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The Wrong Way to Free Trade

Author: Jagdish N. Bhagwati, Senior Fellow for International Economics
July 25, 2011
New York Times

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Late last week, a longstanding debate over free-trade agreements with South Korea, Colombia and Panama — deals that were negotiated under President George W. Bush but never finalized — stalled once again. President Obama supports the agreements, but only if more retraining for workers is part of the deal, a condition Republican leaders are resisting.

Both sides claim to advance the trade agenda, but they are fighting over fairly minor points. Neither side shows the slightest interest in reinvigorating the nearly 10-year-old Doha round of global trade negotiations, which have far greater potential to create prosperity and help working Americans.

Bilateral trade agreements are not the same as free trade. Yes, they liberalize trade for the parties involved, but outsiders then face a handicap. The discrimination comes in the form of barriers like tariffs and antidumping charges, which countries impose on imports that they believe are priced artificially low.

When the United States negotiates bilateral deals with other countries, the unbalanced nature of the one-on-one negotiations also opens the way for all manner of lobbies to ram their self-serving demands into the agreements.

For example, when Washington negotiated free trade deals with Chile and Singapore, Wall Street lobbied to curtail those countries' right to impose restrictions on capital flows at times of crisis — even though the International Monetary Fund now admits that such restrictions often make sense. Business lobbies have also pressed for excessively favorable treatment on intellectual property rights.

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