US Needs New Thinking on Global Trade

US Needs New Thinking on Global Trade

12 November 2001

The administration is trying to move a global trade agenda that was blocked two years ago in Seattle by protesters in the streets and skepticism in the Third World. This time, the World Trade Organization talks have been moved to the Persian Gulf state of Qatar, a despotic oil emirate where protesters, foreign and domestic, are simply not permitted.

But it remains to be seen whether the current talks will produce what the US government considers progress and whether such progress is really in the national or the global interest.

At the Qatar meetings, one big issue dividing the Americans from developing countries is access to cheap drugs. Poor countries cannot afford the huge markups pharmaceutical companies charge for a few cents worth of chemicals. If they pay the price, their people do without.

India and Brazil have defied American conceptions of intellectual property by producing cheap generic versions of drugs that are patented in the United States. But most of the world considers life-saving drugs to be social goods essential for public health, not proprietary commodities.

The Third World essentially dared the drug industry and its government allies to deny cheap drugs to suffering people, and the industry backed down. US Trade Representative Robert Zoellick and the industry hope to mollify poor countries by selling them drugs at deep discount but preserving the patent system. This bargain, even if it papers over the current dispute, is probably unsustainable. Either drugs are social goods or they aren't.

A second issue dividing the United States from much of the world is America's right to levy antidumping duties on exports deemed (by Americans) to be selling in US markets below costs. Congress has insisted that US trade negotiators not give up this right, but the developing world considers discounted exports to be part of their development strategy and the US stance hypocritical.

At Seattle, the United States promoted a grand bargain in which the Third World became more respectful of intellectual property and more open to flows of private capital and commerce, while the United States and Europe gave up some of their own protectionist measures. At the time, it was said that the nation-state was becoming an anachronism and that freer trade was the natural handmaiden of both prosperity and democracy.

Now, however, the nation-state suddenly looks like an essential source of security, and we are painfully learning that much of the world doubts whether the US-led recipe for prosperity is really in their interest. A new report by the Economic Policy Institute documents that in the free-trade era since 1980, world growth has dramatically slowed and world inequality has widened.

Freer trade benefits elites around the globe, but not necessarily ordinary people. A lot of the absence of global support for America in the current crisis reflects resentment at America's efforts to impose its economic system, whatever the human costs.

In our own hemisphere, Argentina scrupulously followed US advice and embraced an austerity program to reassure international investors. It was rewarded by economic free-fall. Investors fled, and Argentina is now about to default on its debt. The US-dominated IMF and World Bank, which hastily bent the rules to bail out America's newest ally, Pakistan, are shedding no tears for Argentina. The rest of the world notices these hypocrisies.

In East Asia, currency speculators, newly liberated by a model imposed by the United States and the International Monetary Fund, wrecked several economies in 1998. Some, like Indonesia, are predominantly Muslim. They had no particular prior sympathy for Islamist radicals but, not surprisingly, have little charity for the United States.

In the Middle East, Islamic fundamentalism is energized by resentment at American alliance with corrupt regimes that bring huge gaps between wealth and poverty. Free commerce and democratization are said to march hand in hand. But the location of this year's trade talks in despotic Qatar vividly underscores that when push comes to shove, commerce trumps democracy.

Supposedly, the post-Sept. 11 world has thrown globalization protesters into disarray. Some American commentators have depicted them as little better than bin Laden. Trade Ambassador Zoellick has even demanded that Congress grant the president new trade liberalization authority as part of the war on terrorism.

But this rationale has it exactly backwards. Dictating rules of global commence to benefit US business is not winning friends or improving lives. America's new global challenges suggest a very different approach to global trade, less beholden to private investors and more respectful of human needs both in America and in the Third World.

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