietnam, Saudi Arabia and Ukraine, and more recently a spate of bilateral agreements and preference programs. It has adapted to address changes in geopolitics, and to take on new issues as economic structure and technology change. And now it is time to adapt again. I would urge the Committee to adopt a trade policy that addresses the genuinely major challenges. These can be divided roughly into three baskets, two dealing with trade policy issues and the third looking at institutional arrangements.

• Economic expansion: The economic integration and phenomenal growth of Asia; the secondary but still major development of the European Union; the technology-driven rise of new industries and acceleration of global integration; • Security and development: The marginalization of many of the world’s large Muslim countries, especially in and around the Middle East; the tilt of trade regimes in the United States and elsewhere against the poor; and the drift towards authoritarian populism in Latin America. • 21st-Century Bretton Woods: The need for a renewal and modernization of the international institutional arrangements launched at the Bretton Woods Conference in 1945, with particular focus on the fading of the international financial institutions; the absence or inadequacy of environmental institutions; and the challenge a climate-change agreement will pose in its own right and for trade policies in particular. Economic expansion: Fundamentally, trade policy should turn from bilateral agreements with relatively small partners toward the fastgrowing industries and major economies that we can tap for growth. Among these industries are services generally, energy and environmental technologies, infrastructure-linked industries where Asian countries in particular are large buyers, and medical and health industries. Our goal should be to ensure that American-based service providers and manufacturers can supply the goods and services where demand is greatest. Major targets should include the EU and Japan, China, India, Brazil, ASEAN, the Persian Gulf, and similar large developing-country markets. A quick conclusion of the Doha Round would be a good start here, though not at all sufficient. Whether Doha succeeds or fails, we should move quickly to a new approach, based on the negotiation of

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plurilateral sectoral agreements among the main economies. These would seek broad liberalization of large and rapidly growing industries: energy and environmental industries perhaps first, also selected medical and health industries, based on agreement among the major players rather than requiring participation of each one of the WTO’s 153 members. The model would be the Information Technology Agreement of 1996, and the WTO’s later agreements on financial services and basic telecommunications. Here is where we will tap rapidly-growing markets, and ensure that America remains a leading player in the industries that will lead the 2010s and 2020s. These agreements have the further advantage of being sectoral in nature, not country-specific, and are therefore based upon MFN policies that work with rather than against supply chains and other business trends. Joined with this we should take up two large regional initiatives. One would be an effort toward regulatory policy coordination with Europe and Japan. This should not aim principally at revising current regulatory policies, but at averting conflicts in new regulatory fields. Our experience with regulatory dialogues like the Transatlantic Economic Partnership and various US-Japan initiatives shows that dealing with current regulations is exceptionally difficult, successful only in very narrow fields, and ought to be limited to areas of genuine dispute. A better approach would be to seek early consensus on regulation of rapidly emerging technologies like nanotechnology, energy and environmental technology, IT, and some medical industries. These are fields which are likely to grow extremely rapidly in the future, and where regulatory coordination among the developed countries will probably set the pattern for the world. The other would be a restoration of the U.S.’ place in East Asian trade and financial arrangements. This is the fastest-growing part of the world, and one in which the US is at risk of marginalization. It is natural that a revival of India and China will reshape Asian trade patterns, and that in some relative sense our share of Asian imports and exports will fall. But it is not natural or inevitable that initiatives like the East Asian Summits, free trade areas linking India, China, and Japan with Southeast Asia, and financial coordination accelerate while the United States remains outside. Should this continue, we will lose opportunities in fast-growing markets and in industries crucial to our technological and economic leadership. Here we should begin by passing the Korea-US free trade agreement. We need to significantly raise our level of dialogue, including agreements, with ASEAN and with India, which is rising very rapidly as a manufacturing-trade partner as well as a services trade partner. But two-thirds of our Asian trade is with China and Japan, and most immediately, direct engagement with both—not skirmishing and positioning in smaller markets—needs to be the heart of Asian policy. With Japan we should consider a comprehensive agreement similar to

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KORUS [Korea-United States Free Trade Agreement], or at minimum a comprehensive services agreement. And we need a well-honed agenda with China. The focus of U.S.–China trade talks should initially center on the negotiation of a bilateral investment treaty and accelerated WTO government procurement agreement, in addition to further trade liberalization and compliance. The broader economic agenda should revolve around macroeconomic policy and climate change. Strategically, China must also come to accept a larger role on a range of issues, in helping manage global finance, macroeconomics, and currency policies; contributing to the effort to slow climate change and develop a more energyefficient global economy; managing the trading system; and other issues as well. Security and Development: Here we need to think about reform of our own trade regime, to make it less punitive toward the poor at home and abroad and more likely to support rather than clash with our goals in the Muslim world. The acceleration of globalization has left much of our trade regime antiquated. Light-industry tariffs in particular are exceptionally high and obsolete, and in need of unilateral reform. Tariffs on clothes, shoes, household linens, luggage, watches, silverware, and a few other light goods raise half of our $26 billion in tariff revenue, on about five percent of imports. They protect few if any jobs, but do noticeable damage to hopes for poverty reduction in the United States and overseas. And they tilt noticeably not only against very poor Asian states, but against Afghanistan, Pakistan, Bangladesh, Turkey, and a number of other large majority-Muslim countries central to the campaign against radicalism and fundamentalism. The greater Middle East is probably the trading system’s major failure. Its countries, roughly spanning the Maghreb through the Middle East per se to Central Asia, participate less than those of any other region in the global trading system. In contrast to Southeast Asia or Latin America, they have been unable to integrate with the world economy; instead, their share of trade and investment has rapidly declined, with bouts of excessive oil wealth only serving to camouflage a deteriorating economic position. Though Egypt and Pakistan have shown some encouraging trade and investment growth in the last two years, as a whole the region remains dependent on resource trade, and lags far behind others in both regional integration and participation in manufacturing and services trade. Weak domestic economic policies and education join a dysfunctional trade environment to give the greater Middle East region the world’s highest unemployment, the lowest level of regional trade, and the largest disparities of wealth—and the most serious security challenge. Economic reform and recovery is not a solution per se to the political and security issues we confront in this region. But it is a step that can help lower the political temperature, reduce the appeal of radicalism,

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and ease the tasks of peacemaking and democratic reform. A major effort to integrate this region into the world economy, as was done with Japan and Germany post-World War II, Southeast Asia in the 1970s and 1980s, and Central America in the 1980s and 1990s, should be a top priority for the next administration. Its foundation should be a broad tariff exemption that makes the GSP system permanent, and grants 100 percent duty-free treatment based on simple and easy rules of origin to the least-developed countries and to other low-income states—Pakistan, Sri Lanka, Iraq, Lebanon—with high national-security significance. Ideally, this would be part of a larger international effort done in concert with Europe, Japan, China and India, designed to exempt all least-developed countries from tariffs and quotas, including sub-Sahara Africa, and to make a special priority of promoting growth and economic diversification in the Muslim Middle East and Muslim South Asia. Accompanying this should be a sustained and targeted foreign aid commitment, designed to help improve education and governance in large and strategically crucial countries such as Pakistan, Afghanistan, Egypt, and others. Africa policy can be developed in perhaps four ways, building upon the work initiated by the African Growth and Opportunity Act. One would be to open entirely AGOA’s product eligibility, and a second would be a much more ambitious technical assistance program, focused in particular on training African farmers to meet American sanitary and phytosanitary rules. Together with this, we should continue to broaden our foreign-aid programs, in particular for the countries hit hardest by the HIV/AIDS pandemic. We should also begin a dialogue, joined by Europe and perhaps China, on the use of natural-resource wealth, where the surge in energy and metals prices has provided a sudden and very large source of income, and consequently an historic opportunity for Africa to reshape its infrastructure and become fundamentally more competitive than it is today. Also under the security category, we need a fresh start with Latin America. In South America, and not only in Venezuela, we are at great risk of a drift toward authoritarian, anti-American populism backed by resource money. Meanwhile, American policy has fragmented since the abandonment of the FTAA several years ago, with the free-trade agreement program increasingly controversial and lacking obvious new partners. Looking ahead, I do think we should begin by passing the Colombia and Panama agreements. We should, I believe, shift toward a policy of dialogue and engagement rather than isolation with Cuba and Venezuela. This should include steps toward eliminating the embargo on Cuba, which does more to undermine than to enhance our ability to influence events there and promote our broader hemispheric interests. But in the next years, the centerpiece of policy needs to be an integration of our existing trade agreements, and a path toward meshing them with Mercosur. Here the key is closer and deeper work with Brazil, which is the largest western hemisphere economy.

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Procedures: “Comprehensive Rounds” and Fast-Track Finally, procedure. Here I think the frequent error of administrations is to put procedure before substance. Our main goal should be to create an agenda that is broadly viewed by Congress as meeting America’s economic, security, and other interests. If we do so, we will be able to find the policies best suited to negotiating and implementing it. Having said this, it is my personal view that two traditional procedural devices—the “comprehensive round” concept used at the WTO, and the “fast-track” procedure used to pass agreements here between 1974 and 2005—have outlived their time and are now more obstacle than aid.

Rounds The “comprehensive round” is essentially a protracted negotiation involving all major issues and requiring assent by all WTO members. It worked reasonably well for the Kennedy Round in the 1960s and the Tokyo Round in the 1970s, spottily for the Uruguay Round in the 1980s and 1990s, and is now a hindrance. The fast-growing future markets are fields like energy and environmental goods and services, medical and scientific technologies, and so on. Here, the political obstacles to liberalization are in relative terms small. In the late 1990s, we were able to quite rapidly conclude very large agreements, with little domestic or international controversy, on information technology goods, financial services, basic telecommunications, and duty-free cyberspace. These remain to this day the only multilateral agreements concluded since 1994. By contrast, a comprehensive round such as Doha, even when relatively limited compared to the Uruguay Round, covers difficult matters such as agricultural reform, movement of natural persons, trade remedies, and other conflicted topics. Making very large potential agreements in fast-growing industries depend upon resolving these issues has been a recipe for slowing trade policy, and ultimately risks making the WTO irrelevant at least as a vehicle for new policy. Thus, if the Doha Round is completed—or in the regrettable event that it is abandoned—the WTO should drop the comprehensive-round concept. Its future is in integrated sectoral agreements in fast-growing industries, under WTO auspices, joining manufactured goods and services, which can be concluded among “critical masses” of countries that cover most of the relevant trade depending on the sector involved. In the case of the ITA, this included 11 countries, expanding over time to a threshold level for the agreement to become effective. That number of countries would depend upon the aggregate percent of trade volume

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covered in the particular sector. Over time, as with the ITA, Financial Services and Basic Telecom, the number of participants expands rapidly, and each is now a condition of WTO entry.

Fast-Track At home, I believe the focus on the fast-track procedure as the key to trade policy is likewise misplaced. The important thing is to get the agenda right—that is, identifying the key economic and strategically important countries, and the purpose of an agreement with each—and build a congressional consensus for it. If that exists, procedures to pass it will follow. If not, procedures will be no substitute. As the recent case of Colombia shows, Congress can remove fast-track rules from an agreement where consensus has not yet emerged; as the Doha experience in 2005 proved, the value of fast-track for negotiators can be overstated. No country refused to negotiate . . . [in the Doha Round] because fast-track is not in force; nor did any country rush to close the Round three years ago in Hong Kong and Potsdam when fast-track neared expiration. More recently, trade debates have consistently seen actual agreements get more support than the fast-track or TPA procedure itself. This indicates that a measure designed to ease consensus on and passage of trade agreements has become more of an obstacle to them—just as the Reciprocal Trade Agreements Act of the 1930s ran out its lifetime by the late 1960s. So my conclusion is that the procedure has become more of an obstacle to successful policy rather than a facilitator. The next administration and Congress should find a different approach. . . . Charlene Barshefsky, U.S. Trade Representative (1997–2001). Statement before the U.S. Senate, Committee on Finance concerning “The Future of U.S. Trade Policy,” July 29, 2008. http://finance.senate.gov/hearings/ testimony/2008test/072908cbtest.pdf (accessed August 2008):

U.S. House of Representatives Joint Letter to President Obama Fifty-four members of the U.S. House of Representatives sent a joint letter to President Obama on February 26, 2009, proposing reforms to current trade policy. Rep. Mike Michaud (D-Me) drafted the letter. The signers included 53 Democrats and one Republican. They represented a diversity of urban and rural districts in 24 states. http://www. michaud.house.gov/index.php?option=com_content&task=view& id=575&itemid=76 (accessed March 2009):

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Dear President Obama: Your election and inauguration has inspired Americans of every region, race, and creed to hope for a better future for their families and our nation. We look forward to working with you to deliver on the promise of change realized in the recent election. Among the great challenges our nation faces is creating new trade and globalization policies that serve America’s workers, consumers, farmers, and firms. We believe that a unique opportunity exists for the legislative and executive branches to work in partnership to reform U.S. trade policies; to ensure that Americans enjoy the benefits of expanded trade; and to remedy the negative consequences on the American economy, environment, and public health and safety that have resulted from aspects of the current trade and globalization model. We heartily agree with your conclusion that trade policies “are not sustainable if they favor the few rather than the many.” Rebalancing our trade and globalization policies so that they create and retain good jobs in the United States, foster sustainable and equitable development worldwide, and provide government with the policy space necessary to solve pressing economic, climate, and other challenges is critical to prosperity and security at home and around the world. The dramatic economic downturn—caused in part by the lack of prudent global regulation of commerce and massive trade and financial imbalances—has fueled the relentless demand from the American public for trade reform. Across the country, successful candidates in 2008 ran against the failed trade policy status quo and pledged a new approach. In the 2006 and 2008 elections, America elected a total of 72 new fair-trade reformers to the House and Senate to replace supporters of the North American Free Trade Agreement (NAFTA), the Central America Free Trade Agreement (CAFTA), the World Trade Organization (WTO), and our current China trade policies. The unprecedented U.S. election focus on trade and globalization reform reflects the public opinion that America’s trade and globalization model needs a major overhaul. It will be challenging to remedy the considerable damage that our past trade and globalization policies have wrought. However, we are confident that, working together, we can replace the failed policies of the past with those that deliver broadly shared benefits. We look forward to working with you to seize this exciting opportunity to create a more just American trade policy, in the areas outlined below and beyond. Remedying the Failed U.S.–China Trade Relationship: We are eager to work with you to resolve the pervasive China currency manipulation problem. Our immense trade imbalance with China is gutting the U.S. manufacturing base and has serious economic and security implications. We urge you to remedy a broken U.S.–China trade relationship by

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engaging the Chinese government at the highest level, utilizing firm targets and deadlines. Further, we urge you to halt negotiations launched by former President Bush to establish a new U.S-China Bilateral Investment Treaty (BIT). While many in Congress have echoed your call for an end to existing loopholes that promote offshoring, BITs provide new protections to assist U.S. firms’ relocation of investment and jobs offshore. A China BIT would also empower Chinese firms, including state-owned firms, to purchase even more U.S. assets under preferential terms. Moreover, a BIT based on the existing U.S. model would allow these Chinese firms to skirt U.S. courts and use foreign tribunals to challenge U.S. regulation of Chinese firms operating here, extending the investor-state system you so rightly criticized during the campaign, and which we address in more detail below. Improving Import Safety: We are also eager to work with you to deliver on your campaign pledge to create new import-safety policies to ensure that food and goods coming from China and all countries meet U.S. safety and inspection requirements as a condition of entering our market and homes. Ensuring that Americans are not exposed to serious and unnecessary risks from imported goods will require improvements to our existing trade agreements, which limit the safety standards and inspection rates applied to imports, and to our domestic imported product and food safety regimes and their funding. Renegotiating NAFTA and CAFTA: During the campaign, you described needed changes to NAFTA and the NAFTA-model FTAs, such as CAFTA. We pledge our support for an inclusive process to review and renegotiate these pacts. The issues that you raised regarding the NAFTA model are those that have been the basis of congressional opposition to NAFTA-style pacts: excessive foreign-investor privileges and private enforcement systems; limits on domestic procurement policy and foodsafety protections; and more. Your call to renegotiate NAFTA, CAFTA, and other pacts, combined with the longstanding interest by many in Congress to improve the U.S. trade-agreement model, provide a longoverdue opportunity for a much-needed debate about U.S. trade pacts, and what policies they must and must not include. We are eager to work with you to build consensus around a new model before considering future agreements. To this end, we ask you to reverse the Bush administration’s unilateral September 2008 declaration that the United States will join in negotiations for a Trans-Pacific Strategic Economic Partnership (with Australia, Brunei, Chile, New Zealand, Singapore and Vietnam.) The Bush Administration Free Trade Agreements (FTAs): We oppose the FTAs with Colombia, Panama, and [South] Korea, which represent the “more-of-the-same” trade-agreement model promoted by the previous administration. Colombia FTA: We would oppose any trade agreement with Colombia until we have witnessed a sustained period during which

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the current extreme human-rights violations against unionists, Afro-Colombians, and indigenous people have ceased. More than 460 unionists have been murdered in Colombia since President Alvaro Uribe took office in August 2002, including 49 in 2008 alone. This is a twenty-five percent increase from 2007, even as Colombia faced high levels of scrutiny related to the FTA. Additionally, there are growing revelations about the Uribe Administration’s links to right-wing paramilitaries responsible for assassination of unionists and other civilians. It is critical to send a signal to the world that the United States will not tolerate the assassination of people seeking to exercise their basic human rights. Panama FTA: We also believe that Panama is not an appropriate U.S. FTA partner. A Government Accountability Office study identified Panama as one of only eight countries—and the only current or prospective FTA partner—that was listed on all of the major tax-haven watchdog lists. Panama has long been a key target of both the Organization for Economic Co-operation and Development and other tax transparency entities for its resistance to international norms in combating tax evasion and money laundering. Indeed, Panama is one of few countries that has refused to sign any tax information exchange treaties. . . Korea FTA: In addition to its lopsided auto provisions, the Korea FTA includes major financial service-sector deregulation and liberalization provisions that contradict global and domestic congressional efforts to re-regulate this volatile sector. We are eager to work with you to build support for the new trade agreement model we create together and for pacts with countries that respect the rule of law and human rights and that provide economic opportunities for American workers, farmers, and firms. While the Bush FTAs with Colombia, Panama, and Korea contain some improvements regarding labor and environmental standards relative to NAFTA, more work is needed on these and other provisions. Many of the most serious problems with the previous trade-agreement model are replicated in these FTAs. They must be renegotiated to ensure that these pacts at a minimum pass the most conservative “do no further harm” test. This includes the FTAs’ investment chapters, which afford foreign investors with greater rights than those enjoyed by U.S. investors. These three pacts’ foreign-investor chapters contain the same provisions in CAFTA that led many Democrats to oppose that pact, and that you cited as problematic during your campaign. Such provisions promote offshoring and subject our domestic environmental, zoning, health, and other public-interest policies to challenge by foreign investors in foreign tribunals. The Bush FTAs also still contain language that limits import inspection and requires the United States to accept imported food that does not meet our domestic safety standards. Further, the Bush FTAs contain

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procurement rules which forbid anti-offshoring and many Buy America policies and subject to challenge many common federal and state procurement policies regarding renewable-energy, recycled-content, and other important standards. These terms must be changed to provide the policy space for many of your exciting “Green Economy” proposals, which we also support. The Bush FTAs also contain the NAFTA-style agriculture trade rules which have simultaneously undermined U.S. producers’ ability to earn a fair price for their crops at home and in the global marketplace. Multinational grain-trading and food-processing companies have made enormous profits, while farmers on both ends have been hurt. As you noted in the campaign, one result of NAFTA-style agricultural rules has been the displacement of millions of farmers in developing-country FTA partners, with corresponding increases in illegal immigration to the United States. Finally, while the most egregious CAFTA-based terms limiting access to affordable medicines have been removed from the Bush FTAs, the texts still include NAFTA-style terms that undermine the right to affordable medicines that were contained in the WTO’s 2001 Doha Declaration on Access to Medicines. Transforming the WTO Doha Round Agenda: We are excited to work with you to create a new agenda for future global trade talks that address the existing problems in current WTO rules. Replacing the now-outdated and long-beleaguered “Doha Round” agenda provides a unique opportunity to reestablish the United States as a global advocate for economic fairness. In contrast, the Doha Round, if concluded, would expand the damage the WTO has already wrought both here and abroad. Since establishment of the WTO and NAFTA, the U.S. trade deficit jumped exponentially from under $100 billion to over $700 billion— over 5 percent of national income. At the same time, U.S. real median wage growth has flattened, despite impressive productivity gains. Meanwhile, the developing countries that have most faithfully adopted WTO rules have seen significant declines in their growth rates, and a global food crisis has caused growing hunger in many poor nations. While your goal of adding labor rights to the WTO is not even on the Doha Round agenda, many troubling proposals are. Among the concessions demanded of the United States under the current talks are the unacceptable weakening of existing U.S. domestic trade laws, and the WTO-binding of increased numbers of guaranteed U.S. visas for foreign workers seeking employment here. Moreover, a key element of the Doha Round agenda is further service-sector deregulation and liberalization— including financial services and energy. Congress and the world at large are struggling to re-regulate financial services and create new energy policies to ensure our shared future; it is extremely counterproductive to permit imposition of new WTO limits on the domestic policy space needed in these critical areas. Indeed, a new WTO negotiating agenda

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must focus on creating the flexibilities needed to address the critical issues of our time, including policies to counter global climate change. We are all eager to work with you to create American trade and globalization policies that promote our shared goals of economic justice, poverty alleviation, healthy communities, human rights, and a sound environment. Correcting our past trade and globalization policy mistakes and moving forward on a new path can help our nation face our considerable economic challenges. We look forward to working with you to create new American trade policies that enjoy broad support.

