Five US reasons for liberalizing trade
By Robert B. Zoellick, US Trade Representative
The International Herald Tribune
November 8, 2001

Washington, 7 November 2001 - The events of the past century demonstrate how trade can deliver tremendous benefits to countries that open their markets to foreign competition and challenge businesses to market their goods and services around the world. But the past century also reveals that there is a high price -- economic and political -- when support for free trade withers. This experience points to the importance of moving forward with trade liberalization. Doing so would open the way for increased development, entrepreneurship, innovation, growth, and ideas to shape the course of globalization.

By opening markets, we can strengthen forces that will help bind nations and peoples together through the peaceful exchange of goods, services, capital and ideas. That is one reason why Albania, Croatia, Georgia, Jordan, Lithuania, Moldova, and Oman have joined the WTO in the past two years, and why China and Taiwan will be invited this week to join.

Building support for free trade has been a top priority for the Bush Administration. President Bush has promoted a strategy to expand trade and investment globally, regionally, and with individual countries -- reaching out to both developed and developing nations. Our strategy serves five principal purposes.

First, by moving forward with trade liberalization, we can signal that there is an international coalition for openness and growth that respects core values. The tragic events of September 11 have given our work a renewed urgency. America and the world have been attacked by a network of terrorists who are masters of destruction, but failures at construction. They stand for intolerance and abhor openness. The international market economy -- of which trade and the WTO are vital parts -- offers an antidote to this violent rejectionism. Trade is about more than economic efficiency; it reflects a system of values: openness, appreciation of differences, peaceful exchange, opportunity, inclusiveness and integration, mutual gains through interchange, freedom of choice, governance through agreed rules, and a hope for betterment for all peoples and lands.

Second, America's ability to sustain coalitions against terrorism will depend in part on our attention to the problems faced by our partners. Many democratic governments in developing nations, already struggling with economic challenges before September 11, now face staggering difficulties. Countries throughout Latin America and Asia, and increasingly nations in Africa, depend on trade with G-7 nations for growth. Through August, the dollar value of trade by the United States, Japan, and Canada had declined 3.6 percent compared to a year earlier. During the same period last year, the trade of these nations was up more than 19 percent. If this trend continues for the United States, as I expect it will, 2001 will be the first year since 1982 that U.S. trade numbers will actually fall.

Third, trade liberalization presents the greatest opportunity for developing nations. They will find, as many nations already have, that trade facilitates greater economic integration and political cooperation with the developed world, while introducing new ideas, investments, business networks, production methods, and technologies.

Building a fairer, rules-based trading system is critical as developing nations seek greater economic opportunity and political stability. As President Bush has said, "Trade creates jobs for the unemployed. When we negotiate for open markets, we are providing new hope for the world's poor. And when we promote open trade, we are promoting political freedom. Societies that open to commerce across their borders will open to democracy within their borders."

A recent World Bank study examined developing countries that opened themselves to global competition, and those that did not. It concluded that the income per person in globalizing developing countries grew more than three-and-a-half times faster than it did in non-globalizing developing countries. The absolute poverty rates for globalizing developing countries fell sharply over the past 20 years, while the income levels of the lowest income households grew in line with the overall economy.

The trade liberalization ushered in by the Uruguay Round highlights the potential of more trade for developing nations. In the six years following completion of the Uruguay Round, exports from developing nations grew by nearly $1 trillion, to a level of $2.4 trillion. With continued trade liberalization, we can create more opportunities, for more people, in nations throughout the world.

A study by Joseph Francois, of Erasmus University in Rotterdam, forecasts that completion of new negotiations would generate approximately $90-190 billion a year in the form of higher incomes for developing nations. In particular, liberalization of the global agriculture market - a top priority for the United States - is arguably the single greatest contribution that new negotiations can make to poverty alleviation in the developing world. The U.S. Department of Agriculture has estimated that complete elimination of distortions in the agriculture trade would produce a 27 percent increase in the annual agriculture exports of developing nations.

These benefits from more trade are not denominated in dollars alone. Open trade advances political reform. Open trade swells the ranks of independent businesses, and can reduce the level of government intervention in national economies throughout the world. And improved trade rules help to level the playing field for developing nations and create the institutions that support economic development.

As the United States and our trading partners pursue free trade, we need to do so in a way that is consistent with our values and draws on our compassion. For example, the Bush Administration is implementing a flexible policy on intellectual property as it relates to medicines to treat HIV/AIDS and other pandemics. This flexibility, afforded by the major international trade agreement on intellectual property, enables countries and companies to help deal with this tragic pandemic by encouraging low-cost access to critical medicines. At the same time, the preservation of intellectual property rules ensures incentives to develop medicines and biotechnology that can help us cure and treat diseases that have plagued humankind since our origin.

We recognize that some of the least-developed countries in the WTO find it difficult to fully comply with the pharmaceutical patent rules governing world trade. In response to these difficulties, the United States has proposed granting the least developed countries a 10-year extension, to 2016, to come into full compliance with all pharmaceutical-related patent obligations under the TRIPs agreement. We have also proposed a moratorium of at least five years on WTO challenges to the action of other sub-Saharan African developing nations as they respond to HIV/AIDS, infections related to AIDS, and other health crises, such as malaria and tuberculosis.

Fourth, opening markets is important for economic recovery in the short run and for economic growth over time. It will also enhance productivity and efficiency, while helping to keep inflation in check. A signal that the world's trading nations are committed to open markets -- and that they will resist protectionism -- would inject additional confidence and energy into financial markets. Businesses will focus more on opportunities to be created and less on competition to be thwarted.

After all, there is a bicycle theory for trade: If the trade liberalization process does not move forward, it will, like a bicycle, be pulled down by the political gravity of special interests. To counter the slippage, some nations are turning to regional and bilateral agreements. By seeking to promote open markets on multiple fronts - globally, regionally, and with individual countries - the United States hopes to create a competition in liberalization that counters the political gravity of protectionism.

Trade liberalization is also needed to affirm the WTO, which is falling behind developments in the world economy. It needs new negotiations to keep up. Since the completion of the Uruguay Round in 1994, international commerce has been transformed by new technologies, networks, business models, and investment patterns. It has also been buffeted by financial crises and other economic shocks. Governments are under increasing pressure to protect local producers.

Fifth, trade liberalization will be an engine of global economic growth that benefits families around the world. In America, the market openings implemented as part of the Uruguay Round and the North American Free Trade Agreement generate annual benefits of $1300- $2000 for the average family of four. The numbers may differ in other nations, but it is clear that opening markets through global trade liberalization can deliver hefty tax cuts for families who are watching their budgets throughout the world. And the biggest beneficiaries of increased trade are those with lower-incomes, as they are the least able to afford the higher prices for food, clothing, and appliances.

While great progress has been made in opening markets in recent years, continued progress is not preordained. The world economy of about a century ago also held out the promise of great technological change, trade flows, and economic integration similar to the forecasts of today. But the world's leading trading nations chose the wrong course, and it took the second half of the century to overcome the disastrous mistakes of the first 50 years.

At the dawn of this new century, we again have a choice of ideas. Which ones will triumph -- those of fear, destruction, and dwindling dreams -- or those of humankind's untapped potential, its aspirations, and the creative energy of free peoples seeking better lives? We can let the hopes of a new generation slip away amidst disputes, narrow interests, and insecurities. Or we can build on the momentum of the past 50 years, championing ideas that lead to opportunity and growth, and setting a course of increased peace and prosperity for the world, not just for a year or two, but for decades to come.

Robert B. Zoellick is the U.S. Trade Representative.

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