The American Enterprise Institute Presents ... Free Trade Foreign Policy; How Trade Myths Impede a Key US Policy Tool

By Levy, Philip I. | Harvard International Review, Fall 2011 | Go to article overview

The American Enterprise Institute Presents ... Free Trade Foreign Policy; How Trade Myths Impede a Key US Policy Tool


Levy, Philip I., Harvard International Review


For at least tour years, bilateral free trade agreements (FTAs) have been a battleground over which US trade skeptics and trade proponents have skirmished. While three such agreements--with South Korea, Colombia, and Panama--were condemned to a policy purgatory, the accord with Peru came into force in early 2009. That deal thus offers the best and most recent opportunity to separate the growing myths about FTAs from the more realistic benefits that such deals can offer to the United States. The Peru deal did not cast low-wage US workers into the streets, nor did it play any role in undermining the shaky global trading system. Instead, it helped solidify economic reforms that Peru had undertaken already, paved the way for Peru's formal integration into the world economy, drew investment into that country at a difficult time, and promised to cushion the blow when a one-time US antagonist ascended to the country's presidency. While Peru is not necessarily representative of all US FTA partners, these benefits are fairly common among developing countries, the most controversial partners. By projecting its economic insecurities onto these FTAs, the US polity has needlessly denied the country a vital foreign policy tool.

Part of the problem in discussing the impact of trade agreements on the United States is that discourse is dominated by an antiquated view of what a trade agreement does. In this conception, we imagine a pair of countries who hitherto have used tariffs and quotas to shield domestic industries from imports. The trade agreement promises to tear down these barriers and let low-cost goods flow-back and forth. As it has for centuries, this prospect of liberalization stokes fears: how can a high-wage economy compete with a low-wage one? Will this spur a race-to-the bottom for labor or environmental standards? Will we be rewarding the partner country for practices we find objectionable?

These are all fine questions, but the premise is badly flawed. The US economy is already broadly open to goods and services from other countries. That has been one of the secrets of our success. Furthermore, the US economy has been particularly open to exports from certain developing countries, whose prosperity we particularly care about. For example, the US government was eager to provide legitimate and viable market access to Peru as an alternative to the lucrative, but highly problematic, marker for narcotics. Thus, the United States adopted a set of trade preferences for Andean nations that reduced trade barriers below already-low levels. The upshot was that in 2006, the year the US-Peru Trade Promotion Agreement was signed, 98 percent of Peruvian exports to the United States entered without any tariff costs. This was years before any provisions of the new agreement came into effect, .so the trade agreement hardly constituted a closed door reluctantly swinging open.

Peru was not unique in this regard. Colombia has had access through the same programs. Panama and the countries in the contentious Central American Free Trade Agreement enjoyed similar access through the Caribbean Basin Initiative. This pervasive gap between perceived and actual liberalization of the US market through these FTAs resulted in a jarring disconnect between alarmist rhetoric and the more sober analysis of the non-partisan US International Trade Commission (ITC). The TIC is required to present Congress with an analysis of proposed trade agreements, including an estimate of their likely effects on the US economy. For the agreement with Peru, the ITC estimated that two US sectors would bear the brunt of the liberalization impact. Metals, not elsewhere classified, would see an employment drop of 0.16 percent; paddy (unprocessed) rice would see a fall of 0.12 percent. These were the only two sectors where employment drops were predicted to exceed 0.10 percent.

On balance, the ITC predicted that the Peru agreement would have a small, positive effect on the US economy. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

The American Enterprise Institute Presents ... Free Trade Foreign Policy; How Trade Myths Impede a Key US Policy Tool
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Author Advanced search

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.