President Obama’s Trade Agenda In this report to Congress (February 27, 2009), the Obama administration offered the first detailed discussion of its trade priorities. It reiterates support for the WTO system of multilateral rules and dispute settlement, and proposes to build on existing free trade agreements so as to make trade policy a major contributor to global economic revival. The statement also calls for greater social accountability and political transparency in trade policy, and for using trade policy to advance national energy and environmental goals. President Obama has charted a course for economic recovery that will restore growth and promote broad-based prosperity. It will emphasize improvements in the living standards of American families while reorienting our economy to meet today’s challenges—energy, the environment, and global competitiveness. The President’s trade agenda will contribute to achieving these objectives. It will reflect our respect for entrepreneurship and market competition, our environment, opportunity for all, and the rights of workers. We seek to benefit Americans and the world by pursuing trade policies that embody these values. We particularly recognize the need to pay special attention to how our policies influence the well being of people struggling both at home and in the poorest regions of the world. Fundamentally, our trade policy needs a keen appreciation of its economic consequences for our workers, their families, and their communities, a fact recognized in the progress our Congress is making to upgrade our existing adjustment assistance programs for workers. Eliminating barriers to trade in the face of serious turmoil in our economy and financial markets will be a challenge. In enacting the Economic Recovery Act, the Congress affirmed our commitment to comply with the rules that govern international commerce and reached agreement to improve our trade adjustment assistance programs. These acts recognize the importance of trade to our economy and our

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responsibilities to those who face the highest hurdles in adjusting to changing trade patterns. The President will use all available tools to address this economic crisis including achieving access to new markets for American businesses large and small. One of these tools is the authority Congress can grant the Executive to negotiate trade agreements and bring them to the legislature for an up or down vote. We will only ask for renewed trade negotiating authority after engaging in extensive consultation with Congress to establish the proper constraints on that authority and after we have assessed our priorities and made clear to this body and the American people what we intend to do with it. Trade is a significant and increasingly important factor in contributing to the U.S. and global economies. In 2008, U.S. goods and services trade (exports plus imports) were equal to 30.8 percent of U.S. Gross Domestic Product (GDP), and exports alone accounted for 13.1 percent of the U.S. economy. World goods and services trade accounted for an estimated 33.5 percent of global GDP in 2008 (about $20.8 trillion dollars). In other words, trade is a large and growing part of our everyday commerce, and the jobs produced by these transactions are significant and well-paying. Yet, there are signs that trade, which has grown consistently in recent years, is slowing markedly. For the first time since 1982, global trade flows are projected to decline in 2009 by 2.1 percent to 2.8 percent. U.S. trade in goods and services already dropped by 14 percent between the 3rd and 4th quarters of 2008. Pressing economic conditions require the discipline to respond to immediate problems while staying true to our long-term goals. The President’s approach will be to promote adherence to the rules-based international trading system in order to promote economic stability, while introducing new concepts—including increasing transparency and promoting broader participation in the debate—to help revitalize economic growth and promote higher living standards at home and abroad. We are in the process of developing a plan of action to address the pending trade agreements in consultation with Congress. We hope to move on the Panama Free Trade Agreement (FTA) relatively quickly. And we plan to establish benchmarks for progress on the Colombian and South Korean FTAs. The President’s agenda will take account of the changing contours of the world economy by underscoring the importance of continuing education and the mastery of new skills to ensure we continuously strengthen our competitiveness. The President’s agenda will also stress the importance of harnessing new technologies to help our citizens learn, conduct business, and compete. It recognizes the impact of transportation and energy infrastructure on the location and productivity of economic activity. The President’s agenda also recognizes the necessity

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of pursuing energy and environmental policies that ensure a sustainable and prosperous future for our planet. These changes will make environmental dynamics more central to the direction of the world economy. We also want to expand the universe of those who benefit from trade and fully address the costs it creates. For example, trade and commercial policies should help small and medium-sized firms become more integrated as effective competitors in the global marketplace. Our goal should not only be to help them respond to competitive imports, it also should be to create conditions that help them become effective exporters. Open world markets can incentivize people and capital to move from less productive to more productive jobs and uses. This process ultimately stimulates higher wages and innovation while lowering prices for consumers. But trade outcomes do not lift everyone up in the short run, and cause painful adjustments for some. It is the responsibility of government to ensure that people receive the assistance they need to make those adjustments. Our trade policy needs a keener appreciation of the consequences of trade for our workers, their families, and their communities. The Congress has already made meaningful progress on this front by upgrading our existing adjustment assistance programs for workers. To make support for global markets sustainable, our consideration of the effects of trade cannot stop at the edge of our borders. Trade is more beneficial for the world, and fairer for everyone, if it respects the basic rights of workers. Our trade policies should build on the successful examples of labor provisions in some of our existing agreements. Also, as we tackle the issues of equity, we need to ask how trade policy can respond to mounting global environmental challenges. These range from climate change to dangerously depleted resources such as fisheries. We should aim to make trade a part of the tool kit of solutions for addressing international environmental challenges. The clear implication of these global challenges is that simply lowering tariffs and eliminating tariffs will not produce a successful trade policy. Managing our nation’s trade policy and engagement in the world economy has become an ever more complex challenge. Therefore, we must bring the same vigor and innovation to making trade policies more transparent and accountable that we are now applying to the process of developing and implementing our domestic economic policies.

President Obama’s Policy Priorities Support a Rules-Based Trading System This Administration reaffirms America’s commitment to a rulesbased trading system that advances the well being of the citizens of

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the United States and our trading partners. We all win from building on the foundations for peaceful commercial exchange created since 1945. We shall continue this country’s commitment to the World Trade Organization’s (WTO) system of multilateral trading rules and dispute settlement. The WTO is both a venue for multilateral liberalization through negotiation and a defense against protectionism. We will aggressively defend our rights and benefits under the rules-based trading system. This is in the interest of all Americans. A strong, market-opening agreement for both goods and services in the WTO’s Doha Round negotiations would be an important contribution to addressing the global economic crisis, as part of the effort to restore trade’s role in leading economic growth and development. The Administration is committed to working with our trading partners for such an outcome. However, it will be necessary to correct the imbalance in the current negotiations in which the value of what the United States would be expected to give is well-known and easily calculable, whereas the broad flexibilities available to others leaves unclear the value of new opportunities for our workers, farmers, ranchers, and businesses.

Advance the Social Accountability and Political Transparency of Trade Policy As the scope of trade policy expands to address nontariff and other barriers to trade, we need trade policy to meet strong standards of social accountability and political transparency. Social accountability includes tackling adjustment issues for the work force that are created by changes in global trade. In the stimulus, the Congress expanded eligibility for Trade Adjustment Assistance (TAA) by adjusting the criteria for receiving benefits and broadening the sectors of the workforce (e.g., services workers) eligible for TAA. Social accountability also means working with our trading partners to improve the status, conditions, and protections of workers. We need to ensure that expanded trade is not at the expense of workers’ welfare and that competitiveness is not based on the exploitation of workers. Building on the provisions concerning labor in some of our FTAs is a way forward in this regard. In addition to promoting social accountability, U.S. trade policy development needs to become more transparent. Many stakeholders are frustrated with the lack of consultation involved in the development and implementation of trade policy, but we can and should expand public participation in advising U.S. trade negotiators. The methods for doing so will have to evolve but improved websites for the trade policy agencies and more public consultation venues outside the established advisory groups are important steps toward this goal.

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Make Trade an Important Policy Tool for Achieving Progress on National Energy and Environmental Goals The President has called for new policies to advance a cleaner environment, a stronger response to the challenge of climate change, and more sustainable natural resources and energy supplies. Trade policy makers will be working to examine how trade can advance these goals. We should build on the environmental goods and services negotiations begun in the Doha Round, whether at the WTO or in other negotiating arenas. We should assure that the frameworks for trade policy and for tackling global climate complement each other so as to reinforce sustainable economic growth. We should ensure that climate policies are consistent with our trade obligations, but we also should be creative and firm in assuring that trade rules do not block us from tackling this critical environmental task.

Make Sure That Trade Agreements Are Addressing the Major Unresolved Issues That Are Responsible for Trade Frictions As tariff levels have declined, other impediments to world trade have become more significant. American firms increasingly focus on “behind the border” measures and other nontariff barriers (NTBs) as major impediments to their access to other national markets. We will negotiate for improved transparency and due process in our partners’ trade practices and policies, including government procurement and the crafting of market regulations. We will seek to open markets and secure fair treatment for American services, which are an increasingly important element of our trading profile. We will protect American innovations and creativity by negotiating and enforcing strong and effective intellectual property protections. We will pursue advances in trade facilitation and consumer product safety, through plurilateral negotiations if appropriate. And we will work with our trading partners to develop and implement policies that address the heightened security threats associated with trade in the least trade-impeding manner possible.

Build on Existing Free Trade Agreements and Bilateral Investment Treaties in a Responsible and Transparent Manner The Bush administration has left a legacy of numerous pending agreements and negotiations. We will conduct extensive outreach and

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discourse with the public on whether these agreements appropriately advance the interests of the United States and our trading partners. In particular, we will promptly, but responsibly, address the issues surrounding the Colombia, [South] Korea, and Panama Free Trade Agreements. We shall also review the implementation of our FTAs and bilateral investment treaties (BITs) to ensure that they advance the public interest. We will also work with Canada and Mexico to identify ways in which NAFTA could be improved without having an adverse effect on trade. We will do this in a collaborative spirit and emphasize ways in which this process can benefit the citizens of all three countries. And, we will consider proposals for new bilateral and regional agreements when they promise to deliver significant benefits consistent with our national economic policies. If new negotiating authority is required, we will seek that from Congress.

Uphold Our Commitment to Be a Strong Partner to Developing Countries, Especially the Poorest Developing Countries Expanded trade can make an important contribution to boosting growth in developing countries and lift their national income levels. Economic growth in these countries benefits the American economy by expanding markets for American exporters. We shall promote trade policies, including technical assistance for capacity building, that will help these countries engage successfully with the world economy. Trade preference programs help entrepreneurs in developing countries compete effectively in the world trading system. Many of our nation’s trade preference programs are coming due for legislative review. We will work with the Congress and public stakeholders on their renewal and reform. We will give careful consideration to proposals to concentrate benefits more effectively on the poorest countries and those that need the margin of preference to compete. In addition to preferences, building trade capacity in developing countries will help them to reap the benefits of the global economy. The United States is already the largest bilateral provider of trade capacity building assistance, and we will continue to support these efforts. Finally, especially in this time of an international financial crisis, credit for trade financing is critical. We will work with international financial institutions and export credit facilities to ensure that there is adequate trade financing available, especially for small and mediumsized exporters.

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Conclusion This agenda addresses the underlying goals and priorities for this Administration’s trade policy within the context of a financial crisis and rapidly changing economies. A reading of the last Administration’s trade policy record that follows in this volume makes clear that there are many strategic and programmatic choices that must be made to advance the President’s agenda. These choices will be the work of 2009. Our agenda is to combine the best elements of previous trade policies, especially a rules-based system of global trade, with a determination to make trade policy a powerful contributor to the President’s national economic agenda for revival of the global economy and renewal of growth that benefits all people. If we work together, free and fair trade with a proper regard for social and environmental goals and appropriate political accountability will be a powerful contributor to the national and global well being. U.S. Trade Representative. 2009, February 27. “The President’s Trade Agenda: Making Trade Work for American Families.” 2009 Trade Policy Agenda and 2008 Annual Report of the President of the United States on the Trade Agreements Program (accessed February 2009 at http://ustr.gov/ assets/Document_Library/Reports_Publications/2009/2009_Trade_ Policy_Agenda/asset_upload_file86_15410.pdf):

References International Monetary Fund (IMF). 2008, April. World Economic Outlook Database. Accessed August 2008 at http://www.imf.org/ external/pubs/ft/weo/2008/01/weodata/index.aspx.

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any government and private organizations have an interest in U.S. trade policy. Some simply collect and publish statistical data— such as the Census Bureau and the Bureau of Labor Statistics. Others have policy responsibilities negotiating trade agreements (such as the U.S. Trade Representative), enforcing existing laws (such as the U.S. Department of Commerce’s International Trade Administration), or providing support to policymakers in the executive branch and Congress. The U.S. International Trade Commission is an independent agency that supports policymakers, but also has enforcement responsibilities. The World Trade Organization is an international institution responsible to its member governments. It collects and publishes statistical information obtained from member governments, serves as a negotiating forum, and has dispute resolution responsibilities. The United States is home to hundreds of nongovernmental organizations (NGOs) that seek to influence trade policy. Some represent interest groups with a stake in expanding trade — such as transnational and export-oriented industries, service providers, and farmers. Others represent businesses, or workers, that compete with imports — such as labor unions, or import-sensitive industries like textiles and steel, or family farmers. Still other groups claim to speak for consumers, environmental interests, or other parties without official standing in trade negotiations. Some of the most influential are ideological groups, such as the Cato Institute, which promotes free trade and open markets. This chapter cannot cover all groups, but it can offer a representative sample of the most important. In each case, we will discuss

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the group and its mission and provide contact information, as well as a brief introduction to its major publications. Alliance for American Manufacturing (AAM) 727 Fifteenth St NW, Suite 700 Washington, D.C. 20005 (202) 393 – 3430 Fax: (202) 628 – 1864 http://www.americanmanufacturing.org/. The Alliance for American Manufacturing is a nonpartisan partnership between some manufacturers and the United Steelworkers to make America the world leader in manufacturing. The members include various steel producers and the United Steelworkers. Scott Paul, a former lobbyist for organized labor, is the group’s executive director. In recent years the group says America has lost more than three million manufacturing jobs to imports. This decline has had severe consequences for the families of laid-off workers and their communities. AAM seeks to promote creative solutions through research, public education, advocacy, and communications. On trade issues, the group holds China accountable for currency manipulation and urges vigorous U.S. administration of trade remedy laws. It strongly favors “Buy-American” provisions to strengthen the U.S. economy and employment. Publications: The AAM Web site offers press releases, newspaper opinion pieces, and testimonies before Congress. There are also issue briefs. American Farm Bureau (AFB) 600 Maryland Avenue, SW, Suite 1000W Washington, D.C. 20024 (202) 406 – 3600 Fax: (202) 406 – 3602 www.fb.org. The American Farm Bureau, founded in 1919, is the voice of agriculture at the national level. One of its priorities is expanding international markets for the products of U.S. farms and ranches. The AFB supports the Doha Round of WTO negotiations to create a level playing field for farm exports. It seeks a negotiated outcome that eliminates export subsidies, brings about substantial

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reductions in tariffs, and eliminates nontariff barriers, such as quotas. Publications: The AFB’s Web site highlights press releases, speeches, and congressional testimonies, as well as issue briefs. Because it is an umbrella organization, representing farmers and ranchers with differing interests, there are 24 other associations serving the interests of such groups as soybean producers, corn growers, meat exporters, rose producers, agricultural retailers, and so forth. The farm bureau Web site provides links to these associations as well as to international agricultural associations. American Federation of Labor-Congress of Industrial Organizations (AFL-CIO) 815 16th Street, N.W. Washington, D.C. 20006 (202) 637 – 5000 Fax: (202) 637 – 5323 http://www.aflcio.org. The AFL-CIO, a federation of 56 national and international labor unions, represents 10.5 million workers. The members are a diverse group, including actors, airline pilots, fire fighters, government workers, longshoremen, grocery workers and retail clerks, letter carriers, musicians, nurses, police and writers, as well as industrial workers — autoworkers, machinists, electrical workers, miners, and steelworkers among other. On trade issues, union members sometimes have divergent economic interests. Some benefit from trade, others compete with trade, and still others have little direct stake. The AFL-CIO, headed by John J. Sweeney, the former head of the Service Employees International Union, takes a strong stand against trade expansion and free-trade agreements. While the AFL-CIO usually supports Democrats in national elections, it battled President Bill Clinton on NAFTA and fast-track trade negotiating authority. More recently, organized labor fought the Bush administration on bilateral and regional trade agreements, such as CAFTA. The AFL-CIO takes the view that all trade agreements should include core human rights and workers’ rights, established by the International Labor Organization. In solidarity with labor unions in other countries, the AFL-CIO has sought to educate workers around the world about their basic rights, and it has battled against child labor and sweatshops. It favors “BuyAmerican” purchasing provisions in government contracts.

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Publications: The AFL-CIO Web site contains issue briefs on pending matters, congressional testimonies, and speeches of union leaders, and various press statements and links to a number of international labor organizations, global union federations, labor support organizations, and research groups. There is considerable material on the unions’ antisweatshop campaign and on their efforts to promote workers’ rights around the world. American Manufacturing Trade Action Coalition (AMTAC) 910 16th Street, NW, Suite 760 Washington, D.C. 20006 (202) 452 – 0866 Fax: (202) 452 – 0739 http://www.amtacdc.org/Pages/Home.aspx. AMTAC defines its mission as preserving and creating American manufacturing jobs through the establishment of trade policy enabling domestic manufacturing to stabilize and grow. It blames the loss of millions of jobs, and the hollowing out of American manufacturing, on flawed trade deals such as NAFTA and the WTO-Uruguay Round in which negotiators used access to the American market for foreign manufactures as a bargaining chip to settle nontrade issues. AMTAC seeks to block trade legislation harmful to U.S. manufacturing and investment, and to insist on vigorous enforcement of existing U.S. trade laws. AMTAC’s executive director is August Tantillo, a former textile trade official in the Reagan administration. The association represents textile and apparel firms impacted by rising imports. Publications: The Web site offers press releases, testimonies, issue briefs, information on congressional votes and legislation, and statistics supportive of AMTAC’s mission. Business Roundtable (BR) 1717 Rhodes Island Avenue, N.W., Suite 800 Washington, D.C. 20036 (202) 872 – 1260 Fax: (202) 466 – 3509 http://www.businessroundtable.org/. An influential association of corporate chief executive officers founded in 1972, the Business Roundtable seeks to analyze public policy issues affecting business and the economy, and to present government officials with practical proposals for action. Its 150

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members actively lobby government and speak out on public policy issues. BR’s powerful voice reflects the fact that its members have $4.5 trillion in annual revenues, employ 10 million workers, and account for nearly half of total research and development spending in the United States. Many of the members have substantial operations outside the United States as well. On trade issues, BR is pro-free trade and strongly supportive of agreements that open and de-regulate markets, promote investment opportunities, and provide for timely and effective dispute settlement. It works with CEO groups in other countries to promote these objectives, and it coordinates a grassroots pro-trade campaign. It strongly opposes “Buy-American” provisions. Publications: BR releases a steady stream of press statements, issue ads, speeches, and testimonies from its members supporting free-trade agreements. It also publishes economic studies supporting its policy positions: that trade is beneficial to the U.S. economy and workers, and that outsourcing of jobs benefits U.S. corporations, consumers, and the general economy. BR has been a vocal advocate for increased economic ties with China, and it coordinates the American Business Coalition for the Doha WTO Round. Business Software Alliance (BSA) 1150 18th Street, NW, Suite 700 Washington, D.C. 20036 (202) 872 – 5500 Fax: (202)-872 – 5501 http://www.bsa.org/country.aspx?sc_lang=en. Business Software Alliance is the voice of the world’s commercial software industry and its hardware partners. Its members include Adobe, Apple, Cisco, Corel, Dell, HP, IBM, McAfee, and Microsoft. BSA advocates stronger intellectual property protection, cyber security, and reduction of trade barriers. One of BSA’s top priorities is its campaign against software piracy—individuals and organizations that make unauthorized copies of software. BSA operates an international enforcement program intended to identify and prosecute cases of unauthorized software use. Publications: BSA’s Web site provides press releases, news, and reports on piracy around the world. Its antipiracy portal provides extensive information and statistics about BSA’s efforts to prosecute software criminals and secure compliance with copyright laws.

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CATO Institute 1000 Massachusetts Ave., NW Washington, D.C. 20001 – 5403 (202) 842 – 0200 Fax: (202) 842 – 3490 http://www.cato.org. CATO Institute, founded in 1977, says its mission is to broaden public policy debates to include consideration of traditional American principles of limited government, individual liberty, free markets, and peace. CATO’s guiding philosophy is libertarianism or market liberalism. CATO has a budget of over $22 million and approximately 95 full-time employees. On trade policy, CATO is an enthusiastic exponent of free trade. Its Center for Trade Policy Studies, directed by Daniel Griswold, touts the blessing of globalization, criticizes adjustment assistance for workers, attacks subsidies for industry and farmers, and defends protections for intellectual property. While supportive of intellectual property protections, CATO would rely on the rule of law, not trade sanctions, to secure enforcement. CATO warns that using sanctions against China would cost U.S. consumers billions of dollars. Publications: CATO’s trade publications. Available at: http:// www.freetrade.org/index.php. In 2008, CATO introduced an interactive Web feature allowing users to access and analyze the trade voting record of any member of Congress over more than a decade. The publications, accessible online, include speeches, testimonies, issue briefs, topical briefs, and “free trade bulletins.” Center for Economic Policy and Research (CEPR) 1611 Connecticut Avenue, NW, Suite 400 Washington, D.C. 20009 (202) 293 – 5380 Fax (202)-588 – 1356 http://www.cepr.net/. Established in 1999, the Center for Economic Policy and Research seeks to promote debate on economic and social issues. Its cofounders, economists Dean Baker and Mark Weisbrot, hold Ph.D.’s from the University of Michigan, and they strive to communicate to policymakers and the general public through a variety of publications, including columns and blogs. One of the most popular is

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Baker’s “Beat the Press,” accessible on the Web site of the American Prospect. It critiques media coverage of economic issues. Baker and Weisbrot offer a left-of-center analysis of trade policy issues, including the Doha negotiations. Baker, for example, is critical of so-called free trade agreements, viewing them primarily as investment agreements to lure manufacturers abroad to utilize low-cost labor in competition with U.S. workers. CEPR strives to address a variety economic topics, and its advisory board includes Robert Solow and Joseph Stiglitz, two Nobel-prize winning economists. Publications: For literature related to trade and globalization, see CEPR’s Web site. Chamber of Commerce of the United States (COC) 1615 H Street, NW Washington, D.C. 20062 (202) 659 – 6000 Fax: (202) 463 – 5327 http://www.uschamber.com/. The U.S. Chamber says it is the world’s largest business federation, representing three million businesses of all sizes, sectors, and regions, as well as 100 American Chambers of Commerce in 91 countries. COC claims 95 percent of its members come from businesses with fewer than 100 employees. Its president, Thomas J. Donohue, is one of the most visible and vocal corporate advocates for free trade and presidential trade negotiating authority, frequently leading delegations of its members to lobby Congress on pending trade issues. While encouraging efforts to knock down foreign trade barriers and promote market access abroad, the U.S. Chamber also recognizes the importance of maintaining U.S. trade remedy laws intended to offset unfair foreign trade practices, such as dumping, subsidies, and infringement of intellectual property. As part of its Anti-Counterfeiting and Piracy Initiative, COC seeks to build an alliance in countries around the world in support of intellectual property protection. The chamber opposes “Buy-American” provisions in economic stimulus legislation. Publications: The Chamber’s Web site contains a variety of issue briefs, letters to Congress, speeches and testimonies, and press releases on the federation’s efforts to promote its trade agenda.

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Citizens Trade Campaign (CTC) 1150 17th Street, NW— Suite 300 Washington, D.C. 20036 (202) 778 – 3320 Fax: (202) 293 – 5308 http://www.citizenstrade.org/. Citizens Trade Campaign, founded in 1992 to oppose NAFTA, claims it is a national coalition united in the belief that trade agreements must reflect the interest of the majority of the world’s peoples rather than the agenda of multinational corporations. CTC member organizations include consumer, environmental, family, faith, and labor groups. Publications: CTC’s Web site provides a variety of information for activists about lobbying government, influencing elections, and understanding various trade issues. Its perspective is generally critical of free-trade policies and the WTO. Coalition of Service Industries (CSI) 1090 Vermont Avenue, NW— Suite 420 Washington, D.C. 20005 (202) 289 – 7460 Fax: 202 – 775 – 1726 http://www.uscsi.org/. The Coalition of Service Industries is an advocacy organization promoting the reduction of barriers to U.S. service exports and domestic policies that enhance the global competitiveness of its members. Founded in 1982, CSI initially sought to ensure that trade in services became a central part of trade liberalization initiatives in the Uruguay Round of GATT negotiations. On its Web site, CSI boasts that its ability to use service trade negotiations to advance the interests of its members is unmatched. Its board of directors includes representatives of AIG, Microsoft, UPS, and Verizon among others. J. Robert Vastine, a former congressional staffer and Treasury Department official, has been president since 1996. CSI uses trade agreements to promote transparency, or openness, in government regulatory policies. It envisages greater WTO commitment to the issue, because services account for over half of GDP in developing countries and over 75 percent in developed countries. CSI has also been supportive of the Doha Round and bilateral negotiations to improve access for service providers.

