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.
American labor unions have learned these same tricks, urging Democratic legislators and administrations to block bilateral trade deals unless their demands for labor protections are met, as they did with the three long-delayed agreements now pending.
But larger countries with more clout, like India and Brazil, will allow no such provisions. They correctly see these labor provisions as a form of anticompetitive protectionism. And they point out that it takes chutzpah for the United States to argue for labor rights abroad that often exceed those at home.
Moreover, when powerful business and labor interests can extract concessions in those bilateral deals, they have no reason to support a multilateral trade agenda. Mr. Obama’s trade representative, Ron Kirk, points out that business leaders press bilateral trade deals, not the Doha round. The proponents of bilateral deals always complain that multilateralism is too slow. This surely confuses cause and effect.
Only presidential leadership can set our trade policy in the right direction: away from bilateral deals and toward Doha. First, Mr. Obama needs to bring the business lobbies on board.
Here is one sweetener he can offer: Finish the Doha round on the basis of what has been negotiated and then declare a new round that will start right away and address unresolved issues. The Doha round, after all, was conceived to address the “unfinished agenda” of the preceding Uruguay round, which ended in 1995 with much accomplished but also much left undone.
Next, the canard that Doha offers little gain for the United States must be put to rest. C. Fred Bergsten, director of the Peterson Institute for International Economics, has estimated that the annual economic gain to the United States from the Doha round would be only $6 billion to $7 billion — a figure widely cited by Doha’s opponents. But a policy must be judged not just by what it directly achieves but also by what would happen in its absence.
The failure of Doha would cause immeasurable harm. It would undermine the credibility of the W.T.O. and its progress in promoting multilateral trade liberalization, and it would begin to erode the binding dispute settlement mechanism, an achievement unparalleled in other international institutions.
The value of that mechanism was demonstrated just this month, when a W.T.O. panel ruled for the United States and the European Union in a case challenging China’s restrictions on exports of industrial raw materials.
President Obama must persuade labor unions, core Democratic constituents, that they are wrong to buy into the fear-mongering that says trade with poor countries produces poverty in rich countries. In fact, what depresses workers’ wages are deep and continuing technological changes; cheap imports of consumer products help workers by offsetting that effect.
The president should ask Democrats and Republicans to immediately add the Doha round, as it has been negotiated over 10 years, into the same all-or-nothing package as the three bilateral deals. Such a bold gesture has a precedent. After sitting on the fence his first year in office, President Bill Clinton embraced the cause of trade, despite the political costs, and fought fiercely, and against great odds, for the Uruguay round. Mr. Obama should do no less.
Jagdish Bhagwati, professor of economics at Columbia and a co-author of Offshoring of American Jobs: What Response From U.S. Economic Policy?