Free Trade: Why AFL-Cio, the Sierra Club and Congressman Gephardt Should like It

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Jagdish Bhagwati [*]

Introduction

Last year, the President lost his bid for fast-track legislation, necessary for further trade liberalization within a framework of negotiations (as distinct from "going alone" and liberalizing unilaterally), for a variety of reasons.

Some had to do with himself. The credibility of his promises, relevant to the fast-track vote since he would have to "buy" support from skeptical Democrats, had been badly bruised by the fact that some of the promises he made during the perilously close NAFTA vote were forgotten but the betrayed Congressmen had not forgotten. [1]

Others included a legacy from an unfortunate, if inherited, flirtation with regional and as distinct from multilateral and MFN-based trade liberalization. While the President is widely credited by the pro-free-trade media and by unsophisticated economists with his success on NAFTA (a Preferential Trade Agreement par excellence and hence to be decried in itself by multilateral free traders such as myself), [2] it was in fact a Pyrrhic victory from the viewpoint of further trade liberalization. In particular, the NAFTA debate had crystallized, in a way that the multilateral (distinct from preferential) trade negotiations, such as the Uruguay Round rarely do, with the fears of workers and labor unions that freer trade with all but rich countries would imperil their real wages. Thus, the widespread perception that impoverished, illegal workers were streaming across from Mexico and driving down our wages led many to argue, quite correctly from an analytical viewpoint, that freer trade with Mexico would be an indirect way that this would happen. [In fact, in the impassioned national debate over the imposition of the first-ever national immigration legislation in 1905 by the English Parliament, the free traders were also free immigrationists, whereas the protectionists were also for immigration restrictions.] [3]

By contrast, the Uruguay Round raised few such worries: the diversity of issues, the multitude of countries, and the lack of political salience of the vastly greater poverty of countries other than Mexico, were guarantors of equanimity over the issue of trade with poor countries and its immiserizing effect on our own poor. [4] One serious legacy of NAFTA (whose advisability to a multilateralist such as myself is suspect anyway), therefore, was the plague it visited on future trade liberalization, by accentuating and politicising these fears (however unjustified, as I argue below) and aligning the unions and their congressional supporters against the further freeing of trade and against the passage of fast-track legislation to advance such efforts without serious qualifications and safeguards that many of us would regard as creating new obstacles to trade.

As it happens, the cause of freer trade is under threat today from precisely fears such as those of the unions over the living standards of the workers and those of environmentalists who are afraid that free trade will harm the environment: and John Sweeney of AFL-CIO and the Sierra Club, among many NGOs, happen to be afflicted by these fears and have turned them into an anti-free-trade agenda. Complementing these fear-induced opponents of Free trade are also the NGOs who seek to "piggyback" on trade institutions and trade-liberalization efforts to simply advance their social agendas, thus raising a very different set of threats to Free Trade.

But the protectionist viewpoint, never absent from the scene even in our classrooms ever since Adam Smith invented the case for Free Trade, is also to be reckoned with since it defines the broadly skeptical backdrop against which these fears are played out, especially by politicians such as Congressman Gephardt (though, I must say, he has lately begun to talk, perhaps for prudential reasons, less like a true-blooded protectionist who challenges the case for Free Trade and more like the fearful NGOs just cited). …