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Publications: The Web site provides analysis of service-related trade issues, press releases, and statistics on cross-border service trade by major categories and countries. Consumer Electronics Association (CEA) 1919 S. Eads Street Arlington, VA 22202 (703) 907 – 7650 Fax: (703) 907 – 7690 http://www.ce.org/. The Consumer Electronics Association represents 2,200 companies with sales of $161 billion within the consumer technology industry. Many of them import from overseas suppliers, or are foreign-owned firms. But CEA members are also large exporters. CEA provides market information, a large consumer technology trade show, and representation before government organizations. CEA’s international department prepares reports for members on international trade opportunities. Gary Shapiro, CEA’s President, has been a visible proponent of free trade, even appearing on television to debate CNN’s Lou Dobbs. CEA advocates multilateral and bilateral FTAs. It particularly wants to enforce WTO’s Information Technology Agreement, which covers 97 percent of trade in information technology products and provides for elimination of duties on those products. Publications: Visitors to the Web site may access press materials, executive speeches. and some research materials. They can also access some of CEA’s publications, including white papers in its International Insider Series and Washington Insider Series. Members enjoy access to much more. Economic Policy Institute (EPI) 1333 H Street, NW, Suite 300 East Tower Washington, D.C. 20005 – 4707 (202) 775 – 8810 Fax: (202) 775 – 0819 http://www.epi.org/. A think-tank affiliated with organized labor, EPI was founded in 1986 by Jeff Faux, and a group of liberal economists, to look at economic issues through the lenses of the average working person. EPI seeks to broaden policy discussions to include the interests of low- and middle-income workers. EPI has a small staff of Ph.D.

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economists, as well as a network of academic associates, who turn out reports and analyses focusing on living standards, globalization and trade, and related issues. Staff economists Robert Scott and Josh Bivens deal regularly with issues of trade and globalization. They write about the trade deficit, free-trade agreements, and the impact of trade on domestic employment and living standards. They also testify regularly before Congress and administrative agencies like the U.S. International Trade Commission. Publications: The EPI Web site contains much data and economic information related to the impact of the global economy on working people and their families. It also provides issue guides, speeches, testimonies and, publications. EPI’s flagship publication is a biennial volume, The State of Working America, that presents a wide variety of data relating to living standards of the American people. Emergency Committee for American Trade (ECAT) 900 17th Street, NW, Suite 1150 Washington, D.C. 20006 (202) 659 – 5147 Fax (202) 659 – 1347 http://www.ecattrade.com. Founded in 1967 to support the results of the Kennedy Round of GATT negotiations, ECAT is an organization focused on promoting growth through the expansion of trade and international investments. Its membership includes a number U.S. international business enterprises (such as Abbott Laboratories, Cargill, Caterpillar, and McGraw Hill) representing all major sectors of the American economy. ECAT members have annual worldwide sales exceeding $1.5 trillion. They employ more than four million people. Calman Cohen, its president and a former congressional liaison for USTR and aide to Senator Robert Byrd (D-WV), has lobbied on these issues in Washington for more than a quarter of a century. In 2009, they helped lead the corporate battle against “Buy-American” provisions in economic stimulus legislation. Publications: ECAT’s Web site provides links to government agencies, foreign governments, and international organizations, as well as its own trade statistics, press releases, and news articles.

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European-American Business Council (EABC) 919 18th Street NW #220 Washington, D.C. 20006 (202) 828 – 9104 Fax: (202) 828 – 9106 http://www.eabc.org. This association bills itself as a trans-Atlantic alliance of large European and American businesses. It is a single council representing two continents and having a single agenda. EABC promotes free and fair trade; market access and national treatment; and the legal, balanced protection of intellectual property. It promotes transparent and friction-free regulatory regimes, based on government-to-government and business-to-government consultations. EABC also assigns priority to trans-Atlantic cooperation in antitrust and competition policies. Its members network with senior government officials and company executives, gain access to strategic information, and offer leadership to the trans-Atlantic economy. EABC’s chief executive officer is Michael Maibach, a former lobbyist for Caterpillar and Intel. Publications: The Web site emphasizes commercial linkages between American states and European countries. It offers readers a variety of policy papers, opinion pieces, and press releases. Focus on the Global South (Focus) CUSRI, Chulalongkorn University Wisit Prachuabmoh Building Bangkok-10330, Thailand (66) 2 – 2187363 – 65 Fax: 66 – 2-2559976 http://www.focusweb.org/. This group of anti-WTO activists is based in Bangkok, Thailand, and has satellite offices in the Philippines and India. Walden Bello, a sociology professor at the University of the Philippines, is executive director and the organization’s most visible personality. Focus mounts a global campaign against the WTO and claims success in derailing the WTO ministerial in Cancun, Mexico, in 2005. It also campaigns against other neo-liberal policies such as regional free-trade arrangements in the Americas (FTAA) and Southeast Asia (AFTA).

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Publications: The Web site offers many downloads, including annual reports, special reports, occasional papers, books, videos and even a Derailers Guide to the WTO. There are links to other sites for activist groups around the world. Friends of the Earth (FOE) 1717 Massachusetts Avenue, Suite 600 Washington, D.C. 20036 (202)-783 – 7400 Fax: (202)-783 – 0444 http://www.foe.org/. Friends of the Earth, organized in 1969 in San Francisco, now has an international network of activist groups in 70 countries to protect, preserve, and restore the Earth. While much of its attention is directed to climate change, clean energy solutions, and pollution issues, it engages the globalization of trade and investments. It seeks to ensure that investments and consumption are consistent with environmental protection and poverty alleviation. Brent Blackwelder, the president of FOE, is Washington’s longest serving environmental lobbyist. He was active at the 1999 WTO summit in Seattle. FOE believes that WTO is not the appropriate body to resolve conflicts between trade rules and environmental issues. It, and the Sierra Club, opposed the Colombia Free Trade Agreement on the grounds that the pact adhered to a flawed NAFTA model encouraging industries to relocate in their quest for the least stringent environmental and social standards. Publications: FOE’s Web site contains a few studies relevant to trade issues, including one showing increased numbers of people dying from heart and lung disease as a result of increases in global shipping traffic. Institute for Agriculture and Trade Policy (IATP) 2105 First Avenue South Minneapolis MN 55404 (612) 870 – 0453 Fax: (612) 870 – 4846 http://www.iatp.org/. The Institute for Agriculture and Trade Policy was formed in 1987 with the mission of fostering sustainable rural communities and regions in the face of trade-led globalization. Led initially by Mark Ritchie, now Minnesota’s Secretary of State, IATP has assumed

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a unique role of analyzing international trade agreements and assessing the ramifications for local communities in the United States and abroad. It has sought to work with overseas partners to promote alternatives to agricultural and trade policies that it considers economically, socially, and environmentally destructive. Its trade and global governance program seeks to strengthen the voice of civil society around the world so as to democratize the multilateral system of policymaking. IATP has an office in Geneva, Switzerland. Publications: IATP publications are available free online. They include Trade Observatory, an electronic journal documenting the activities of the WTO, NAFTA, FTAA, and other international agreements. It also posts the work of activist groups promoting fair trade systems and alternatives to globalization. See http:// www.tradeobservatory.org/. International Intellectual Property Alliance (IIPA) 2101 L Street, NW Suite 1000 Washington, D.C. 20037 (202) 833 – 4198 Fax: 202 – 331 – 3101 http://www.iipa.com. This private-sector coalition represents U.S. copyright-based industries in trade negotiations to improve international protection of copyrighted materials. Its seven members are trade associations each with a significant segment of the copyright community. They are: Association of American Publishers; Business Software Alliance; Entertainment Software Association; Independent Film and Television Alliance; Motion Picture Association of America; National Music Publishers Association; and Recording Industry Association of America. IIPA claims that losses due to piracy of U.S. copyrighted materials around the world are estimated at $30 – 35 billion annually. IIPA and its member associations track copyright legislation and enforcement in 80 countries. They work with representatives of U.S. and foreign governments, as well as the private sector, to promote effective enforcement. Publications: Along with press releases, readers can find statistics and IIPA’s annual Special 301 Report to the U.S. Trade Representative on copyright protection and enforcement around the world.

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International Chamber of Commerce (ICC) 38 cours Albert 1er 75008 Paris, France 33 – 1-49 – 53 – 28 – 28 (Fax) 33 – 1-49 – 53 – 28 – 59 http://www.iccwbo.org/. The International Chamber of Commerce describes itself as the voice of world business championing the global economy as a force for economic growth, job creation, and prosperity. Its fundamental mission is promoting trade and investment across frontiers and helping business to meet the challenges of globalization. ICC describes itself as the equivalent of a general assembly of an intergovernmental organization but with business executives as representatives. Founded in 1919, the ICC has thousands of member companies in 130 countries. Through a network of national committees, it has direct access to national government all over the world through its local affiliates. The U.S affiliate is the U.S. Council for International Business (USCIB). ICC promotes arbitration and dispute settlement mechanisms, open multilateral trade and the market system, and business self-regulation. In effect, it seeks to write the rules for global business, working through international and national authorities. ICC provides business recommendations to the WTO, and its leaders reinforce ICC positions with signed articles and interviews in the world press. The ICC has long backed multilateral trade liberalization as the best way for all countries to strengthen economies and standards of living. Publications: A variety of its publications, policy statements, and recommendations are available online. Motion Picture Association of America (MPAA) 1600 Eye Street, NW Washington, D.C. 20006 (202) 293 – 1966 Fax: (202) 296 – 7410 http://www.mpaa.org/. MPAA and its international counterpart, the Motion Picture Association (MPA), serve as the voices and advocates of the American motion picture industry. A major focus of these associations is movie piracy. It comes in several forms: Internet piracy, DVD

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copying, illegal sales, and theatrical camcording. MPA estimates that its six international members lose $6.1 billion annually in potential revenue to piracy. As a result, MPA directs a comprehensive worldwide antipiracy program. During 2007, MPA investigated 36,200 cases of piracy in the Asia-Pacific region and assisted law enforcement agencies in conducting nearly 13,000 raids. The result was seizure of 31 million illegal optical discs, 40 factory optical disc production lines, and 6,400 optical disc burners. Publications: The Web site offers press releases, news stories, research and statistics, and considerable information about movie piracy. National Association of Manufacturers (NAM) 1331 Pennsylvania Avenue, NW Washington, D.C. 20004 – 1790 (202) 637 – 3000 Fax: (202) 637 – 3182 http://www.nam.org/. Established in 1895, the NAM has long sought to promote American manufacturing exports. In its early years, the NAM also espoused protective tariffs on U.S. imports of manufactured goods. The contemporary NAM with 11,000 members seeks to promote manufacturing in the United States. Its executive committee includes representation of some of this country’s largest manufacturers: DuPont, Exxon, Intel, and Xerox. Some of these manufacturers, like Sony and Shell Oil, have foreign ownership, thus it is no surprise that NAM espouses policies that encourage foreign investment in the United States and U.S. investment abroad. On trade policy, it generally favors free and open markets. But many of NAM’s smaller members are unable to compete in the United States against low-cost Asian imports. NAM favors effective enforcement of U.S. trade remedy laws to counteract unfair foreign trade practices. These include injurious dumping and subsidies, as well as theft of intellectual property. NAM strongly backs the WTO’s dispute settlement process, saying that it is the key enforcement mechanism for multilateral trade agreements. John Engler, the former Republican governor of Michigan, was a close ally of President George W. Bush. Under his leadership, NAM has often backed Bush-administration policies. Publication: The NAM Web site provides links to relevant trade data, information on the organization’s policy positions, and a

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useful communications and media section with press releases, transcripts and speeches, newsletters, and other studies and reports. National Foreign Trade Council (NFTC) 1625 K Street, NW, Suite 200 Washington, D.C. 20006 (202)-887 – 0278 Fax: (202)-452 – 8160 http://www.nftc.org/. Founded in 1914 by American companies involved in international trade, the National Foreign Trade Council is a national organization that advocates the international and public policy priorities of its members. Under Bill Reinsch, a veteran Senate staff and former under-secretary of Commerce, NFTC has become another powerful voice for large transnational firms in the nation’s capital. On its board of directors are representatives of the largest firms engaged in the trade of goods, service, and finance —including American International Group, Boeing, Caterpillar, DHL, DuPont, Exxon, Ford, General Motors, Halliburton, Johnson & Johnson, Microsoft, Pfizer, and Wal-Mart, among others. The membership includes foreign-owned firms who share a common interest in promoting an open international trade and investment regime. Its agenda includes supporting a successful conclusion to the Doha Round, working for congressional approval of FTAs, and taking a leadership role on trade policy developments with the Middle East. NFTC has battled against legislative initiatives in some states to end pension-fund investments in companies doing business with Iran. Its affiliate USA Engage wants the Obama administration to remove bans on travel and trade with Cuba. Publications: NFTC’s Web site contains policy papers, press advisories, and a monthly column by Reinsch about developments in Washington. National Labor Committee (NLC) 75 Varick Street, Suite 1500 New York, NY 10013 (212)-242 – 3002 Fax: (212)-242 – 3821 http://www.nlcnet.org/. The National Labor Committee, an affiliate of organized labor, seeks to put a human face on the global economy. Its mission is to

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defend the rights of workers in the global economy. To that end, NLC investigates and exposes sweatshop conditions —low wages, unsafe working conditions, child labor —involving U.S. corporations. With a large database, NLC serves as an information center, distributing literature and videos, helping to bring attention to worker and human rights issues. Publications: Its “Newsroom” contains articles, press releases, and other media-related activities focusing on sweatshops. It is searchable by companies and countries. Oxfam America Policy & Advocacy Office 1100 15th Street, NW, Suite 600 Washington, D.C. 20005 (202) 496 – 1169 Fax: (202)-496 – 1190 http://www.oxfamamerica.org. The American affiliate of Oxfam (begun in 1942 as the Oxford Committee for Famine Relief), is a nonprofit international development and relief agency. Since 1995 it has taken a strong advocacy role on trade issues. It opposes pro-trade policies, advanced by governments and transnational corporations, and supports fair trade policies that Oxfam says will help poor people benefit from international trade. It seeks to promote a global citizen movement to promote change in world trade. It has a number of trade-related campaigns, including those to make trade fair, oppose free-trade agreements, and promote workers’ rights. Publications: Oxfam’s Web site provides access to press releases, campaign materials, discussion papers, and research reports intended to support Oxfam’s campaigns. Peterson Institute for International Economics (PIIE) 1750 Massachusetts Avenue, NW Washington, D.C. 20036 – 1903 (202) 328 9000 Fax: (202) 659 3225 http://www.iie.com. Founded by international economist C. Fred Bergsten, a Treasury official in the Carter administration, PIIE is a nonpartisan think-tank for study of international economic policy with twodozen researchers (most of them economists) studying global

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macroeconomic topics, international money and finance, trade and related issues. Founded by the German Marshall Fund, and supported by major corporate and international donors, PIIE claims to have provided the intellectual foundation for many major financial and trade initiatives. Publications: The Web site provides many issue briefs, testimonies, op-eds, and related publications. Generally, the policy recommendations are pro-globalization, and pro-free trade. Electronic versions of many publications are available online. Public Citizen’s Global Trade Watch (GTW) 215 Pennsylvania Avenue, SE Washington, D.C. 20003 (202) 546 – 4996 Fax: (202) 588 – 7798 http://www.citizen.org/trade/. Activist Lori Wallach heads the GTW division of consumeradvocate Ralph Nader’s Public Citizen nonprofit organization. Wallach first gained attention in 1993 when she helped organize grass-roots opposition to NAFTA. Two years later she helped form Global Trade Watch with the Nader organization, and in 1999 Wallach and her network of activists organized massive protests against the World Trade Organization in Seattle. GTW has opposed the Bush trade agenda, and worked with like-minded elected officials in Congress, such as Sen. Sherrod Brown of Ohio, to develop a new trade policy model. Wallach wants a more democratic policy, responsive to the concerns of everyday consumers, workers, environmentalists, family farm, and faith groups. She says that corporate interests have hijacked past trade deals to jack up drug prices with patent extensions, to obtain subsidies for offshoring production, and the like. Publications: The GTW Web site offers a large number of publications critical of current trade policies —including bilateral, regional, and multilateral agreements, NAFTA and CAFTA. It prepares and circulates information on a number of globalizationrelated economic issues—such as offshoring, imported food-product safety, immigration, state and local governance, harmonization of regulation, and other issues. Web site viewers can access congressional voting records on trade issues, as well as blogs, and other pertinent information.

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Recording Industry Association of America (RIAA) 1025 F Street NW, 10th Floor Washington D.C. 20004 (202) 775 – 0101 http://www.riaa.com/. RIAA represents the United States recording industry. Its members create, manufacture, and distribute about 90 percent of legitimate sound recordings produced and sold in the United States. RIAA seeks to protect its members’ intellectual property rights worldwide. The association says that global music piracy causes $12.5 billion in economic losses each year, and is accountable for 71,060 lost jobs in the United States. Publications: The Web site provides considerable information about RIAA’s efforts to address music piracy, especially illegal uploads and downloads, and to prosecute criminals who manufacture counterfeit CDs for sale. Sierra Club Legislative Office 408 C Street, NE Washington, D.C., 20002 (202)-547 – 1141 Fax: (202)-547 – 6009 http://www.sierraclub.org/trade/. America’s oldest (founded in 1892) and largest environmental group with 1.3 million members, the Sierra Club takes an interest in trade issues. Arguing that trade is integrally linked to traditional environmental issues, the Sierra Club says it wants trade that is green, clean, and fair. It argues that the current free-trade model has the potential to cause devastating climate changes. The Sierra Club advocates a fair trade bill of rights, one that supports environmental and labor standards. According to the Sierra Club, the WTO has had a negative impact on environmental health and safety. The Sierra Club also has been critical of fast-tracking negotiating authority, claiming it places Congress in the back seat. It says large corporations have used dispute settlement provisions such as Chapter 11 of NAFTA to circumvent environmental safety. Publications: The Web site offers some fact sheets explaining how trade agreements affect the environment and impact food, public health, and safety.

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Third World Network (TWN) 131, Jalan Macalister, 10400, Penang, Malaysia (60) 4 2266728 Fax: (60) 4 2264505 http://www.twnside.org.sg/. This nonprofit network of organizations and individuals involved in development-related issues is based in Penang, Malaysia. It is critical of free trade and the WTO. TWN has offices and affiliates in a number of third-world countries in Asia, Africa, and Latin America. On trade policy issues, one of the most active analysts is Martin Khor, a Malaysian economist and journalist, who is the director of the Third World Network and has been its leader since 1984. Publications: The TWN Web site offers policy statements, speeches, and issue briefs on a wide range of topics, including global warming biotechnology, and human rights. The network produces features for journalists each week, and a monthly magazine Third World Resurgence, which strives to give a third-world perspective to issues. United Nations Conference on Trade and Development (UNCTAD) Palais des Nations 8 – 14, Avenue De la Paix 1211 Geneva 10, Switzerland (41) 22 917 5809 Fax: (41) 22 917 0051 http://www.unctad.org. UNCTAD, founded in 1964, says it promotes development-friendly integration of developing countries into the world economy. Once largely a forum for the world’s poorest countries to voice grievances, UNCTAD in recent years has evolved into a knowledgebased institution whose work and research helps shape current policy debates and thinking about development. As noted in the biographical section, UNCTAD’s first secretary-general was Argentine economist Raul Prebisch, a sharp critic of the multilateral trading system. Its current secretary-general is Thailand’s Supachai Panitchpakdi, who served previously as the WTO’s DirectorGeneral. In that role, he emphasized the critical importance of multilateral trade negotiations for developing countries.

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Publications: UNCTAD’s Internet page is an important gateway to information and analysis of the global economy. Especially valuable are its interactive statistical databases, including the UNCTAD Handbook of Statistics. Some of its most useful annual publications are Review of Maritime Transit, Trade and Environment Review, Trade and Development Report, and World Investment Report. There are also many discussion papers and staff papers on a great variety of topics. This is one of the best Web sites for trade-related information. U.S. Business and Industrial Council Educational Foundation 910 16th Street NW Suite 300 Washington, D.C. 20006 (202)-728 – 1990 Fax: (202)-728 – 1981 http://www.americaneconomicalert.org. This is the research arm of the U.S. Business and Industry Council, a national organization of small and medium-sized business, many of them family-owned or privately-held firms. They are rooted in their communities, and committed to the nation, unlike many of the large corporations with global agendas and mixed loyalties. USBIC’s affiliate publishes AmericanEconomicAlert, a Web site critical of globalization and free trade from a business point of view. Urging a more nationalistic approach, it suggests ways to reduce the trade deficit, safeguard the U.S. industrial base, and protect national sovereignty. Researchers Alan Tonelson and William Hawkins write most of the articles. Publications: AmericanEconomicAlert offers an annotated listing of links to trade associations, unions, think-tanks, and lobbying groups, many of them with similar points of view. Tonelson’s “Globalization Follies” pokes fun at the statements of pro-globalization leaders. US-China Business Council (USBC) 1818 N Street, NW, Suite 200 Washington, D.C. 20036 – 2470 (202)-429 – 0340 Fax: (202)-775 – 2476 http://www.uschina.org/. Founded in 1973, the USCBC is an organization of more than 250 American corporations that conduct business in China. The

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membership includes Boeing, Caterpillar, Coca-Cola, Dell, Dow Chemical, Exxon, Ford, J&J, Procter & Gamble, Wal-Mart, and others. USCBC describes its mission as being to expand the commercial relationship with China for the benefit of its members and the U.S. economy. It seeks to expand business opportunities and to remove trade barriers. Critics, such as William R. Hawkins of the U.S. Business and Industry Council, note that USCBC members often appear to be cheerleaders for the business relationship, while ignoring national security differences. Publications: The Web site includes articles, analysis, press releases, speeches, congressional testimonies, and links to various external sources. There are links to trade statistics and investment information, and survey results. A China Briefing Book provides information for travelers to China. Members of the organization have access to a variety of newsletters and publications. See “Will Congress Sell Out the American People at ‘U.S.’ Multinational CEOs’ Request?” November 20, 2007. American Economic Alert. Accessed February 2008 at http://www.americaneconomicalert. org/view_art.asp?Prod_ID=2889. U.S. Congress, House of Representatives, Committee on Ways and Means 1102 Longworth House Office Building Washington, D.C. 20515 (202) 225 – 3625 Fax: (202) 225 – 2610 http://waysandmeans.house.gov/. The Ways and Means Committee, established in 1795, is the standing committee with responsibility for all aspects of U.S. government financial policy. Since the tariff was once the chief source of government revenue, this committee has long been actively involved in trade policy. Rep. Charles Rangel (D-NY) chairs the committee, and Rep. Sander Levin (D-MI) chairs the subcommittee on trade. Publications: On its Web site, readers can find publications describing committee missions to foreign countries, its compilation of U.S. trade statutes, and hearings on a variety of trade legislation in different sessions of Congress. Witnesses, representing trade impacted industries and workers, regularly testify to Ways and Means.

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U.S. Congress, Senate, Committee on Finance 219 Dirksen Senate Office Building Washington, D.C. 20510 – 6200 (202) 224 – 4515 Fax: (202) 228 – 0554 http://finance.senate.gov/. The Committee on Finance, chaired by Senator Max Baucus (D-MT), is the Senate counterpart of the House Ways and Means Committee. It has jurisdiction over all matters relating to government finances. All trade legislation passes through the committee. Established in 1815, the committee is one of the most powerful and prestigious in the Senate. Over nearly two centuries, the committee has had a number of legendary chairmen, including Justin Morrill (R-VT), John Sherman (R-OH), Boies Penrose (R-PA), Reed Smoot (R-UT), Walter George (D-GA), Harry Byrd (D-VA), Russell Long (D-LA), and Bob Dole (R-KS). Blanche Lincoln (D-AR) chairs the subcommittee on international trade and global competitiveness. Publications: The committee’s Web site contains a History of the Committee on Finance United States Senate, press releases of Chairman Baucus and ranking Republican Charles Grassley (R-IA), as well as legislation and hearings. U.S. Council for International Business (USCIB) 1212 Avenue of the Americas New York, NY 10036 (212) 354 – 4480 Fax: (212) 575 – 0327 http://www.uscib.org/. Organized in 1945 to promote multilateral trade liberalization, USCIB seeks to communicate American business ideas, values, and solutions to U.S. and international decision-makers. USCIB, the U.S. affiliate of the International Chamber of Commerce, strives to promote world business consensus on critical international issues. Its members are the larger global companies —including major law, accounting, and consulting firms — that strongly favor a rules-based, transparent multilateral trading system centered on the WTO. Publications: Its free publications include regular newsletters on the WTO, the OECD, the International Organization of

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Employers, and other groups. The Web site also contains an assortment of testimonies, editorials, and other policy statements. U.S. Department of Agriculture (USDA) 1400 Independence Avenue, SW Washington, D.C. 20250 (202) 720 – 3631 Fax: (202) 720 – 2166 http://www.usda.gov/. The Department of Agriculture has broad responsibilities for food, agriculture, and some natural resources. In the trade area, it strives to expand markets for agricultural products abroad, and its specialists are involved in all trade negotiations involving agricultural products. It also seeks to reduce sanitary and phytosanitary restrictions and other technical barriers to trade placed on U.S. exports, as well as foreign barriers to U.S. beef. Responsible for safeguarding domestic animal and plant resources from pests and disease, as well as protecting the integrity of the supply chain for meat, poultry, and egg products, USDA has the authority to inspect all food, fibers, and plants entering the United States. Publications: USDA collects and publishes a large volume of trade-related data and information. These include reports on agricultural policies and production of other countries from agricultural attaches assigned to U.S. embassies abroad, and on agricultural trade negotiations. In this regard, see http://www. fas.usda.gov/ustrade.asp. For information on food safety and inspection, as well as the Codex Alimentarius, a collection of internationally-adopted food standards and codes, see http:// www.fsis.usda.gov/. U.S. Department of Commerce (DOC) 1401 Constitution Avenue, NW Washington, D.C. 20230 (202) 482 – 2112 Fax: (202) 482 – 2741 http://www.commerce.gov/. The Department of Commerce is one of the principal Cabinet agencies involved with trade issues. Created in 1903 as the Department of Commerce and Labor, DOC had 40,382 employees in 2008, and budget outlays of $8.2 billion. It has broad responsibilities for promoting economic growth. In this regard, its trade

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functions include opening new markets for U.S. exporters, protecting intellectual property rights, obtaining compliance with trade agreements, and enforcing unfair trade laws. DOC also collects, analyzes, and publishes trade-related statistics. The voice of business in the federal government, DOC is one of the most important agencies on trade-related issues. Publications: Along with its statistical publications, described in subsequent sections, DOC publishes a great variety of information intended to benefit business and manufacturing, promote exports, protect intellectual property, forecast the weather, stimulate economic growth, and similar activities. At http://www. commerce.gov/About_Us/index.htm, readers can find a basic directory of commerce agencies and portals for information. Readers should remember that Commerce as an executive agency has a duty to champion executive-branch policies and its publications— aside from basic statistics —need to be read in this light. U.S. Department of Commerce, Bureau of the Census 4700 Silver Hill Road, #2049 – 3 Suitland, MD 20746 (301) 763 – 2135 Fax: (301)-457 – 3761 http://www.census.gov/. The Census Bureau provides current measures of U.S. population, economy, and government. Its work began with the first decennial census of 1790. In 1903, the Census Bureau was created in the Department of Commerce and Labor; previously a Census Office had existed in the Department of Interior. The Census Bureau collects, tabulates, analyzes, and disseminates a great deal of economic data. It has conducted periodic censuses of manufactures and other sectors since early in the 20th century. In 2008, it had an estimated 10,670 employees, making it one of the largest units of Commerce. Publications: The Census Bureau’s online data provides access to a great deal of domestic economic data. The site also provides historical foreign trade data from 1960 to 2005. U.S. Department of Commerce, Bureau of Economic Analysis (BEA) 1441 L Street NW, #6006 Washington, D.C. 20230

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(202) 606 – 9600 Fax: (202) 606 – 5311 http://www.bea.gov/. The Bureau of Economic Analysis is one of the U.S. government’s most important statistical agencies. It collects and analyzes data, and conveys statistics to the general public. Its international economic statistics, including balance of payments data, provides information on trade in goods and services, and investment information on the operations of multinational corporations. Publications: One of the most useful publications is BEA’s Survey of Current Business, a monthly presenting the latest national, international, regional, and industrial estimates. U.S. Department of Commerce, International Trade Administration (ITA) 1401 Constitution Avenue NW, #3850 Washington, D.C. 20230 (202) 482 – 2867 Fax: (202) 482 – 4821 http://trade.gov/index.asp International Trade Administration is the unit of Commerce responsible for trade and investment promotion. It helps U.S. companies export, and its U.S. Commercial Service has a network of officials around the world covering 96 percent of U.S. export markets. ITA has a market access and compliance unit working with business to see that they receive the benefits of more than 270 trade agreements. Another unit of ITA enforces unfair trade laws relating to dumping and subsidies. ITA also administers a program of foreign trade zones, and sector-specific programs relating to textiles and steel. ITA has about 2,000 employees. Publications: Readers accessing the link above can find an enormous wealth of publications —including press releases, speeches and testimonies —by looking at the Web site of ITA units: U.S. Commerce Service, Manufacturing and Services, Market Access and Compliance, and Import Administration. ITA has a strong advocacy role, and readers may wish to consult other sources listed in this chapter for different perspectives. U.S. Department of Energy (DOE) 1000 Independence Avenue, SW #7B252 Washington, D.C. 20585

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(202) 586 – 5500 Fax: (202) 586 – 7210 http://www.doe.gov/. The Department of Energy believes its mission is to advance the national, economic, and energy security of the United States to promote scientific and technological innovations in support of that mission, and to ensure environmental cleanup of the national nuclear weapons complex. The Assistant Secretary for Policy and International Affairs has primary responsibility for DOE’s international energy activities, including negotiations and dialogues with other governments. Specific initiatives relate to carbon sequestration, reporting of greenhouse gases, and clean energy. The Web site also features useful links to other government agencies, foreign governments, and data sources. Publications: DOE publishes a great variety of data. Of special importance is its Annual Energy Review available at http://eia. doe/gov/emeu/aer/contents.html. U.S. Department of Health & Human Services, Food and Drug Administration (FDA) 5600 Fishers Lane Rockville, MD 20857 (301) 827 – 2410 Fax: (301) 443 – 3100 http://www.fda.gov/. FDA is responsible for protecting the public health by assuring the safety, efficacy, and security of human and veterinary drugs, biological products, medical devices, the nation’s food supply, cosmetics, and products that emit radiation. To achieve these goals, it has a budget of over $2 billion and more than 10,000 employees. The Center for Food Safety and Applied Nutrition (CFSAN) administers the FDA Foods Program. It regulates $417 billion worth of domestic food, $49 billion of imported food, and $62 billion of cosmetics. The Office of Regulatory Affairs (ORA) conducts inspections of domestic and foreign food establishments, and is the enforcement arm of the FDA. Publications: The FDA Web site provides much information for consumers and those the agency regulates. A good place to begin is with the “newsroom”, where readers can find FDA press releases, public notices, speeches and testimonies, annual reports and statistics, media transcripts, and information about regulatory

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actions. There is information about import refusals, recalls, seizures, and warning letters among other enforcement actions. U.S. Department of Homeland Security, Customs and Border Protection (CBP) 1300 Pennsylvania Avenue, NW, #4.4A Washington, D.C. 20229 (202) 344 – 2001 Fax: (202) 344 – 1380 http://www.cbp.gov/. Customs and Border Protection, a division of the new Department of Homeland Security, has responsibility for enforcement of many trade laws. It inspects cargoes and assesses duties on applicable imports. It seeks to prevent unsafe products from entering the United States, and it combats trade in counterfeit and pirated goods. CBP inspects agricultural imports for possible bio or agroterrorist contamination. Another priority area is to protect against terrorists using shipping containers to smuggle weapons, or other items. CBP has developed an automated commercial trade processing system connecting CBP and the trade community. Truckers can file electronic cargo manifests, enabling CBP to prescreen trucks and shipments to help ensure the safety and health of arriving cargoes. Publications: The Web site “newsroom” provides fact sheets, publications, speeches and statements of CBP officials, and congressional testimonies. U.S. Department of Labor, Bureau of Labor Statistics (BLS) Postal Square Building 2 Massachusetts Avenue, NE Washington, D.C. 20212 – 0001 (202) 691 – 7800 Fax: (202) 691 – 7797 http://www.bls.gov/. BLS is the government’s principal fact-finding agency for labor and economic statistics. It collects, processes, analyzes, and distributes statistical data to the American public and to other government organizations. BEA data provide international comparisons of hourly compensation costs, productivity and labor costs, as well as other data. Most of the comparisons relate to other major industrial countries.

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Publications: Along with a great variety of data available online, BLS publishes the Monthly Labor Review and an important Occupational Outlook Handbook. U.S. Department of State (DOS) 2201 C Street, NW Washington, D.C. 20520 (202) 647 – 5291 Fax: (202) 647 – 6434 http://www.state.gov/. Until the 1960s, the State Department was the agency responsible for trade policy, and the foreign policy perspective shaped trade agreements. In the contemporary era, State continues to influence policy directly and indirectly. State participates in all negotiations with foreign governments, and has officers who focus on relations with the WTO, intellectual property enforcement, bilateral affairs, as well as agriculture, biotechnology, and textile trade affairs. Professionals with DOS experience frequently move to USTR where they supervise negotiations. For example, Robert Zoellick, who served President George W. Bush as trade representative, served at the State Department during the term of President George H. W. Bush. Appointed USTR in 2001, he returned to State in 2005 as deputy secretary. At lower levels of the federal bureaucracy, there are many similar examples of transfers among agencies, ensuring that the foreign affairs perspective is taken into account. Publications: The DOS Web site offers a wide variety of information for Americans traveling abroad—including passport and visa information, travel tips and warnings, and currency exchange rates. U.S. Department of Transportation (DOT) 400 7th Street, SW, #10200 Washington, D.C. 20590 – 0003 (202) 366 – 2222 (202) 366 – 7202 http://www.transportation.gov/. The Department of Transportation regulates motor carriers, railroads, aviation, pipelines and hazardous materials, and shipping, thus having a role in aspects of trade policy that relate to transportation matters. It has a budget of about $68 billion and more than 55,000 employees, of which nearly 46,000 work for the Federal Aviation Administration.

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Because increasing foreign trade requires a transportation system connecting producers to their consumers, DOT has an important facilitating role. DOT’s strategy hinges on opening more international transportation markets and in improving intermodal transportation linkages. Publications: The Web site provides a great variety of information, including testimonies and speeches, press releases, and statistics. Users will want to browse the subsites of subordinate agencies —like the Federal Aviation Administration, the Maritime Administration, and the Federal Highway Administration. For international transportation policy issues, see in particular the Office of the Assistant Secretary for Aviation and International Affairs at http://ostpxweb.dot.gov/aviation/index.htm. U.S. Department of Treasury 1500 Pennsylvania Avenue NW, #3330 Washington, D.C. 20220 (202) 622 – 1100 Fax: (202) 622 – 0073 http://www.treasury.gov/. Treasury is one of the oldest and most powerful cabinet-level agencies. It has responsibility for managing the government’s finances, collecting taxes, disbursing payments, and borrowing funds to run the government. It also supports the dollar, works with other financial agencies like foreign governments and international institutions, regulates banks, and enforces finance and tax laws. Finally, Treasury promotes international investment flows, and it seeks to protect the financial system against terrorists and money launderers. Trade and investment policy issues are handled in the office of the Under Secretary for International Affairs. He has responsibility for Treasury’s international capital monitoring system, and chairs the Committee on Foreign Investments in the United States (CFIUS). This inter-agency group reviews proposed foreign investment activities for their national security implications. Treasury’s office of international trade participates in trade negotiations led by USTR and represents Treasury’s interests, such as promoting more open financial markets. Publications: The department’s online press room provides speeches and testimonies, reports on international reserves, investments, exchange rate policy, occasional staff papers, and

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related matters. A quarterly publication, Treasury Bulletin, is available at http://www.fms.treas.gov/bulletin/index.html and offers a summary of key statistics. U.S. International Trade Commission (USITC) 500 E. Street, NW Washington, D.C. 20436 (202) 205 – 2000 Fax: (202) 205 – 1819 http://www.usitc.gov. The U.S. International Trade Commission, once called the Tariff Commission, is an independent, quasi-judicial agency with six commissioners. It has broad authority to investigate all aspects of U.S. international trade. In pursuit of this mission, it holds hearings and prepares research reports for the benefit of Congress and the executive branch. The commission also does import injury investigations in which it determines whether imports of a product have injured domestic industries. In antidumping and countervailing duty investigations, affirmative determinations by the commission and the U.S. Department of Commerce, which determines dumping and subsidy margins, lead to duties offsetting the amount of unfairness. In so-called escape clause investigations, the commission examines whether imports have been a substantial cause of serious injury to domestic industries, and if so, it recommends relief to the president. Publications: On the commission’s Web site readers can find annual reports, press releases, working papers and staff research, and reports to Congress and the executive on USITC investigations. U.S. Trade and Development Agency (USTDA) 1000 Wilson Boulevard, Suite 1600 Arlington, VA 22209 (703) 875 – 4357 Fax: (703) 875 – 4009 http://www.ustda.gov/. This is a tiny federal aid agency that seeks to promote publicprivate partnerships in order to boost U.S. exports and benefit low and middle-income countries. The agency claims it funds various forms of technical assistance, training, and business workshops supporting the development of modern infrastructure and a fair and open trading environment. Many of its projects involve

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transportation, or energy and power. USTDA has no trade policy responsibilities. In 2007, it had a budget of about $50 million and was involved in 205 projects in 65 countries. Publications: The principal publications available on its Web site are annual reports, as well as press releases, speeches, and congressional testimonies. U.S. Trade Representative (USTR) 600 17th Street NW, #209 Washington, D.C. 20508 (202) 395 – 6890 Fax: (202) 395 – 4549 http://www.ustr.gov/. The Office of the U.S. Trade Representative is a small agency with about 200 staff, responsible to the president and Congress, for developing and coordinating U.S. international trade, commodities, and direct investment policy. The U.S. Trade Representative is a member of the president’s Cabinet who also reports directly to Congress. The USTR oversees trade negotiations and resolves disputes. This activity takes place bilaterally (between governments), regionally (such as with the European Union or NAFTA), and multilaterally (through the WTO). Because USTR is a small agency, with overseas offices only in Brussels and Geneva, it works closely with other trade agencies who help staff the negotiations. USTR is most closely involved with State, Treasury, Commerce, and Agriculture, as well as the U.S. International Trade Commission, an independent support agency. Publications: On USTR’s Web site readers can find the text of trade agreements and comments of advisory committees involving business sectors, labor, and public-interest groups. There is a vast quantity of information, including many advocacy documents— presenting facts supporting the administration’s trade policy. World Customs Organization (WCO) Rule du Marche, 30 B-1210 Brussels Belgium (32 – 02) 209 94 42 Fax: (32 – 02) 209 94 96 http://www.wcoomd.org/. This intergovernmental organization with 172 members focuses narrowly on Customs matters. It works to develop global

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standards, to simplify and harmonize procedures, and to facilitate enforcement. WCO is also involved with issues of supply chain security, and anticounterfeiting and piracy. Publications: Many publications are restricted to member governments. The public can access news releases, and some general publications. World Economic Forum (WEF) 91 – 93 route de la Capite CH—1223 Cologny Geneva, Switzerland 41 – 0-22 – 869 – 1212 Fax: 41 – 0-22 – 786 – 2744 http://www.weforum.org/. The World Economic Forum says it is the foremost global community of business, political, intellectual, and other leaders of society who are committed to improving the world. In 1971, Klaus Schwab, a professor of business administration at the University of Geneva, invited European business leaders to Davos, Switzerland, for discussion of global issues. In 1987, this group evolved into the World Economic Forum with attendees from around the world. Each January, the WEF convenes in Davos, a Swiss ski village, so that top business and political leaders can discuss issues of interest. WEF has a number of continuing initiatives, including business efforts to address global hunger, climate change, poverty, governance, health, humanitarian relief, and similar issues. Activist groups consider the WEF a private club for the rich and the powerful. As a result, the winter meetings in Davos often attract demonstrators eager to gain media attention for their cause. Publications: The WEF Web site offers information about its initiatives and public relations material about its meetings, including webcasts, videos, photos, press releases, and transcripts. World Intellectual Property Organization (WIPO) PO Box 18 CH-1211 Geneva 20 Switzerland (41 – 22) 338 9111 Fax: (41 – 22) 733 54 28 http://www.wipo.int/. The World Intellectual Property Organization is a specialized intergovernmental organization, founded in 1967, responsible for

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promoting the protection of intellectual property (IP) throughout the world. It provides members with a forum to debate these issues, it administers 24 international treaties and promotes the development and harmonization of national IP legislation. It also provides services to individual owners and users of IP, including multiple filings with a single application. Publications: The WIPO Web site provides statistics, including the annual World Patent Report, an IP digital library, and other reports and documents. World Trade Organization (WTO) Centre William Rappard Rue de Lausanne 154 CH-1211 Geneva 21 Switzerland (41 – 22) 739 51 11 Fax: (41 – 22) 731 42 06 http://www.wto.org/. The successor to GATT, the WTO is a forum for trade negotiations and an international institution responsible for administering multilateral agreements. The WTO also has the authority to settle trade disputes, review national trade policies, assist developing countries in complying with their rights and obligations, and to cooperate with other international organizations. The WTO has 152 members, and a budget in 2007 of about $150 million. It administers rules negotiated under GATT and extended in the Uruguay Round to services, intellectual property, and dispute settlement on the principal of nondiscrimination with each country having both rights and obligations. The WTO operates by consensus with decisions made by the entire membership. Disagreements are resolved under the WTO’s dispute settlement procedures. The WTO secretariat, based in Geneva, has about 637 staff members. It is headed by a director-general who serves a four-year renewable term. The current director-general is Pascal Lamy, a talented French bureaucrat. Traditionally, the head of GATT/WTO has been a European, although there have been two exceptions: Mike Moore of New Zealand and Supachai Panitchpakdi of Thailand, who shared a single term. Publications: The WTO Web site provides a great quantity of information for various audiences: students, journalists, NGOs, and member governments. Readers can access the legal texts and

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official documents, testimonies and speeches, and information about a variety of trade topics —including multilateral negotiations, regional agreements, civil aircraft, competition policy, electronic commerce, and the environment. Annual publications include the WTO Annual Report, World Trade Report, International Trade Statistics, World Tariff Profiles, and Trade Profiles. There is also an interactive trade statistics database.

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his chapter presents a selective, annotated list of print and nonprint sources on U.S. trade policy. The first section offers a general list of standard monographs and reference works written by historians, economists, political scientists, and legal scholars. The next section identifies key government reports from national and intergovernmental organizations. Another discusses journals and newsletters. Then comes a short section considering visual materials (films, DVDs, etc). Finally, we discuss Web sites for governmental and nongovernmental organizations. Our listings include departments of foreign governments involved with trade matters, as well as private business, labor, and advocacy groups. Embassies in the United States often have Web sites discussing how to do business with their country. Frequently, these provide information about trade agreements and trade policy initiatives.

Books Aaronson, Susan Ariel. 2001. Taking Trade to the Streets: The Lost History of Public Efforts to Shape Globalization. Ann Arbor: University of Michigan Press. 264 pp. Written in the aftermath of the 1999 protests against the WTO in Seattle, business historian Aaronson seeks to explain the opposition. She notes that the trade critics were not traditional protectionists concerned about specific industries, but political activists eager to protect consumers, workers, and the environment through

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national regulation. They used the new technologies of the Internet and cell phones to educate and mobilize their supporters. Aaronson, Susan Ariel, and Jamie M. Zimmerman. 2008. Trade Imbalance: The Struggle to Weigh Human Rights Concerns in Trade Policymaking. New York: Cambridge University Press. 337 pp. The authors explore the relationship between human rights and trade, providing readers with an overview of the WTO system and research on the subject. In four case studies, they also show how South Africa, Brazil, the European Union, and the United States try to resolve conflicts between human rights and trade objectives. Aldcroft, Derek H. 2001. The European Economy 1914 –2000. New York: Routledge. 336 pp. The text covers the major economic changes of the 20th century, including the breakdown of the old order in World War I, instability in the 1920s, the economic crisis of the 1930s, World War II and reconstruction, Western Europe’s sustained expansion, and the socialist economies of Eastern Europe. The latest edition of this succinct economic history contains new chapters on the economic transition of Eastern Europe and on the integration of Europe. Arup, Christopher. 2000. The New World Trade Organization Agreements: Globalizing Law Through Services and Intellectual Property. New York: Cambridge University Press. 340 pp. Arup, an Australian legal scholar, examines the General Agreement on Trade in Services (GATS) and the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). The author shows how these agreements extend multilateral trade agreements beyond the border to include personal services and intellectual endeavors. Barfield, Claude E. 2001. Free Trade, Sovereignty, Democracy: the Future of the World Trade Organization. 253 pp. This volume focuses on the WTO’s controversial dispute settlement mechanism. After describing the history and evolution of the GATT/WTO system, it analyzes the new dispute settlement system, examines a variety of criticisms, and offers recommendations for returning to a less formal and rigid system of resolving

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disputes. The author is a resident scholar at the American Enterprise Institute, a conservative think-tank supporting free enterprise. Barton, John H., Judith L. Goldstein, Timothy E. Josling, and Richard H. Steinberg. 2006. The Evolution of the Trade Regime: Politics, Law, and Economics of the GATT and the WTO. Princeton, NJ: Princeton University Press. 256 pp. The authors, four California academics with backgrounds in law, political science, and economics, wrote this book after the 1999 Seattle riots disrupted the WTO ministerial summit. Their endeavor became a broader attempt to explain the workings of the WTO system, and the challenges it faces. They emphasize how political power shaped the trading system. Their account discusses how trade rules were extended to cover behind-the-border issues, such as health, intellectual property, and industrial standards. It highlights the growing involvement of nonstate actors and the proliferation of regional groupings in response. The authors question whether the WTO can enjoy legitimacy as a rules-oriented institution and as a development-oriented institution. Ben-Atar, Doron S. 2004. Trade Secrets: Intellectual Piracy and the Origins of the American Industrial Power. New Haven, CT: Yale University Press. 281 pp. Ben-Atar, a historian at Fordham University, explores the efforts of U.S. leaders to smuggle and acquire European technology from the colonial period to the age of Andrew Jackson. Like many developing countries in the 21st century, the United States once indulged in the theft of intellectual property to promote economic development. Berend, Ivan T. 2006. An Economic History of Twentieth-Century Europe: Economic Regimes from Laissez-Faire to Globalization. New York: Cambridge University Press. 372 pp. The author, an academic specialist in the economic and social history of Central and Eastern Europe, surveys recent European economic history. He organizes the book around the rise and fall of laissez-faire, economic dirigisme, the centrally planned economic system, and the mixed economy with its welfare state. The final chapter assesses the impact of globalization on Europe.

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Bethlehem, Daniel, Donald McRae, Rodney Neufeld, and Isabelle Van Damme, eds. 2009. The Oxford Handbook of International Trade Law. New York: Oxford University Press. 801 pp. This handbook offers a broad context for the WTO’s international trade law regime and examines how its fits with, and is modified by, existing systems. Chapters explore links with civil society, development, the environment, health, human rights, investment, and labor among other topics. Bhagwati, Jagdish. 2008. Termites in the Trading System: How Preferential Agreements Undermine Free Trade. New York: Oxford University Press. 160 pp. Bhagwati, a prominent international economist and former adviser to the GATT, criticizes the trend to bilateral and regional FTAs for undermining the principle of nondiscrimination at the core of the multilateral system. He views these preferential agreements as stumbling blocs to the attainment of multilateral free trade. Bronfenbrenner, Kate. 2007. Global Unions: Challenging Transnational Capital through Cross-Border Campaigns. Ithaca, NY: Cornell University Press. 261 pp. The author, director of labor education research at Cornell University, has edited a volume directed to the issue of how labor unions can confront globalization and the shifting of production to developing countries. Individual case studies focus on generating cross-border union campaigns. Chanda, Nayan. 2007. Bound Together: How Traders, Preachers, Adventurers, and Warriors Shaped Globalization. New Haven: Yale University Press. 391 pp. The author, an economist journalist, links solitary traders and other travelers to the globalization process that transformed the world, connecting peoples and countries. He pursues the story from African beginnings in the Ice Age to contemporary times, concluding that the trend toward globalization will be hard to stop. Chang, Ha-joon. 2002. Kicking Away the Ladder: Development Strategy in Historical Perspective. London, UK: Anthem Press. 187 pp. In this award-winning historical study, Chang, a Cambridge University development economist, shows that today’s rich countries

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developed behind protective barriers, not the free-trade and open-market policies they recommend for developing economies. He accuses the United Kingdom and the United States of “kicking away the ladder” (a phrase employed by 19th century German economist Friedrich List) so that others could not follow their path to economic success. Choate, Pat. 2005. Hot Property: The Stealing of Ideas in an Age of Globalization. New York: Alfred A. Knopf. 352 pp. Economist Pat Choate depicts the piracy of intellectual property as the great economic crime of the 21st century, costing the United States $200 billion per year. In addition to the economic losses, counterfeit medicines, auto and aircraft parts, and baby formula pose threats to health. After exploring the history of intellectual property conflicts, Choate focuses on problems of enforcement in the global economy. Choate, Pat. 2008. Dangerous Business: The Risks of Globalization for America. New York: Alfred A. Knopf. 278 pp. Choate, an economist and Ross Perot’s vice presidential running mate in 1996, warns that the downside of global economic integration involves growing dependence, risks to national security, and social costs. He criticizes corporatism, elitism, and a political system driven by money and special interests for the loss of democracy and sovereignty. Chorev, Nitsan. 2007. Remaking U.S. Trade Policy: From Protectionism to Globalization. Ithaca, NY: Cornell University Press. 242 pp. Chorev, a Brown University sociologist, focuses on trade liberalization from the 1930s to the present and seeks to explain why the U.S. government came to champion free-trade principles. She concludes that internationalist business succeeded in transferring trade-policy authority from a protectionist-oriented Congress to the executive branch and the World Trade Organization. Cohen, Stephen D., Robert A. Blecker, and Peter D. Whitney. 2003. Fundamentals of U.S. Foreign Trade Policy: Economics, Politics, Laws, and Issues. Boulder, CO: Westview Press. 2nd ed., 360 pp. An American University professor of international relations and two economist colleagues combine to write this text explaining

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trade policy in a political, economic, and legal context. Chapters offer a historical survey, a discussion of relevant economic theories, considerations of executive and legislative decision-making, and the WTO. Other chapters discuss trade sanctions, trade relations with Japan and China, the European Union, regional agreements, and the antiglobalization backlash. Crump, Larry, and S. Javed Maswood. 2007. Developing Countries and Global Trade Negotiations. London: Routledge. The authors, two Australian international business scholars, analyze the evolution of Doha Round of WTO negotiations, especially the controversial issues separating developed and developing countries. The book gives attention to agricultural, industrial, intellectual property, and service issues. The authors note that the negotiating impasse gave the impetus to bilateral and regional trade negotiations. Cudahy, Brian J. 2006. Box Boats: How Container Ships Changed the World. New York: Fordham University Press. 338 pp. Cudahy, a transportation writer, offers a colorful history of container shipping from Malcolm McLean’s experiments in the mid1950s to the 21st century. McLean’s line gradually grew into container giant Sea-Land, which was acquired by Maersk of Denmark. Deese, David A. 2008. World Trade Politics: Power, Principles, and Leadership. New York: Routledge. 224 pp. Deese, a political scientist, relies on extensive interviews and a careful survey of the secondary literature in writing this stimulating text on the development of the global trading system since World War II. He focuses on the leadership role of the United States and European negotiators in establishing the GATT/WTO system, and on Brazilian and Indian leadership of developing countries during the Doha Round. Destler, Irving McArthur. 2005. American Trade Politics: System under Stress. Washington, D.C.: Institute for International Economics. 4th ed. 390 pp. Destler, a professor of public administration at the University of Maryland and a long-time fellow at the internationalist Peterson

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Institute for International Economics, has written a well-received interpretation of trade-policy making in the post-World War II period. The fourth edition stresses the decline of traditional businessbacked protectionism, the breakdown of bipartisan support for trade liberalization, emerging conflicts with China, and a grassroots backlash against globalization. Dobbs, Lou. 2004. Exporting America—Why Corporate Greed is Shipping American Jobs Overseas. New York: Warner Business Books. 208 pp. CNN commentator Lou Dobbs rails at big business for outsourcing middle-class American jobs to low-wage countries. Dobbs also criticizes free-trade agreements for aiding and abetting the outsourcing process. Dobson, John M. 1976. Two Centuries of Tariffs: The Background and Emergence of the U.S. International Trade Commission. Washington, D.C.: Government Printing Office. 144 pp. This brief history of U.S. tariff acts, controversies, and the U.S. Tariff Commission (forerunner of the U.S. International Trade Commission (USITC)) was commissioned as a bicentennial project. The author, a historian at Iowa State University, focuses on the commission’s traditional fact-finding investigations, and the unsuccessful effort of Progressives to take politics out of tariff making. In the 1970s, the USITC would gain enhanced responsibilities administering U.S. trade remedy laws, including antidumping and countervailing duties, and emerge as a quasi-judicial agency. Dryden, Steve. 1995. Trade Warriors: USTR and the American Crusade for Free Trade. New York: Oxford University Press. 452 pp. Dryden, an economic journalist, presents a readable history of the Office of the U.S. Trade Representative from the Kennedy to the Clinton administrations. It focuses on key trade officials, including USTR’s Christian Herter, Robert Strauss, Bill Brock, Clayton Yeutter, Carla Hills, Mickey Kantor, and their subordinates. The author makes extensive use of interviews and declassified government documents. Eckes, Alfred E., Jr. 1995. Opening America’s Market: U.S. Foreign Trade Policy since 1776. Chapel Hill: University of North Carolina Press. 402 pp.

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The author, a historian and former U.S. trade official, offers a bold critique of U.S. trade policies, placing them in a broad historical perspective. Using government documents and archival sources, the book shows how U.S. officials opened the domestic market to imports while tolerating discrimination against American exports. Eckes, Alfred E., Jr., ed. 2000. Revisiting U.S. Trade Policy: Decisions in Perspective. Athens: Ohio University Press. 184 pp. Based on the oral histories of 35 former U.S. trade policymakers, this book offers a unique retrospective on some of the most important events in America’s post-World War II trade liberalization program. It emphasizes the Kennedy Round, the Tokyo Round, and the development of the GATT/WTO system. Eichengreen, Barry. 2007. The European Economy since 1945. Princeton, NJ: Princeton University Press. 495 pp. Eichengreen shows how Europe’s postwar economic growth was facilitated by governments, trade unions, and employers’ associations. Students of trade policy will be interested in his chapters on Western European integration and the collapse of the Bretton Woods structure. There is little on external trade or the multilateral trading system. Eichengreen, Barry. 2008. Globalizing Capital: A History of the International Monetary System. Princeton, NJ: Princeton University Press. 2nd ed. 276 pp. The author, a prominent economic historian, has updated his succinct history of the international monetary system since 1850 to include the euro, sovereign wealth funds, and contemporary current account imbalances. This book is intended for general readers. Eichengreen, Barry. 2008. Globalizing Capital: A History of the International Monetary System. 2nd ed., Princeton, NJ: Princeton University Press. 265 pp. The author, an economic historian at the University of California Berkeley, presents a succinct history of the international monetary system. The book is written for a general audience. The second edition offers a lucid discussion of global imbalances, involving China, Europe, and Japan.

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Findlay, Ronald, and Kevin O’Rourke. 2007. Power and Plenty: Trade, War, and the World Economy in the Second Millennium. Princeton, NJ: Princeton University Press. 645 pp. Economists Findlay and O’Rourke offer a comprehensive and integrated economic history of international trade during the last millennium. They emphasize how the expansion of trade depended on war and peace, not the workings of an economic model. Written for scholars and graduate students, this important book contains much useful data and an excellent bibliography of contemporary writings. Foreman-Peck, James. 1995. A History of the World Economy: International Economic Relations Since 1850. New York: PrenticeHall. 2nd ed., 404 pp. A standard history of the world economy, written by a British economic historian, this volume’s coverage concludes in the mid1980s. A central theme is how trade, ideas, and the migration of people bound together nations in a world economy. Gomory, Ralph, and William Baumol. 2000. Global Trade and Conflicting National Interests. Cambridge, MA: MIT Press. 199 pp. This important book, by a mathematician and an economist, reexamines classical trade models and shows that in a modern environment, free trade is not always mutually beneficial. They conclude that limited government intervention to retain strategic industries may be in the national interest. Hira, Ron, and Anil Hira. 2005. Outsourcing America. New York: Amacom Books. 236 pp. This book, written for the layperson, is a biting critique of outsourcing. The authors, who teach public policy and political science, blame shortsighted U.S. policymakers, free-trade ideologues, and big business’s penchant for trading domestic jobs for competitive advantage. They are also critical of companies that bring in cheap foreign labor on temporary visas. Hoekman, Bernard M., and Michel M. Kostecki. 2001. The Political Economy of the world Trading System: The WTO and Beyond. New York: Oxford University Press. 2nd ed. 570 pp.

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Hoekman, an official of the World Bank, and Kostecki, a Swiss business economist, have written a comprehensive text on the economics, politics, and institutional mechanics of the world trading system. Using a political economy approach, they seek to explain how the WTO functions and why it has been difficult to expand the multilateral system into new areas that impact civil society. Hugill, Peter J. 1993. World Trade since 1431: Geography, Technology, and Capitalism. 400 pp. Hugill, a geographer, shows how the interplay of technology and geography has guided the development of the contemporary world economy over 550 years. Individual chapters focus on shipping; overland transportation, including canals and railroads, and motor vehicles; and aviation. Irwin, Douglas A. 2002. Free Trade under Fire. Princeton, NJ: Princeton University Press. 257 pp. This book, written by a Dartmouth University economist, strives to defend free trade and the WTO against its critics —nationalists, protectionists, and social interventionists —in the aftermath of the Seattle protests. The author is a passionate proponent of free trade and open markets. James, Harold. 2001. The End of Globalization: Lessons from the Great Depression. Cambridge, MA: Harvard University Press. 260 pp. The author, a Princeton University economic historian, shows how unexpected events involving trade, finance, and immigration led to the collapse of economic and financial globalization. He shows that flaws in the prosperous and integrated international economy, and its institutions, contributed to the disintegration. Kennon, Donald, and Rebecca Rogers. 1989. The Committee on Ways and Means, 1789–1989: A Bicentennial History. Washington, D.C.: U.S. Government Printing Office. 535 pp. Accessed January 2008 at http://www.gpoaccess.gov/serialset/cdocuments/100– 244/browse.html. This official history of the Ways and Means Committee contains much useful information about the key committee in the House of Representatives responsible for trade and tax legislation. The history also contains biographical information about the committee members.

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Kindleberger, Charles P. 1986. The World in Depression 1929– 1939. Revised and enlarged ed., Berkeley: University of California Press. 355 pp. This classic, by a renowned economic historian, concludes that the Great Depression had international origins involving commodity prices and exchange rates. He says the depression endured so long because there was no international lender of last resort. Levinson, Marc. 2006. The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger. Princeton, NJ: Princeton University Press. 376 pp. The author, an economic journalist, shows how the container revolution reduced shipping costs and enabled business to supply customers from Asian factories. Lovett, William A., Alfred E. Eckes, Jr., and Richard L. Brinkman. 2004. Armonk, NY: M. E. Sharpe. 2nd ed. 236 pp. The authors, a legal scholar, a historian, and an economist, provide a critical review of recent U.S. trade policy and its theoretical underpinnings. They call for a renewed emphasis on balance and reciprocity, and on responsible national government policies. Low, Patrick. 1993. Trading Free: The GATT and U.S. Trade Policy. New York: Twentieth-Century Fund Press. 299 pp. Low, who has served as the WTO’s chief economist, wrote this book at a time when the Uruguay Round seemed stalled. Focusing on the period from the early 1980s, Low makes the case for multilateralism and for extending the system to cover trade in services, rules on investment, and intellectual property. He criticizes U.S. trade policymaking, particularly growing congressional involvement, for fostering unilateralism and hidden protectionism. Lowenfeld, Andreas F. 2006. International Economic Law. New York: Oxford University Press. 2nd ed. 1016 pp. This text, written by a distinguished legal scholar, covers the GATT/WTO system, dispute resolution, the rules of international trade including subsidies and dumping, environmental issues, and competition law. It also contains sections on international investment issues, the international monetary system, and economic sanctions.

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MacArthur, John R. 2000. The Selling of “Free Trade”: NAFTA, Washington, and the Subversion of American Democracy. New York: Hill & Wang. 388 pp. The author, a journalist and publisher of Harper’s, interprets the passage of NAFTA through the U.S. Congress as an example of how business oligarchs dominate trade politics and disregard workers’ and environmentalists’ concerns. MacArthur claims that NAFTA, sold to the public as a free-trade agreement, subverted democracy. Maddison, Angus. 2007. The World Economy: A Millennial Perspective/Historical Statistics (Development Centre Series). Paris: OECD. 653 pp. This volume contains two reference works by Maddison, an OECD researcher. The first attempts to quantify the economic performance of nations since the year 1000. The second uses historical statistics to explore the divergence in the rate of economic advance in different regions of the world. A monumental achievement, this book is an essential reference for those conducting research on the global economy. Matsushita, Mitsuo; Thomas J. Schoenbaum, and Petros C. Mavroidis. 2006. The World Trade Organization: Law, Practice, and Policy. New York: Oxford University Press. 2nd ed., 1104 pp. Three legal scholars from Japan, the United States, and Switzerland authored this text. It examines the WTO in a topical way, covering standard issues such as the most-favored-nation principle, national treatment, and safeguards, and emerging issues such as environmental protection, regional trade agreements, developing countries, intellectual property, trade and health, competition policy, and future challenges. Michalos, Alex C. 2008. Trade Barriers to the Public Good: Free Trade and Environmental Protection. Montreal, Canada: McGillQueen’s University Press. 419 pp. Michalos, a Canadian political scientist, examines the workings of NAFTA’s Chapter 11 in the context of a complicated case involved a gasoline fuel additive. He concludes that international trade deals such as NAFTA undermine constitutionally-protected democratic rights.

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Narlikar, Amrita. 2005. The World Trade Organization: A Very Short Introduction. New York: Oxford University Press. 168 pp. The author, a Cambridge University lecturer in international relations, seeks to provide a concise explanation of what the WTO is, what it does, and how it operates. Chapters consider the background and formation of the WTO, its decision-making and mandate, dispute settlement, the Doha development agenda, and the burden of governance. Northrop, Cynthia Clark, ed. 2005. Encyclopedia of World Trade: From Ancient Times to the Present. Armonk, NY: M. E. Sharpe. 4 vols. 1,212 pp. This general reference set contains 450 biographical and topical essays. There are maps, pictures, bibliographical entries, documents, a glossary and a chronology, but little data. These volumes seem best suited for high school students and beginning undergraduates, not specialists in post-World War II foreign trade policy. Odell, John S., ed. 2006. Negotiating Trade: Developing Countries in the WTO and the NAFTA. New York: Cambridge University Press. 310 pp. Odell, a political scientist, edits this series of essays about the process of trade negotiations involving developing countries. With the establishment of the WTO in 1995, he notes, developing countries became increasingly involved in the multilateral process, both in trade negotiations and in dispute resolution proceedings. Also, with the explosion of bilateral and regional agreements, developing countries have been more engaged in a variety of regional and sub-regional agreements. Ostry, Sylvia. 1997. The Post-Cold War Trading System: Who’s on First? Chicago, IL: University of Chicago Press. 309 pp. The author, a former Canadian trade negotiator during the Uruguay Round, argues for deepening trade integration and strengthening the WTO as the foundation of a rules-based global system. Prestowitz, Clyde, Jr. 1988. Trading Places: How We Allowed Japan to Take the Lead. New York: Basic Books. 365 pp. Written by a Reagan-administration trade negotiator, this inside account seeks to explain why the United States had limited success

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in opening the Japanese market to outside competition. Prestowitz shows that U.S. and Japanese negotiators played by different rules, and faults American policymakers for not comprehending Japan’s approach to industrial policy. Rivoli, Pietra. 2005. The Travels of a T-Shirt in the Global Economy. Hoboken, NJ: John Wiley. 271 pp. The economist author follows a bale of cotton from its production in Texas to China where it is upgraded and sewn into a T-shirt for the American market. Through the T-shirt she tells a complicated story about global sourcing and the factors that shape trade policy. Robert, Maryse. 2000. Negotiating NAFTA: Explaining the Outcome in Culture, Textiles, Autos, and Pharmaceuticals. Toronto, Canada: University of Toronto Press. 298 pp. This book, a revised doctoral dissertation submitted at the Fletcher School of Law and Diplomacy, Tufts University, gives attention to Canada’s performance in the NAFTA negotiations. She focuses on four sectors: automobiles, pharmaceuticals, textiles, and cultural issues. Rodrik, Dani. 2007. One Economics Many Recipes: Globalization, Institutions, and Economic Growth. Princeton, NJ: Princeton University Press. 277 pp. Rodrik, a prominent international economist, questions the prevailing wisdom that expanding trade is essential to economic development. He argues that different nations have used different development strategies, and opening the economy to trade is seldom a key factor at the onset of the development process. He urges the WTO to be more tolerant of diverse institutions and standards in the development process, and allow developing nations to suspend their obligations. Schwab, Susan C. 1994. Trade-Offs: Negotiating the Omnibus Trade and Competitiveness Act. Boston, MA: Harvard Business School Press. 275 pp. This insider account of the 1988 Omnibus Trade Act discusses the political, economic, and institutional forces that influenced the legislation. The author notes that this bill was drafted primarily in

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Congress and opened the way for a policy environment more vulnerable to interest-group manipulation. Schwab, an aide to then Sen. Jack Danforth (R-Mo.), would become U.S. Trade Representative under President George W. Bush. Tonelson, Alan. 2000. The Race to the Bottom: Why a Worldwide Worker Surplus and Uncontrolled Free Trade Are Sinking American Living Standards. Boulder, CO: Westview Press. 222 pp. The author, a research fellow with the U.S. Business and Industry Council, argues that cheap-labor countries, such as China, with weak safety standards, low taxes, and barriers to unions, are the driving force behind job losses in U.S. manufacturing. In an open global economy, expensive labor in the United States and Western Europe is in a race to the bottom with competition from the global workforce. Toye, John, and Richard Toye. 2004. The UN and Global Political Economy: Trade, Finance and Development (United Nations Intellectual History Project Series). Bloomington: Indiana University Press. 411 pp. The Toyes, father and son, have written an intellectual history of UN economic development thought. They show that between 1945 and 1964 a small group of economists within the UN Secretariat — among them Hans Singer and Raul Prebisch— challenged the reigning free-trade orthodoxy and offered neoprotectionist alternatives. Trebilcock, Michael J., and Robert Howse. 2005. The Regulation of International Trade. New York: Routledge. 3rd ed., 784 pp. The authors, two legal scholars with ties to the University of Toronto, examine the institutions and rules that govern international trade, giving attention to the WTO, NAFTA, and the European Union. Their lengthy text, best suited for law students, includes chapters on dispute settlement, regional trading arrangements, trade policy and domestic health and safety regulation, and environmental issues. Van den Bossche, Peter. 2008. The Law and Policy of the World Trade Organization: Texts, Cases and Materials. New York: Cambridge University Press. 2d ed., 917 pp.

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This excellent textbook provides a clear introduction to the WTO, its rules and procedures, and institutional structure. The author, a Dutch legal scholar, served as counselor to the Appellate Body of the WTO. Wallach, Lori, and Patrick Woodall. 2004. WTO: Whose Trade Organization? New York: New Press. 404 pp. Wallach, the lead author, is a fearless critic of corporate-led globalization. In this book, she and her colleague portray the WTO as a Trojan Horse institution with a nontrade agenda harmful to domestic sovereignty, democratic governance, and public health and safety. According to the authors, the WTO operates in secrecy and in its decision-making commerce takes precedence to the environment, food safety, public health, democracy, equity and access to essential services. Weinstein, Michael, ed. 2005. Globalization: What’s New? New York: Columbia University Press. 288 pp. This fine collection of essays intended for lay readers surveys what’s new in international economic relationships —including trade, capital flows, and immigration. The contributors include economists Jeffrey Frankel, William Easterly, Dani Rodrik, Jeffrey Sachs, and Joseph Stiglitz among others. Winham, Gilbert R. 1986. International Trade and the Tokyo Round Negotiation. Princeton, NJ: Princeton University Press. 449 pp. The author, a Canadian political scientist, offers a detailed account of the Tokyo Round GATT negotiations. His research rests on extensive interviews with participants, as well as secondary accounts and government documents. Zeiler, Thomas W. 1992. American Trade & Power in the 1960s. New York: Columbia University Press. 371 pp. This account, by a diplomatic historian, examines U.S. trade policy under Presidents John F. Kennedy and Lyndon Johnson. Zeiler concludes European integration and Gaullist obstructionism thwarted the Kennedy-Johnson leadership and presaged America’s economic decline. Zeiler, Thomas W. 1999. Free Trade Free World: The Advent of GATT. Chapel Hill: University of North Carolina Press, 267 pp.

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Based on extensive archival research in several countries, Zeiler’s history of the beginnings of the General Agreement on Tariffs and Trade (GATT) emphasizes how America’s free-trade ideology and its Cold-War security concerns shaped the new international institution during the Truman administration.

Government Documents U.S. Government U.S. Congress. House of Representatives. Committee on Ways and Means. 2005. Overview and Compilation of U.S. Trade Statutes. 109th Congress, 1st session, WMCP 109–4 and 109–5. 1523 pp. A valuable overview and compilation in two volumes intended for use by the Committee Members and interested parties in the international trade community. Available at: http://waysandmeans. house.gov/Documents.asp?section=9. U.S. Congress. Senate. Committee on Finance. 1981. History of the Committee on Finance. Washington, D.C.: U.S. Government Printing Office. 180 pp. Available at: http://finance.senate.gov/history.pdf. U.S. Department of Commerce. Bureau of Economic Analysis (BEA). Monthly. Survey of Current Business. This monthly survey and analysis of BEA data presents the latest national, international, regional, and industry estimates. Individual issues contain tables and charts. U.S. Department of Labor. Bureau of Labor Statistics (BLS). Monthly Labor Review. Washington, D.C.: U.S. Government Printing Office. From 1915 to 2007, this journal of analysis and research from BLS was published in print form. It covers the labor force, the economy, employment, inflation, productivity, occupational injuries, wages, prices, and other information. The authors include BLS staff as well as private sector professionals. Available at: http:// www.bls.gov/opub/mlr/. U.S. International Trade Commission. Annual since 1949. The Year in Trade: Operations of the Trade Agreements Program. Washington, D.C.: USITC.

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More than 60 reports extend back to the end of World War II. They seek to summarize major international trade-related activities and include information on U.S. trade laws, preferential programs, participation in GATT/WTO, and free-trade agreements. The ITC intends its annual reports to be the objective reports of an independent agency. Available at: http://www.usitc.gov/publi cations/index.htm. U.S. International Trade Commission. Annual since 1993. Recent Trends in U.S. Services Trade. Washington, D.C.: U.S. International Trade Commission. These reports cover accounting and management consulting services, advertising, air transportation, architectural, engineering, and construction, audiovisual, banking and securities, computer and data processing, education, energy, environmental services, health care, insurance, intellectual property rights, legal, maritime, retail, telecommunications, travel and tourism, and wholesale. The annual reports also discuss services trade negotiations in the WTO and provide substantial data primarily from the Department of Commerce’s Bureau of Economic Analysis. Available at: http://www.usitc.gov/publications/index.htm. U.S. International Trade Commission. Annual since 1994. Shifts in U.S. Merchandise Trade. The Commission report covers 10 merchandise sectors: agricultural products, forest products, chemicals, energy, textiles, apparel and footwear, minerals and metals, machinery, transportation equipment, electronic products, and miscellaneous manufactures. Available at: http://www.usitc.gov/publications/index.htm. U.S. International Trade Commission. Annual since 1917. Year in Review. (USITC annual report). Available at: http://www.usitc. gov/publications/index.htm. U.S. Trade Representative. Annual. National Trade Estimate Report on Foreign Trade Barriers. Washington, D.C.: USTR. The Omnibus Trade and Competitiveness Act of 1988 requires that USTR prepare an annual report documenting foreign trade and investment barriers. The report also includes a discussion of U.S. efforts to eliminate those barriers. Organized alphabetically by country, these reports may extend more than 700 pages.

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Available at: http://www.ustr.gov/Document_Library/Reports_ Publications/Section_Index.html. U.S. Trade Representative. Annual. Special 301 Report. Washington, D.C.: USTR. This is an annual report on the state of intellectual property rights protection and enforcement around the world. USTR prepares the report in accordance with Special 301 provisions of the 1974 Trade Act. The report indicates countries placed on a “Priority Watch List” and a regular “Watch List” for attention in bilateral discussions. Available at: http://www.ustr.gov/Document_Library/ Reports_Publications/Section_Index.html. U.S. Trade Representative. Annual. Trade Policy Agenda and Annual Report. Washington, D.C.: USTR. The Trade Act of 1974 requires that the president submit to Congress not later than March 1 of each year an annual report on the trade agreements program during the past year and the national trade policy agenda for the year ahead. These reports typically have more than 400 pages of detail, including detail on WTO activities, bilateral, and regional negotiations. The reports reflect the incumbent administration’s assessment of its performance and prospects. Available at: http://www.ustr.gov/Document_ Library/Reports_Publications/Section_Index.html.

Other Governments Canada. Department of Foreign Affairs and International Trade. Annual. Canada’s International Market Access Report. Ottawa: Foreign Affairs and International Trade. 72 pp. Canada prepares this annual report outlining market access issues, including investments, innovation, science and technology. Available at: http://www.dfait-maeci.gc.ca/international/index. aspx. European Commission. Annual. United States Barriers to Trade and Investment. Brussels: European Commission. Europe’s response to the USTR annual report on foreign trade barriers, the succinct EU documents identify U.S. tariff and nontariff barriers, investment-related measures, intellectual property right

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barriers, and obstacles to trade in services. The report for 2008 has 68 pages. Available at: http://trade.ec.europa.eu/doclib/. European Union. Market Access Database. Available at: http:// madb.europa.eu. The EU’s Market Access Database, which describes itself as “Your Guide to Cracking World Markets,” provides much practical information for exports and scholars, including statistical data, information on trade barriers, a guide for exporter’s, and other information. Japan. Ministry of Economics, Trade and Industry (METI). Annual. Report on Compliance by Major Trading Partners with Trade Agreements –WTO, FTA/EPA, BIT. The 2008 Japanese report contains 31 pages on ASEAN, 86 pages on China, 18 pages on the European Union, and 68 pages on the United States. Available at: http://www.meti.go.jp/english/ report/downloadfiles/2008WTO/1– 3ASEAN.pdf.

Intergovernmental Agencies International Monetary Fund (IMF). Semi-annual. World Economic Outlook. Washington, D.C.: IMF. The World Economic Outlook, released in April and October, offers the IMF staff economists’ assessments of world economic developments with an emphasis on the major economies. The data base for this exercise is available online, as well as the report. Available at: http://www.imf.org/external/ns/cs.aspx?id=29. Organization for Economic Cooperation and Development (OECD). Annual. OECD Factbook: Economic, Environmental and Social Statistics. Paris: OECD. The OECD collects, analyzes, and publishes a variety of data, including international trade, pertaining to its members and major nonmembers. Available at: http://www.oecd.org. United Nations Conference on Trade and Development (UNCTAD). Annual. Handbook of Statistics. Geneva, Switzerland: UNCTAD.

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This report provides essential data for analyzing world trade, investment, international financial flows, and development. The tables represent analytical summaries of data accessible on the UNCTAD Web site via the statistics portal. Available at: http:// www.unctad.org/Templates/Page.asp?intItemID=171&lang=1 United Nations Conference on Trade and Development (UNCTAD). Annual since 1996. Trade and Development Report. Geneva, Switzerland: UNCTAD. Each report analyzes current economic trends and major policy issues of international concern. United Nations Conference on Trade and Development (UNCTAD). Annual since 1991. World Investment Report. Geneva, Switzerland: UNCTAD. Each annual report covers latest trends in global direct foreign investment and development. Available at: http://www.unctad. org/Templates/Page.asp?intItemID==1485&lang=1 World Bank. Annual. World Development Indicators. Washington, D.C.: World Bank Group. Selected data are available online at http://www.worldbank.org. World Bank. Annual since 1978. World Development Report. Washington, D.C.: World Bank. This report is described as a guide to the economic, social, and environmental state of the world. Available at: http://www.world bank.org. World Trade Organization (WTO). Annual since 1998. International Trade Statistics. Geneva, Switzerland: WTO. The WTO says this report provides comprehensive and up-todate statistics on trade in merchandise and commercial services permitting an assessment of world trade flows by country, region and main product groups or services by category. Available at: http://www.wto.org/english/res_e/statis_e.htm. World Trade Organization (WTO). Annual since 1998. WTO Annual Report. Geneva, Switzerland: WTO.

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This is the WTO’s report to members and the public on institutional matters, including its activities, staff, and budget. Available at: http://wto.org/english/res_e/reser_e/annual_report_e.htm. World Trade Organization (WTO). Annual since 2003. World Trade Report. Geneva, Switzerland: WTO. Prepared by the WTO’s Secretariat, this report (the 2007 report contained 436 pages) surveys recent developments and selected trends in trade. It includes many tables of data. Available at: http://www.wto.org/english/res_e/wtr_arc_e.htm.

Periodicals, Journals, and Newsletters Boston University International Law Journal William S. Hein & Co., Inc. 1285 Main Street Buffalo, NY 14209 –1987 ISSN: 0737– 8947 Published biannually, the journal publishes articles by professional authors and practitioners, and notes and case comments written by student authors. Georgetown Journal of International Law Georgetown University Law Center Office of Journal Administration 600 New Jersey Avenue, NW Washington, D.C. 20001 Formerly Law and Policy in International Business, the journal publishes four issues a year. It has a special interest in international trade law. An annual issue provides a critique and analysis of the work of the U.S. Court of International Trade. Global Economy Journal (GEJ) Bepress 2809 Telegraph Avenue, Suite 202 Berkeley, CA 94705 ISSN: 1524 – 5861 The official journal of the International Trade and Finance Association, an association of academics and professionals interested

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in all aspects of the global economy. This peer-reviewed electronic journal publishes four issues each year containing scholarly research relating to international trade and finance issues. The GEJ also publishes important research that falls outside the scope of traditional economics, including international law, information technology and intellectual property, global marketing, immigration, and the social impact of globalization. Available at: http:// www.bepress.com/gej/. INSIDE U.S. TRADE Inside Washington Publishers 1919 South Eads St., Suite 201 Arlington, VA 22202 This is a valuable weekly newsletter on all aspects of trade policy. It is available to readers who have access to LexisNexis Academic. See http://www.lexisnexis.com/us/Inacademic/. International Trade Journal Taylor and Francis, Inc. 325 Chestnut Street, Suite 800 Philadelphia, PA 19106 Print ISSN: 0885 – 3908 This is a refereed academic journal with a broad scope, including trade, finance, globalization, emerging markets and regional studies. International Trade Reporter Bureau of National Affairs 9435 Key West Avenue Rockville, MD 20850 This biweekly newsletter reviews news pertaining to U.S. trade policy, including regulatory, legislative, and judicial developments. It also monitors trade negotiations. Journal of International Economic Law Journals Customer Service Department Oxford University Press 2001 Evans Road Cary, NC 27513 Print ISSN 1369 – 3034

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This prestigious international law journal publishes four issues each year. It has an international board of editors and solicits manuscripts from scholars, government officials, and legal professionals on fundamental, long-term, systemic problems and possible solutions. The editors hope the journal’s contents will influence real events and provide critiques of policies, negotiations, or course cases. New Global Studies Bepress 2809 Telegraph Avenue, Suite 202 Berkeley, CA 94705 ISSN: 1940 – 0004 Available at: http://www.bepress.com/ngs/. New Global Studies is an electronic journal published by Berkeley Electronic, devoted to globalization in the 20th and 21st centuries. It reaches across disciplinary lines, drawing from history, sociology, anthropology, political science, and international relations to study the past and present of today’s globalizing process. North Carolina Journal of International Law and Commercial Regulation UNC School of Law, CB# 3380 Chapel Hill, NC 27599 – 3380 This international law journal, begun in 1976, publishes three issues each year, containing articles by scholars, practitioners, and ILJ members The World Economy Blackwell Publishing 350 Main Street Malden, MA 02148 Print ISSN: 0378 – 5920 Directed at researchers, analysts, and policy advisers, this journal’s scope includes international trade and the environment, finance, development, global and regional institutions. Articles from back issues are available online. Available at: http://www. blackwellpublishing.com/journal.asp?ref=0378 – 5920.

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World Trade Review Cambridge University Press 32 Avenue of the Americas New York, NY 10013-2473 Print ISSN: 1474-7456 Established at the initiative of the WTO, this interdisciplinary journal seeks to publish articles of relevance to the world trading system. While the journal appears to have an independent board of scholarly editors, critics of the WTO may find the perspective overly supportive of the international trade organization and its mission.

Films and Video Recordings Book Zaniello, Tom. 2007. The Cinema of Globalization: A Guide to Films about the New Economic Order. Ithaca, NY: Cornell University Press. 202 pp. This book covers 213 films relating to globalization. Of these, 143 are from English-language film industries. The author, an adjunct professor at the National Labor College, offers extensive discussion of each film and recommends supplementary readings. This is a first-rate guide to the films pertaining to globalization —many of them intersecting trade-policy issues.

Films and Video Recordings American Jobs http://www.americanjobsfilm.com 2005, 60 minutes This documentary by filmmaker Gregg Spotts blames globalization and free-trade agreements for the loss of manufacturing jobs in textiles, computer programming, and aircraft manufacturing. Commanding Heights: the Battle for the World Economy PBS Item No. CHTS400 2002, 360 minutes on 3 Discs

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This series, based on the best-selling book by Daniel Yergin and Joseph Stanislas, presents a positive view of the new global economy and its impact on people around the world. Global corporations occupy the “commanding heights” and spread free-market capitalism, which triumphs over Soviet-style central planning. Yergin interviews a number of prominent individuals, including former President Bill Clinton, former Vice-President Dick Cheney, and former Soviet president Mikhail Gorbachev, among others. Frontline: Is Wal-Mart Good for America? PBS Item No. FRL62304 2004, 60 minutes Hedrick Smith, Pulitzer-prize winning former New York Times correspondent, shows how Wal-Mart shoppers are connected to China and the global economy. With Wal-Mart demanding lower prices from its suppliers to satisfy consumers, U.S. factories, like an RCA television plant in Circleville, Ohio, closed up and outsourced production to China. There Smith found Wal-Mart suppliers reliant on cheap Chinese labor competing for contracts on their ability to cut costs. The New Rulers of the World Bullfrog Films 2001, 54 minutes Australian investigative journalist John Pilger presents Indonesia as a case study in the costs of globalization. He claims big business teamed up with the CIA to overturn a popular government in 1964 and turned Indonesia into a client of the West. Pilger reports on sweatshops and does an attack interview with one of the new rulers of the globalized world— IMF Vice President Stanley Fischer. Pilger’s solutions include debt-relief for developing countries, stronger labor unions, and more transparent decision-making in the global economy.

Databases and Internet Resources AFL-CIO http://www.aflcio.org.

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This Web site offers press advisories, blogs, issue briefs, and data from the Department of Labor. The AFL-CIO is generally critical of agreements that open U.S. markets to greater competition from cheap labor countries. African Growth and Opportunity Act (AGOA) http://www.agoa.info/. This Web site provides detailed information on the AGOA program of the U.S. government. It enhances market access to the United States for 39 Sub-Saharan African countries. The Web site provides trade profiles, statistics, technical information, and downloads of legal documents, reports and research papers. The site is maintained by the Trade Law Center for Southern Africa. Alliance for American Manufacturing http://www.americanmanufacturing.org. This Web site contains blogs, issue briefs, press advisories, publications, and testimonies. It is one of the better Internet sources for information supporting domestic-based manufacturing in its battle with imports from China and other low labor-cost countries. American Farm Bureau http://www.fb.org. This Web site provides press advisories and issue briefs plus links to other farm organizations. The American Farm Bureau tends to be pro-free trade and supportive of agreements to open foreign markets. American Manufacturing Trade Action Coalition http://www.amtacdc.org/. This Web site contains press materials, issue briefs, testimonies, statistics, and information on key congressional legislation and votes. It is one of the better sources for information about the domestic textile industry and its importrelated problems.

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American Sugarbeet Growers Association http://www.americansugarbeet.org. Sugarbeet growers wish to maintain tariff rate quotas on imports, and generally oppose increased imports of sugar. This Web site provides press releases, statistics, testimonies, and publications supporting their position. Asia-Pacific Economic Cooperation (APEC) http://www.apec.org. The 21 members of APEC seek to promote free and open trade and investment in the Asia-Pacific region by 2010 for developed economies and by 2020 for developing economies. This useful Web site provides annual statements and declarations, data about the member economies, and downloadable publications. The Association of Southeast Asian Nations (ASEAN) http://www.asean.org. This comprehensive Web site provides many links to useful sites in member nations, as well as press releases, documents, research, and publications. Readers can obtain statistics, including the ASEAN Statistical Yearbook. Australian Government, Department of Foreign Affairs and Trade http://www.dfat.gov.au/trade/. This official Web site is a place to begin research on issues pertaining to Australia’s trade and trade policy. Bilaterals.org http://www.bilaterals.org. This open Web site, intended by activists to stimulate cooperation against bilateral trade and investment agreements, allows anyone to post materials. The site contains a great many articles in six languages: Dutch, English, French, German, Portuguese, and Spanish.

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Brazil, Ministry of External Relations http://www.mre.gov.br/. For trade and trade policy issues involving Brazil, check out this Web site. It has a BrazilTradeNet intended to stimulate Brazilian exports and to attract foreign direct investment to Brazil. Business Roundtable http://www.businessroundtable.org/. This Web site, representing the CEOs of big business, contains issue briefs, press releases, speeches, congressional communications, and testimonies. The Business Roundtable is an enthusiastic backer of free-trade agreements, outsourcing, and transnational business activities. Business Software Alliance http://www.bsa.org. This Web site, representing the interests of the commercial software industry, contains issue briefs, press statements, statistics, and testimonies pertaining to piracy of intellectual property. Canada, Department of Foreign Affairs and International Trade http://dfait-maeci.gc.ca/. For information pertaining to Canada’s trade policy and trade administration, see this Web site. It contains links to other related Canadian sites. CATO Institute http://www.cato.org. The CATO Institute offers a libertarian, pro-free trade perspective on public policy issues. Its Web site contains publications and presentations of its Center for Trade Policy Studies. Centre for Trade Policy and Law http://www.carleton.ca/ctpl/.

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This Canadian think-tank, based in Ottawa, focuses on building greater public understanding for trade and investment policy, and encouraging research on these issues. The Web site contains a number of papers and studies on trade policy, written by Canadian specialists. Chamber of Commerce of the United States http://www.uschamber.com. This Web site of America’s largest business trade association contains press releases, issue briefs, testimonies, and Web links. The U.S. Chamber is a vigorous proponent of free trade. China, Ministry of Commerce http://english.mofcom.gov.cn/. For trade policy issues and statistics pertaining to China, this Web site is an important source. Citizens Trade Campaign http://www.citizenstrade.org/. This coalition of activists, representing consumer, environmental, farm, labor, religious, and other groups, wants trade policy to serve the majority of the world’s people, not simply large corporations. The Web site contains issue briefs, press releases, and other information of interest to those critical of current policies. Coalition of Service Industries http://www.uscsi.org/. This association is a vigorous booster of trade agreements to open trade for service industries. The Web site contains data on service-related trade and discussion of bilateral, regional, and WTO trade negotiations. Common Market for Eastern and Southern Africa (COMESA) http://www.comesa.int/. This Web site is the official site for this 19-member African common market. The Web site includes information on the

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institution, agreements, and member countries, as well as a statistical database. Consumer Electronics Association http://www.ce.org. This association is a strong supporter of free-trade agreements. The site contains free trade blogs, multimedia, downloads, white papers, press releases, and congressional testimonies. Consumers for World Trade http://www.cwt.org/. This organization presents a pro-free trade consumer perspective in Washington, D.C., and seeks to mobilize consumers on trade issues that impact their purchasing power. The Web site contains some press releases and blogs. Economic Policy Institute http://www.epinet.org. Affiliated with organized labor, EPI’s Web site contains data, economic indicators, multimedia downloads, and publications. This is one of the best sites for information relating to trade and economic globalization. It tends to be critical of free-trade agreements. Emergency Committee for American Trade http://www.ecattrade.com. ECAT is a strong supporter of trade liberalization and multinational business. Its Web site provides trade statistics, news articles, press releases, and valuable links to foreign governments, U.S. government agencies, and international organizations. European-American Business Council http://www.eabc.org. This Web site provides press releases and articles, policy papers, and trans-Atlantic data showing commercial linkages between American states and European countries.

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European Commission—External Trade http://ec.europa.eu/trade/. This European Commission Web site contains trade statistics, information on negotiations, as well as press statements, documents, publications, and downloads. It is the place to begin research on the European Union’s approach to trade negotiations and policy. European Free Trade Association http://www.efta.int/. This is the official site of EFTA, a free-trade association for the benefit of Iceland, Liechtenstein, Norway, and Switzerland. The Web site contains statistics, documents, legal texts, and various publications, including annual reports. Focus on the Global South http://www.focusweb.org/. This group opposes the WTO and other free-trade agreements. Its Web site provides papers, videos, and links to other activist groups around the world. This is one of the best sites for antiWTO activists. Free Trade Area of the Americas (FTAA) http://www.ftaa-alca.org/alca_e.asp. This is the official Web site of the FTAA. At the Summit of the Americas, held in Miami, Florida, in December 1994, 34 governments in the Western hemisphere agreed to complete negotiations by 2005. The site contains detailed information about the negotiations, as well as trade and tariff data compiled by the Inter-American Development Bank. The participants failed to reach agreement in 2005, and no further negotiations were planned as this book went to press. Friends of the Earth http://www.foe.org. The Web site contains some trade-related items relating to the WTO and free-trade agreements, written from an environmental point of view.

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Hong Kong, Department of Foreign Affairs and Trade India, Ministry of Commerce and Industry http://commerce.nic.in/. This Web site is the place to begin for trade policy and administration issues involving India. There is also trade data. Institute for Agriculture and Trade Policy http://www.iatp.org/. This Web site, sympathetic to small farmers, carries reports and publications critical of the WTO. It is one of the better activist sites with links to other groups promoting fair trade and alternatives to globalization. Institute for International Business, Economics & Law http://www.iit.adelaide.edu.au/. This institute at the University of Adelaide in Australia provides a variety of advisories and publications on trade from an Australian point of view. International Centre for Trade and Sustainable Development http://ictsd.net/. Based in Geneva, Switzerland, this international group evaluates trade negotiations from a sustainable development perspective. International Chamber of Commerce http://www.iccwbo.org. The Web site of this prestigious international business association provides a variety of materials supportive of multilateral trade negotiations. International Intellectual Property Alliance http://www.iipa.com. This Web site contains the alliance’s annual report to U.S. Trade Representative on copyright protection and enforcement around the world.

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International Monetary Fund http://www.imf.org. Researchers can use the search tool to find IMF research studies dealing with international trade issues. The IMF also publishes various international financial statistics, and direction of trade statistics. It also maintains an interactive world economic outlook database containing selected macroeconomic data series. Israel, Ministry of Industry, Trade & Labor http://www.moital.gov.il/NR/exeres/B0B48981– 357D-446FAFAC-91A358E93C87.htm. This official Web site offers information on Israel’s trade agreements, its industry and workers, and a list of Israel’s economic and trade representatives abroad. There are also other useful links. Japan, Ministry of Economy, Trade and Industry http://www.meti.go.jp/english/. This Web site is a good place to begin research on trade policy issues involving Japan. There are statistics, papers and reports, press releases, and speeches. Jordan, Ministry of Industry & Trade http://www.mit.gov.jo/tabid/36/default.aspx/. This Web site provides information about Jordan’s trade relations with other Arab countries, the WTO, and its freetrade agreements with Europe and the United States among others. Malaysia, Ministry of International Trade and Industry http://www.miti.gov/my/ekpweb. This official portal offers a great variety of statistics and practical trade information, including Malaysia’s involvement in WTO negotiations. Mercosur http://www.mercosur.int/msweb/.

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The official Web site of Mercosur, the South American regional trade agreement involving Argentina, Brazil, Paraguay, and Uruguay. Readers must access information in Portuguese or Spanish. Information available includes official directives, technical documents, and data bases. Mexico, Ministry of the Economy http://www.economia.gov.mx/?NLanguage=en&P=2. The Web site of the Ministry of the Economy contains information about trade negotiations, maquila plants, and competitiveness initiatives. There are also official speeches and press releases. Motion Picture Association of America http://www.mpaa.org. This Web site is the best online source regarding movie piracy, including statistics. National Association of Manufacturers http://www.nam.org. The NAM is the largest U.S. association of manufacturers. Its Web site contains relevant trade data, press releases, transcripts and speeches, and other studies and reports on trade-related issues, one of the NAM’s principal concerns. National Foreign Trade Council http://www.nftc.org. One of the most influential associations involved in trade-policy issues, the NFTC represents large U.S. and foreign firms engaged in international trade. It is supportive of the WTO process. This important site offers press releases, issue briefs, data, and a regular commentary on developments in Washington, D.C. It sponsors USA Engage, a coalition concerned with the proliferation of unilateral sanctions. National Labor Committee http://www.nlcnet.org/.

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This Web site focuses on global working conditions, particularly sweatshops, unsafe working conditions, and child labor. There are photos and reports on specific companies. National Pork Producers Council http://www.nppc.org. This Web site contains press releases, issue briefs, statistics, and pork recipes. The organization is a vigorous booster of trade agreements to expand pork exports. New Zealand Ministry of Foreign Affairs and Trade http://www.mfat.gov.nz/. For research on issues relating to New Zealand’s trade or trade policy, this Web site is a place to begin. North American Free Trade Agreement Secretariat (NAFTA) http://www.nafta-sec-alena.org. The NAFTA secretariat, which administers the trade dispute mechanisms, has three sections, one in Ottawa, Canada; one in Mexico City, Mexico; and one in Washington, D.C. The NAFTA site has links to the separate sections, as well as legal texts, and information on dispute panel decisions. Organization for Economic Cooperation and Development (OECD) http://www.oecd.org/. The 30-member OECD is one of the most reliable sources of statistics and comparative data. For its statistics, go to http:// www.oecd.org/std/its. Organization for International Investment http://www.ofii.org/. This organization represents in Washington, D.C., the subsidiaries of foreign companies. It works to educate policymakers on the positive role U.S. subsidiaries play in the

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American economy and seeks to ensure that foreign-owned firms are not discriminated against in state or federal law. The site contains press materials and data showing the number of jobs in each state supported by subsidiaries. Organization of American States, Foreign Trade Information System http://www.sice.oas.org. This Web site offers information on trade agreements, statistics, and trade policy developments in the Western hemisphere. There are links to national trade policy organizations and statistics. Oxfam American http://www.oxfamamerica.org. Oxfam takes a strong advocacy role on trade issues, and its Web site provides materials to support these campaigns— including press releases, discussion papers, and research reports. Peterson Institute for International Economics http://www.iie.com/. This Web site contains a variety of press releases, reports, and publications on a variety of global economic issues. The institute is strongly internationalist, and many of its publications, policy briefs, working papers, speeches and testimonies, and news releases are available online. Public Citizen’s Global Trade Watch http://www.citizen.org/trade/. One of the most important Web sites for critics of the WTO and free-trade agreements, GTW provides information on congressional voting records, and information on various trade negotiations and agreements. GTW prepares analysis of major globalization-related issues, including offshoring, food safety, immigration, and the harmonization of regulatory approaches.

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Recording Industry Association of America http://www.riaa.com This Web site provides information on the association’s efforts to cope with music piracy, especially illegal uploads and downloads, and the criminals who manufacture counterfeit CDs for sale. Russia http://www.russiaexport.net/. This private site, maintained by a British company and a Russian agency, provides a great deal of information for those wishing to trade or invest with Russia. Sierra Club http://www.sierraclub.org/trade/. The oldest and largest environmental group in the United States, the Sierra Club’s Web site provides information showing how trade agreements impact the environment, public health, and safety. The club favors trade that is green, clean, and fair. It is critical of the neo-liberal freetrade model. Singapore, Ministry of Trade and Industry http://app.mti.gov.sg. This Web site is the place to begin research on trade policy issues involving Singapore. South Africa, Department of Trade and Industry http://www.thedti.gov.za/. This Web site provides statistics and information about trading with South Africa. South Asian Association for Regional Cooperation http://www.saarc-sec.org/main.php?t=2.1.6. This site provides information on the South Asian Free Trade Area, involving Bangladesh, India, Pakistan, Sri Lanka, and several other countries.

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South Korea, Ministry of Foreign Affairs and Trade http://www.mofat.go.kr/english/. For information on the South Korean government’s approach to trade policy issues, this Web site is the place to begin. Southern African Customs Union (SACU) http://www.sacu.int/. The official site of this customs union provides press information, speeches, and information about trade facilitation and negotiations. Taiwan, Ministry of Economic Affairs, Republic of China http://w2kdmz1.moea.gov.tw/english/index.asp. This official Web site provides trade data, information for exporters and importers, and information about Taiwan’s foreign trade policies. The Philippines, Permanent Mission to the WTO http://philippineswto.org. For issues involving the Philippines and the WTO, this Web site is a place to begin. Third World Network http://www.twnside.org.sg/. This important site strives to present a third-world perspective on trade and development issues. It provides features for journalists, and produces a monthly magazine, Third World Resurgence. The Web site contains a great variety of papers and reports, statements and speeches, and briefing papers. It also includes detailed reporting on the WTO negotiations. Trade Law Centre for Southern Africa http://www.givengain.com/cgi-bin/giga.cgi?c=1694. This institute, established in 2002, with support from the Swiss Department of Economic Development, seeks to build trade-law

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capacity in southern Africa. The goal is to help African countries participate effectively in the global economy and to negotiate trade agreements that will support development objectives. The site contains legal texts, publications, discussions, and other resources. Trade Observatory http://www.tradeobservatory.org/. The Institute for Agriculture and Trade Policy based in Minneapolis, Minnesota, manages this Web site, which is critical of the WTO and multinational corporations. The site contains reports from WTO negotiations in Geneva, as well as press materials, research, and blogs. Transnational Institute http://www.tni.org/. Based in Amsterdam, the Netherlands, this organization of scholar-activists opposes the WTO, and seeks to steer the world in a democratic, equitable, and environmentally sustainable direction. The site contains publications from as far back as 1973. United Nations Conference on Trade and Development http://www.unctad.org. UNCTAD’s Web site is one of the most important intergovernmental portals to statistics and analysis of the global economy. The interactive statistical data bases, including the UNCTAD Handbook of Statistics, are valuable, as are the annual Trade and Development Report and the World Investment Report. U.S. Board of Governors of the Federal Reserve System http://www.federalreserve.gov. The Web site offers a greater deal of statistical data, including U.S. reserve assets and foreign official assets, and country exposure lending. There are also speeches and testimonies of the governors. Readers can access The Federal Reserve Bulletin and The International Journal of Central Banking.

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U.S. Business and Industrial Council Educational Foundation http://www.americaneconomicalert.org. This Web site offers a nationalistic, probusiness perspective, critical of globalization, free-trade agreements, and transnational corporations. It is one of the better sites representing the views of family-owned and privately-held firms in the United States experiencing difficulty competing with low Chinese prices. U.S.–China Business Council http://www.uschina.org. This Web site represents the view of large transnational corporations (more than 250) that conduct business with China. The site offers press release, speeches, congressional testimonies, and links to other external sources. It provides information about the Chinese government structure and tips for getting around China. U.S. Congress, House of Representatives, Committee on Ways and Means http://waysandmeans.house.gov. This Web site provides texts of testimonies before the committee, reports on committee missions to foreign countries, and an important compilation of U.S. trade statutes useful to researchers. U.S. Congress, Senate, Committee on Finance http://finance.senate.gov/. The committee’s Web site contains hearings, testimonies, and a History of the Committee on Finance. U.S. Council for International Business http://www.uscib.org. This council, the U.S. affiliate of the International Chamber of Commerce, provides regular newsletters on the WTO, the OECD, and the International Organization of Employers. There

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is an ample assortment of press releases, policy statements, testimonies, and the like. U.S. Department of Agriculture http://www.usda.gov/ustrade.asp. This Web site contains a variety of information about agricultural trade and negotiations, including reports of agricultural attaches stationed abroad. For information on food safety and inspections, see http://www.fsis.usda.gov. U.S. Department of Commerce http://www.commerce.gov/. This Web site is a portal to information on Commerce’s diverse functions —including business and manufacturing, export promotion, intellectual property protection, weather forecasts, and stimulation of economic growth. U.S. Department of Commerce, Bureau of the Census http://www.census.gov. The Census Bureau’s site allows readers to access an enormous variety of economic and social data, including foreign trade statistics. The site also provides historical foreign trade data from 1960 to 2005. U.S. Department of Commerce, Bureau of Economic Analysis http://www.bea.gov. This Web site allows readers to access BEA’s Survey of Current Business as well as balance of payments data, information on trade in goods and services, and data on the operations of multinational corporations. U.S. Department of Commerce, International Trade Administration http://trade.gov/index.asp. Commerce’s International Trade Administration Web site provides access to press statements and publications, speeches, and testimonies. Readers interested in exporting can find

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detailed information at http://www.export.gov. Those keen on industry-specific information can go to http://trade.gov/ mas/index.asp. For information on gaining access to foreign markets, see http://trade.gov/mac/index.asp. On unfair foreign trade practices and imports, see http://trade.gov/ia/ index.asp. U.S. Department of Energy http://www.doe.gov. This Web site provides access to a variety of energy-related data. U.S. Department of Health & Human Services, Food and Drug Administration http://www.fda.gov. This Web site provides information for consumers and those interested in the agency’s regulations. There is information about import refusals, recalls, seizures, and warning letters among other enforcement actions. U.S. Department of Homeland Security, Customs and Border Protection http://www.cbp.gov. This Web site provides fact sheets, press releases, publications, speeches, and the testimonies of officials. Customs and Border Protection has the responsibility of enforcing many traderelated laws. It inspects cargoes, and assesses duties on dutiable imports. CBP looks for unsafe products, contaminated imports, and terrorist shipments. U.S. Department of Labor, Bureau of Labor Statistics http://www.bls.gov. Through this Web site, readers can access data on comparative international labor statistics. Also available online is the department’s Monthly Labor Review and its Occupational Outlook Handbook. U.S. Department of State http://www.state.gov/.

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The department’s Web site provides a variety of information intended for Americans traveling abroad—including passport and visa information, travel tips and warnings, currency exchange, and per diem rates. U.S. Department of Transportation http://www.transportation.gov. The Web site contains press releases, statistics, speeches, and testimonies. Users can browse subsites for subordinate agencies with trade-related interests, including the Federal Aviation Administration, the Maritime Administration, and the Federal Highway Administration. U.S. Department of Treasury http://www.treasury.gov. The Web site provides press releases, official speeches, and testimonies, reports on international investments, and exchange rate policy. The Treasury Bulletin offers a summary of key statistics. See http://www.fms.treas.gov/bulletin/index. html. U.S. Federal Reserve Bank of New York http://www.ny.frb.org/. The New York Federal Reserve Bank is the federal reserve bank most involved with international operations, such as intervention in foreign exchange markets. The Web site offers staff analysis of banking globalization and U.S. balance of payments, and foreign exchange operations. The bank also provides global economic indicators for key countries. U.S. International Trade Commission http://www.usitc.gov. On the ITC’s Web site readers can find annual reports, press releases, reports of investigations, working papers and staff research, and reports to Congress and the executive on investigations. There is an interactive tariff and trade data

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link that allows readers to access data from 1989 to the present. U.S. Trade and Development Agency http://www.ustda.gov/. The agency’s reports are available on this Web site. U.S. Trade Representative http://www.ustr.gov. USTR’s Web site provides texts of trade agreements and comments of advisory committees involving business, labor, and public-interest groups. There are also press releases, official speeches, and testimonies. Users can find annual reports on the trade agreements program and on foreign trade barriers. USA *Engage http://www.usaengage.org/. U.S.A. Engage is a coalition of business, agriculture and trade associations, formed in 1997, to promote U.S. engagement with the world and concerned about the harmful effects of unilateral U.S. sanctions. The Web site contains press releases, studies, and a report card on Congress. Vietnam. American Chamber of Commerce in Vietnam. http://www.amchamvietnam.com/399. This Web site provides news, answers to FAQs, and lists of contacts for those doing business in Vietnam. Vietnam, Ministry of Foreign Affairs http://www.mofa.gov.vn/en/. This general Web site contains information on Vietnam’s efforts to integrate into the global economy. Washington International Trade Association http://www.wita.org.

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This trade forum, founded in 1982, holds regular discussions of trade policy and related issues. The site contains resources, including a vast number of links to trade-related groups in the United States and abroad. World Bank Group http://go.worldbank.org/SD2AZHQUM0. This site provides a way to access World Bank data and research related to international trade, trade policy, and related subjects. Readers can also access certain online databases at http:// go.worldbank.org/6HAYAHG8H0. World Customs Organization http://www.wcoomd.org/. Those interested in technical tariff issues, such as nomenclature, valuation, rules of origin, and the harmonized system, should consult this site. World Economic Forum http://www.weforum.org. Each January, 1,500 top business leaders join with government leaders and scholars to discuss global issues in Davos, Switzerland. This Web site showcases their deliberations and provides videos and summaries of their discussions. World Intellectual Property Organization (WIPO) http://www.wipo.int. This Web site includes statistics and digital library of intellectual property. World Trade Law Net http://www.worldtradelaw.net. This Web site, run by two international trade lawyers based in Florida, is a portal for web sources relating to international trade law. The free version provides access to trade law articles, external links and reports of the WTO and

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GATT. There is also information about the history of WTO negotiations. World Trade Organization http://www.wto.org/. This official site provides press materials, speeches, documents, research reports, and legal texts dealing with all aspects of the WTO. There are links to guide students and researchers to basic or detailed information about the WTO and the international trading system. This Web site is an essential stop for those working on trade-policy issues.

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Glossary

Absolute advantage Adam Smith’s case for free trade in The Wealth of Nations was based on absolute advantage. In a two-country model, with capital not moving between countries, each country could benefit by specializing in the product it produced more efficiently, and engaging in trade with the other country. This remains the rationale for most international trade. Ad valorem tariff A tariff based on a percentage of the value of the good. Example: the U.S. duty on finished automobiles is 2.5 percent ad valorem. Adjustment assistance Government programs for providing training and income support to workers who lose their jobs because of imports or whose jobs are shifted to other countries. The assistance may include job search and relocation allowances, wage insurance for older workers, and a tax credit for health insurance coverage. Antidumping duty Duty placed on low-priced imports to offset the margin of dumping—that is, selling goods in one market at less than the home market. The WTO, with which U.S. law conforms, allows importing countries to impose antidumping duties only if dumping is found to cause material injury, or threat of material injury, to a domestic industry. Buy-American clause A provision in law that stipulates that government agencies shall discriminate in purchasing decisions in favor of domestic producers of goods and services. The WTO’s Agreement on Government Procurement, a plurilateral agreement binding only its 39 signatories, seeks to promote transparent purchasing and to ensure that such decisions do not discriminate against foreign suppliers. Major developing countries, such as Brazil, China, and India, are not parties to the agreement, and thus are not eligible for nondiscriminatory treatment. Comparative advantage David Ricardo’s case for free trade rested on comparative advantage, not absolute advantage. In a two-product, twocountry model, with capital immobile between countries, one country was more efficient in the production of both products, but, contrary to

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intuition, trade could still be advantageous to both countries. If the first country is relatively more efficient in the production of one good than another, both countries can specialize and benefit from trade. However, in a world where investments move easily from one country to another, it is arguable that the conditions for comparative advantage do not hold and both countries may not benefit. Countervailing duty Duty placed on imports to offset a subsidy found to cause material injury to a domestic industry. As permitted under the WTO’s agreement on subsidies and countervailing measures, the United States employs a bifurcated process in which the Department of Commerce determines whether unfair subsidies exist, and the U.S. International Trade Commission determines whether the subsidized imports cause material injury to the domestic industry. Currency manipulation The practice of certain governments, working through their central banks, to set exchange rates artificially in order to gain an advantage. It is alleged that China and Japan, among major trading countries, manipulate their currencies in order to stimulate exports and discourage imports. Current account The difference between a country’s exports of goods and services, its factor income (interest and dividends), and transfer payments (remittances of overseas workers, foreign aid), and its imports of the same items. The current-account surplus, or deficit, is considered the best measure of a nation’s economic relations with the world. Escape clause A provision in a trade agreement permitting parties to suspend portions of the agreement for a limited period of time under specified conditions. See Safeguards. Exchange rate The rate at which one currency trades for another. In the contemporary world, major currencies trade freely in the market place in response to supply and demand conditions. Occasionally, governments intervene in order to influence market forces. Many smaller countries peg their currency to one of the large international currencies—such as the United States dollar or the European euro. Fair trade This term has multiple definitions. In the context of the 2008 U.S. elections, the term was adopted by some candidates who favored renegotiating or replacing NAFTA and the WTO, and revising trade policy to give greater emphasis to the interests of workers, consumers, and the environment. Other candidates, identified with fair trade, voiced concerns about offshoring of jobs, corporate power, and the trade deficit. For some activist groups, fair trade also involves promoting more equitable trading relationships for workers in developing countries by

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certifying the products of producers who agreed to produce and trade goods in conformance with international labor standards. To international trade lawyers and government officials, the term fair trade is sometimes used for international trade conducted in accordance with trade agreements and WTO obligations. Fast-track negotiating authority An agreement between Congress and the U.S. president authorizing the executive branch to negotiate a trade agreement. In return for trade negotiating authority and regular consultations, Congress agrees to approve or disapprove any agreement within 90 days of submission without amendments. This is also known as TradePromotion Authority (TPA). Foreign investment There are two types of foreign investments. When a business from one country purchases the assets of an existing company or builds a new plant, direct investment occurs if the investor has control. When the foreign firm merely buys stock or bonds without taking control, it is portfolio investment. Free trade This is a theory in which goods and services flow from one country to another without the impediment of government barriers. Proponents of free trade show that it improves efficiency, stimulates growth, enhances consumer choice, and increases incomes. Free Trade Agreement (FTA) Contemporary free trade agreements cover far more than trade in goods and raw materials. They may also include services (everything from shipping and tourism to banking, insurance, telecommunications, and intellectual property), competition policy, labor, and environmental standards. Most so-called free trade agreements involve a substantial amount of government management in which exportcompeting industries and service providers gain improved access to foreign markets, often at the expense of import-competing industries. Intellectual property This term refers to creations of the mind, such as inventions, books, plays, musical works, recordings, movies, and designs. Managed trade When governments restrict flows of goods and services across borders, they manage trade. Many so-called free trade agreements are in fact managed trade agreements because they contain provisions limiting market access. It is arguable that regional agreements like NAFTA and CAFTA, and bilateral FTAs, are actually managed trade agreements. Mercantilism During the 16th, 17th, and 18th centuries, the major European nation states practiced an economic policy of mercantilism. That is, they used the power of the government to promote exports of manufactures and to discourage imports, while accumulating monetary reserves in the form of gold. In this scheme, colonies existed to serve the mother

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country with raw materials and to consume its manufactured exports. In the contemporary world, China and Japan are sometimes accused of practicing mercantilism and they generate huge trade surpluses while amassing monetary reserves. Most-favored-nation principle

See Nondiscrimination

Multilateralism In trade policy, multilateralism refers to negotiations under the auspices of the WTO, the successor to GATT, where each nation—no matter what its population or share of world trade—is treated equally. Multinational corporation A multinational, or transnational, corporation manages business units in at least two countries. The two terms— multinational and transnational—are generally used interchangeably. National treatment One of the fundamental principles of the GATT/ WTO system is that once goods have entered a country and cleared customs, they are treated like domestically produced goods. Otherwise, regulations might be used to protect domestic producers and to nullify the benefits of trade negotiations. Neoliberalism In trade and economic policy, neoliberalism represents a new form of liberalism that hearkens back to the laissez-faire policies of Adam Smith and David Ricardo. Neoliberals embrace free trade and deregulation of the economy. They celebrate privatization, the free market, and the accumulation of wealth. Net international investment position For a country, this is the difference between the amount of foreign assets (debt and equity) its residents and governments own and the amount of domestic assets that foreign residents and governments own. A creditor nation is one with a surplus, a debtor nation is one with a deficit. The United States currently is the world’s largest debtor nation. Nondiscrimination The principle of nondiscrimination is the cornerstone of the GATT/WTO international trading system. Often described as the most-favored-nation principle, it is a legal obligation to provide equal treatment to all nations who are party to the agreement. When nondiscrimination is unconditional (unconditional most-favored nation policy) as under the WTO, nations are treated alike whether or not they make reciprocal concessions. In the past, this has benefited free riders, nations that seek to benefit from the concessions of others while making few of their own. When nondiscrimination is conditional, benefits are accorded only to the members who provide reciprocity. The principle of nondiscrimination has two fundamental exceptions: one involves regional trading groups, such as the European Union and NAFTA, and the other involves preferences for developing countries. Nontariff barrier These are barriers to trade, such as quotas, and health, safety, and sanitation restrictions.

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Offshoring Offshoring involves shifting business activities from one country to another, frequently to reduce labor costs. If a firm shifts the activity abroad to another company, it is offshore outsourcing. Outsourcing This involves transferring a business activity to a subcontractor. If the subcontractor is abroad, this is offshore outsourcing. If the subcontractor conducts performs the task domestically, it is onshore outsourcing. Permanent Normal Trade Relations (PNTR) This term refers to the U.S. obligation to provide most-favored-nation treatment to other members of the GATT/WTO system. To qualify for PNTR, a foreign nation must not discriminate against the rights of its citizens to emigrate (Jackson-Vanik) and it must negotiate a bilateral accession agreement with the United States. Protectionism Those who wish to shelter domestic firms and workers from foreign competition are called protectionists. While economic selfinterest is often a motivating factor, some protectionists take this position to preserve traditional ways of life (such as farming), others have political goals such as preserving sovereignty, local autonomy, or national security. Quota A quota is a quantitative limit on the amount of a good that may be imported or exported. Reciprocity The negotiating objective of gaining concessions from trading partners equal to the concessions given up. Safeguards The GATT/WTO regime allows nations to impose temporary trade restrictions to protect industries injured from increased imports. Specific duty A tariff imposed on the quantity of a good, such as 5 cents a pound. Supply chain A system for transforming raw materials and components into finished goods for customers. In the contemporary world, large corporations search the world for raw materials where they are cheapest, transport them to locations where labor is least expensive for assembly into finished products, and then transport the final product to retailers and consumers. Tariff A tax imposed on imports, or on occasion exports. A revenue tariff is one primarily intended to generate revenue for the government, whereas a protective tariff is one intended to shelter domestic industry from foreign competition. A bound tariff is one that a country has committed not to raise beyond a specified point. Trade balance The merchandise trade balance of a nation is the difference between its exports and imports. The current account balance is a broader measure that also takes into account trade in services, interest and dividends, and unilateral transfers.

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Trade liberalization

This involves reducing barriers to trade.

Trade-promotion authority (TPA)

See Fast-track negotiating authority.

Transnational corporation See Multinational corporation. Unconditional most-favored nation policy See Nondiscrimination.

Index

Adams, John, 8 African Development Bank, 189 Alliance for American Manufacturing (AAM), 44 – 45, 60, 244 Alternative Trade Adjustment Act (ATAA), 221 Amalgamated Clothing and Textile Workers Union, 25 American Farm Bureau (AFB), 53, 62, 244 – 245 American Federation of LaborCongress of Industrial Organizations (AFL-CIO), 245 – 246 American Manufacturing Trade Action Coalition (AMTAC), 44, 188, 246 Argentina, 7, 92 Association of South East Asian Nations (ASEAN), 92, 118, 119, 145 Australia, 104; China’s role in, 121; contemporary trade patterns of, 93; foreign policy in, 30; Japan’s trade with, 104; multilateral trade liberalization in, 15; protectionism in, 5; World Trade Organization’s role in, 112 Automotive Products Trade Agreement (APTA), 21

Ball, George, 17 Bank for International Settlements, 95, 188 Banking liquidity crisis, 7, 96 Barshefsky, Charlene, 48, 144, 224 –228 Battle of Seattle, 26 –27 Baucus, Max, 51, 53, 155 –156 Baumol, William, 4 Beef imports, 51–52 Bello, Judith, 26 Bergsten, C. Fred, 61 Bhagwati, Jagdish, 56, 64, 66, 122, 185 Bhatia, Karan, 57 Bilateralism, 20, 116 –122 Blinder, Alan, 38 Boeing, 27, 51, 60, 169, 205 Bolivia, 29, 30 Brady, Kevin, 156 –157 Brazil, 103–104; China’s role in, 99; environmental trade in, 68; Free Trade Area for America’s role in, 29; free trade fault line in, 41; Group of Twenty’s role in, 114; human rights and trade in, 86; South Africa’s role in, 106; trade patterns in, 8; trade strategies in, alternative, 121–122; World Trade Organization, negotiations with, 52 Brock, Bill, 20, 24, 139

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334

Index

Brown, Sherrod C., 47, 55, 157–158 Buis, Tom, 53 Bureau of Economic Analysis, 187 Bureau of Labor Statistics (BLS), 38, 187, 270 –271 Bureau of the Census, 187, 267 Bush, George W., 11, 21, 28, 30 –31, 37, 40, 46, 172 Business Roundtable (BR), 9, 25, 40, 246 –247 Business Software Alliance (BSA), 247 CAFTA-Dominican Republic (CAFTA), 30 –31, 37, 55, 149 Cairns Group, 101, 104, 113 –114 California, 47 Camp, Dave, 158 –159 Canada, 100 –101; China’s role in, 58; economic recovery in, 78; free-trade initiatives in, 20; high tariffs in, 12–13; Japan’s trade with, 101; trade patterns in, 8; trade strategies in, alternative, 120 Carter, Jimmy, 19, 139, 182 Cassidy, Robert, 28, 56, 59 Castro, Fidel, 62, 65 Caterpillar, 9, 27, 50, 60, 205, 252 CATO Institute, 248 Center for Economic Policy and Research (CEPR), 248 –249 Center for Public Integrity, 10 Chamber of Commerce of the United States (COC), 9, 249 Chang, Ha-joon, 5 Chavez, Hugo, 29, 48, 50 Chevron, 51 China, 99–100; Australia’s role in, 121; Brazil’s role in, 99; Canada’s role in, 58; deficit in, 6; European Union’s trade with, 6, 99; high tariffs in, 12; India’s role in, 77; Japan’s trade with, 99; merchandise trade surplus

in, 6; trade debate, responding to, 58 – 62; trade liberalization in, 43; trade strategies in, alternative, 120 –121; and U.S. deficit, 6; World Trade Organization admission, 27–28 China Currency Coalition, 59, 61 Citigroup, 50, 51 Citizen’s Global Trade Watch (GTW), 23, 63, 260 Citizens Trade Campaign (CTC), 44, 250 Citizen Trade Watch, 26, 31, 57, 69, 145, 183 Civil War, 12, 131, 170 Clay, Henry, 12 Climate strategy, 69–70 Clinton, Bill, 23, 25, 29, 37, 40, 46, 142 Clinton, Hillary, 39, 153 Club for Growth, 59– 60 Coalition of Service Industries (CSI), 250 –251 Cobden, Richard, 12, 130 –131 Cobdenites, 12 Cold War, 1, 16, 28, 91–92 Colombia, 39, 48 Columbia University, 49–50 Committee on Finance, 155, 181, 269 Common Agricultural Policy (CAP), 97–99, 136, 182 Communist Party, 27, 58 Consumer Electronics Association (CEA), 54, 251 Consumer goods, 8, 38, 43, 200, 205 Corn laws, 12, 130 Cuba, 13, 15, 30, 62, 65, 176 Cuban trade, 62– 63 Customs and Border Protection (CBP), 270 Dairy importation, 73, 77, 111 Deficit, 6 – 8, 194

Index

De Gotari, Carlos Salinas, 21 Dingley Tariff (1897), 13, 132 Dispute settlement, 24, 115 –116 Dobbs, Lou, 38, 159– 60 Doha Development Round, 30, 52, 54, 57, 112–113, 116, 178, 185 Dorgan, Byron, 47, 55 –56 Drugs, 73 Economic partnership agreements (EPA), 117, 119 Economic Policy Institute (EPI), 43, 57, 188, 251–252 Economic recovery, 77–78 Emergency Committee for American Trade (ECAT), 40, 252 Engler, John, 51 Environmental trade, 67–70 European-American Business Council (EABC), 253 European Bank for Reconstruction and Development, 189 European Common Market, 17, 92, 122 European Community, 24, 109, 182 European Economic Community (EEC), 17, 136 European Union (EU), 30, 97–99, 117–119; Cairns Group’s role in, 113; China’s trade with, 6, 99; dairy importation in, 77; Group of Thirty-Three’s role in, 115; Group of Twenty’s role in, 114; India’s trade with, 105; Internet gambling in, 71; Japan’s trade with, 100; merchandise trade surplus in, 6; Mexico’s trade with, 101–102; Russia’s trade with, 102; seafood importation in, 73; South Africa’s trade with, 106; World Trade Organization negotiations, 52 Export-competing companies, 9

335

Fair-trade, 5 Fast-track, 45 – 46 Federal Reserve, 7– 8 Federalism, 47 Federation of International Trade Associations, 188 Focus on the Global South (Focus), 253 –254 Food and Drug Administration (FDA), 73, 269–270 Fordney-McCumber Act of 1922, 13 Foreign energy supplies, 196 Foreign investment, 194 Foreign markets, 41 Foreign policy, 30 Fortune magazine, 38 Franklin, Benjamin, 9 Free trade, 2– 4; defined, 2; regional and bilateral, 28 –31; shortcomings of, 3 – 4 Free trade agreement (FTA), 37; Canadian, 20; U.S.–Colombia, 49–50; U.S.–Panama, 50; U.S.– South Korea, 50 –52 Free Trade Area for the Americas (FTAA), 29, 30 Free trade fault line, 40 – 45 Free-trade initiatives, 19–21 Friedman, Milton, 3 Friends of the Earth (FOE), 69, 254 Geithner, Timothy, 160 –161 General Agreement on Tariffs and Trade (GATT), 15 –16, 91 Generalized System of Preferences (GSP), 109 Gingrich, Newt, 46 Global recession, 7, 59 Global Trade Watch, 43 Globalization, 38, 39, 93 Gomory, Ralph, 4 Grassley, Charles (Chuck), 53, 161–162

336

Index

Great Britain, 14 Great Depression, 11, 12, 13, 42, 45 Griswold, Daniel, 56 Gross domestic product (GDP), 93 Group of Thirty-three (G-33), 114 –115 Group of Twenty (G-20), 114 Gulf Corporation Council (GCC), 120 Hale, David, 96 Hamilton, Alexander, 11, 162–163 Harding, Warren, 13 Harrison, Benjamin, 11 Hartquist, Skip, 61 Hastert, Dennis, 30 –31 Hawkins, William, 99–100 Hawley, Willis, 13 High tariffs, 4 –5, 12–13 Hills, Carla A., 21, 24, 218 Hoover, Herbert, 77 House of Representatives, 19, 29 House Ways, 13 Hufbauer, Gary, 218 Hull, Cordell, 11, 14, 45, 163 –164 Human rights, 64 – 67, 86 Import restrictions, 10 Import-competing companies, 9 Import-sensitive manufacturers, 44 Importation, 72–73 India, 105 –106, 121; China’s role in, 77; Doha Round’s role in, 52, 54; European Union’s trade with, 105; globalization in, 93; World Trade Organization’s role in, 112 Industrial piracy, 8 Institute for Agriculture and Trade Policy (IATP), 254 –255 Inter-American Development Bank Group, 189 International Chamber of Commerce (ICC), 42, 256

International Energy Agency, 188 International Intellectual Property Alliance (IIPA), 255 International Labor Organization, 49, 66 International Monetary Fund, 5, 7, 15, 26, 188 International trade, 8 International trade law, 75 Internet gambling, 71 Isolationism, 42 Israel, 15, 20, 57 Japan, 30, 100, 119–120; Australia’s trade with, 104; Canada’s trade with, 101; China’s trade with, 99; deficit in, 7; European Union’s trade with, 100; free trade in, 4; high tariffs in, 12; Mexico’s trade with, 102; multilateral trade liberalization in, 15 –16; protectionism in, 5; South Africa’s trade with, 106; trade patterns in, 8; World Trade Organization’s role in, 52 Jefferson, Thomas, 8, 11 Job losses, 38 Kantor, Mickey, 24, 40, 70 Kearns, Kevin, 44 Kennedy, John F., 17 Kennedy Round, 17–18 Kennedy Round Congress, 45 Kentucky Whig, 12 Kernaghan, Charles, 209 Kirk, Ron, 40, 165 Krueger, Anne, 5 Krugman, Paul, 4 Labor costs, 197 Labor unions, 47 Lamy, Pascal, 45, 166 Latin America, 30 Latin American Trade Coalition, 50 Lee, Thea, 44

Index

Levin, Sander (Sandy), 166 –167 Liberalization, 29, 38, 43 Lighthizer, Robert, 76 List, Friedrich, 5, 167–168 Locke, Gary, 169–170 London Economic Conference (1933), 13 Long, Russell, 17 Madoff, Bernie, 44 Manufacturing job losses, 38, 205 McKinley, William, 11, 131, 170–171 McMillion, Charles, 58 Means Committee, 13 Merchandise trade, 94 Merchandise trade deficit, 6, 153, 202, 205 Merchandise trade surplus, 6 Mercosur, 92 Methanex, 47 Mexico, 101–102; European Union’s trade with, 101–102; Group of Thirty-Three’s role in, 114; Japan’s trade with, 102; North American Free Trade Agreement’s role in, 21–22; trade patterns in, 8; World Trade Organization’s role in, 115 Middle East, 30 Middle East Free Trade Initiative (MEFTA), 30 Ministry of International Trade ( Japan), 16 Mishel, Lawrence, 43 Moore, Mike, 112 Morrill, Justin Smith, 12, 131, 171–72 Motion Picture Association of America (MPAA), 54, 256 –257 Mulroney, Brian, 22 Multilateral trade liberalization, 15 –17 Multinational corporations, 43 Myrdal, Gunnar, 5 Myung-bak, Lee, 51

337

Nader, Ralph, 26 Napoleonic Wars, 12 National Association of Manufacturers (NAM), 9, 40, 188, 257–258 National currency, 7 National Family Farm Coalition (NFFC), 53 National Farmers Union (NFU), 53 National Foreign Trade Council (NFTC), 40, 52, 258 National Labor Committee (NLC), 66, 209–212, 258 –259 National Labor Committee for Worker and Human Rights, 66 National Trade Estimate Report on Foreign Trade Barriers (report), 59 Net earnings, 194 New York Times (magazine), 4, 74 Nixon, Richard, 45 Nongovernmental organizations (NGOs), 69 North American Free Trade Agreement (NAFTA), 21–23, 46 Obama, Barack, 39– 40, 44, 45, 64, 78 Offshoring, 38 Oil exportation, 191 Organization for Economic Cooperation and Development (OECD), 188 Organization of the Petroleum Exporting Countries (OPEC), 92 Organized labor, 43 – 44, 48, 53 Otabe, K., 16 Ottawa, 21 Outsourcing, 38 Oversea investment earnings, 6 Oxfam America, 259 Panama, 50 Panitchpakdi, Supachai, 112

338

Index

Paris Convention for the Protection of Industrial Property, 9 Patents, 9 Paul, Ron, 71 Paulson, Henry (Hank), 172–173 Pelosi, Nancy, 48, 173 –174 Pending agreements, 48 –56 Pentagon, 58 People’s Republic of China, 58 Permanent Normal Trade Relations (PNTR), 27 Peterson Institute for International Economics (PIIE), 259–260 Petroleum, 8 Pew Research Center, 10 Pharmaceutical patents, 10 Philippines, 13 Pierce, Franklin, 12 Pirating, 102–103 Prebisch, Raul, 175 –176 Private finance, 95 Private investment, 95 –96 Protectionism, 4 – 6 Public opinion, 10 Quebec, 21, 27 Rangel, Charles, 176 –177 Ratzenberger, John, 45 Raw materials, 8 Reagan, Ronald, 28 Reciprocal trade, 13 –15 Recording Industry Association of America (RIAA), 54, 261 Regionalism, 116 –122 Reinsch, Bill, 52 Ricardo, David, 2, 177–178 Roosevelt, Franklin D., 13 –14, 77 Rosen, Howard E., 221 Russia, 102–103; banking liquidity crisis in, 96; European Union’s trade with, 102; free trade fault line in, 41; importation in, 77; multilateral trade liberalization in, 15

Safety, 71–74 Samuelson, Paul, 4 Schwab, Susan, 11, 178 –179 Seafood importation, 73 Seattle Convention Center, 26 Senate, 19 Senate Finance Committee, 12, 17, 19 Separation of powers, 10 –11 Service trade, 6 Sheinkman, Jack, 25 Sierra Club, 265 Smith, Adam, 2, 179–180 Smoot, Reed, 13, 180 –181 Smoot-Hawley Tariff (1930), 13, 42 South Africa, 106 –107; Brazil’s trade with, 106; Cairns Group’s role in, 113; European Union’s trade with, 106; Group of Twenty’s role in, 114; Japan’s trade with, 106; World Trade Organization’s role in, 112 South American Mercosur, 29 South Korea, 50 –52 Sovereignty, 70 –71 Soviet Union, 15 Special trade representative (STR), 17 State Department, 14, 15 Stiglitz, Joseph, 26 Strauss, Robert S., 19, 181–182 Strengthening Trade Assistance (Rosen), 221 Switzerland, 30 Taft, William Howard, 13 Tantillo, Auggie, 44, 47 Tariff Act (1930), 13, 65 Tariff reductions, 14 Terrorism, 71–72 Thailand, 7 Third World Network (TWN), 262 Tokyo Round, 18 –19, 108 –109 Trade: debating gains and losses from, 56 –58; and economic recovery, 77–78;

Index

and environment, 67–70; and human rights, 64–67; and safety, 71–74; and sovereignty, 70–71 Trade Act of 1974, 18 Trade Act of 2002, 69 Trade adjustment assistance (TAA), 63 Trade Agreement Act (1979), 19 Trade debate. See also Trade: background on, 37–39; in China, 58–62; factors shaping, 2–31; historical overview of, 11–31; pending agreements on, 48–56 Trade debate, factors shaping, 2–31; deficits, 6 – 8; fair trade, 4 – 6; free trade, 2– 4; protectionism, 4 – 6; trade patterns, 8 –9; trade politics, 9–11; trade surpluses, 6 – 8 Trade debate, historical overview of, 11–31; Battle of Seattle, 26 –27; China’s admission to World Trade Organization, 27–28; fast track, 18 –19; free trade, 19–21, 28 –31; high tariffs, 12–13; Kennedy Round, 17–18; multilateral trade liberalization, 15 –17; North American Free Trade Agreement, 21–23; reciprocal trade, 13 –15; Tokyo Round, 18 –19; Uruguay Round, 24 –26 Trade dislocated workers, 63 – 64 Trade Expansion Act (TEA), 17 Trade liberalization, 8, 43, 57 Trademarks, 9 Trade negotiations, 45 – 48, 68 Trade partners, leading, 97–107; Australia, 104; Brazil, 103 –104; Canada, 100 –101; China, 99–100; European Union, 97–99; India, 105 – 6; Japan, 100; Mexico, 101–102; Russia, 102–103; South Africa, 106 –107 Trade patterns, 8 –9; contemporary, 91–97

339

Trade politics, 9–11 Trade priorities, 39– 40 Trade-promotion authority (TPA), 45 – 47 Trade-Related Aspects of Intellectual Property Rights (TRIPS), 102 Trade-related investment measures (TRIMs), 110 Trade strategies, alternative, 116 –122; in Brazil, 121–122; in Canada, 120; in China, 120 –121; in European Union, 117–119; in India, 121; in Japan, 119–120 Trade surpluses, 6 – 8 Transitional corporations, 41– 42 Transnational business, 96 Treaty of Rome (1957), 98 Trowbridge, Alexander, 18 Tyler, John, 11 Unilateral transfers, 6 United Nations Conference on Trade and Development (UNCTAD), 109, 188, 262–263 UN Food and Agricultural Organization, 188 United Parcel Service (UPS), 51 U.S. Business and Industrial Council Educational Foundation, 263 U.S. Chamber of Commerce, 42, 50 US-China Business Council (USBC), 188, 263 –264 U.S.–China Economic and Security Review Commission, 212–213 U.S.–Colombia, 49–50 U.S.–Colombia FTA, 49–50 U.S. Constitution, 26 U.S. Consumer Product Safety Commission, 74 U.S. Council for International Business (USCIB), 40, 42, 265 –266

340

Index

U.S. Department of Agriculture (USDA), 73, 266 U.S. Department of Commerce: Bureau of Economic Analysis, 267–268; Bureau of the Census, 267; International Trade Administration, 268 U.S. Department of Commerce (DOC), 76, 268 U.S. Department of Energy (DOE), 268 –269 U.S. Department of State (DOS), 271 U.S. Department of Transportation (DOT), 271–272 U.S. Department of Treasury, 272–273 U.S. International Trade Commission (USITC), 19, 75 –76, 273 U.S.–Panama free trade agreement, 50 U.S.–South Korea free trade agreement, 50 –52 U.S. Trade and Development Agency (USTDA), 273 –274 U.S. Trade Deficit Review Commission, 6 U.S. trade issues: background and history of, 1–31; problems with, controversies and solutions to, 37–78; worldwide perspective on, 91–123 U.S. trade laws, 74 –77 U.S. Trade Representative (USTR), 10, 11, 29, 274 U.S. Treasury, 7; bonds, 8; International Bank for Reconstruction and Development, 15 United Steelworkers, 60 Uruguay Round, 24 –26, 109–112

Venezuela, 29 Vietnam War, 18 Wage stagnation, 205 Wal-Mart, 42, 50, 58 Wall Street, 40 Wallach, Lori, 26, 31, 47, 57, 70, 183 War of 1812, 12 Watergate scandal, 18 Ways and Means Committee, 264 Wealth of Nations, The (Smith), 2 White, Sir Eric Wyndham, 184 White collar workers, 38 Wilson, Woodrow, 13 World Bank, 26 World Customs Organization (WCO), 274 –275 World Economic Forum (WEF), 275 World Intellectual Property Organization (WIPO), 275 –276 World Trade Organization (WTO), 25, 107–16, 276 –277; Australia’s role in, 112; Brazil’s negotiations with, 52; Cairns Group’s role in, 113 –114; China’s admission to, 27–28; dispute settlement, 115–116; European Union’s negotiations with, 52; Group of Thirty-Three’s role in, 114 –115; Group of Twenty’s role in, 114; India’s role in, 112; Japan’s role in, 52; leadership transition in, 112–113; Mexico’s role in, 115; South Africa’s role in, 112; and Tokyo Round, 108–109; and Uruguay Round, 109–112 World War II, 14 –15 Yeutter, Clayton, 24 Zoellick, Robert, 29, 56, 185 –186

About the Author

Alfred E. Eckes, Jr., is Ohio Eminent Research Professor at Ohio University in Athens. He is a former chairman and commissioner of the U.S. International Trade Commission and the author of several books on U.S. trade policy.