Americans are supposed to understand that 96 percent of the world’s consumers live outside the United States. Getting GATT approved was supposed to be a piece of cake after the NAFTA debate cleared the cobwebs from heads that had not recently revisited the arguments for free trade. But for the Clinton administration, nothing is easy. The administration resembles the Washington Redskins’ inept place-kicker of whom it was said, ““He put the excitement back into the point after touchdown.’’ The administration, gripped by health care monomania, has been inattentive, and both the left and the right are making mischief about GATT.
The left winces whenever government declares itself either not competent or not entitled to intrude itself into economic affairs. GATT is a large act of self-denial by governments pledging to abstain from some traditional protectionist foolishness. But American liberals believe that when it comes to efficiently allocating society’s resources, markets are no match for a government controlled by clever liberals. And the left everywhere believes that controlling foreigners’ access to domestic markets is necessary for government ““planning’’ to make society ““rational.’’ Also, most House and Senate Democrats voted against NAFTA, citing the core value of today’s liberalism, compassion. Compassion involves the prevention or amelioration of pain; economic dynamism causes casualties – the attrition of the least efficient. So increasing the velocity of international trade will mean some pain. Therefore GATT is suspect.
Conservative criticism of GATT is harder to comprehend, given that GATT is the largest tariff cut in history, and hence is a huge international tax cut. Mistaken conservative criticism concerns sovereignty; sensible criticism concerns subsidies.
Conservatives, dismayed by the Clinton administration’s dilution of U.S. sovereignty by subservience to the United Nations, mistakenly see another such surrender in the GATT agreement’s creation of the World Trade Organization to arbitrate trade disputes. However, the WTO cannot alter or override any U.S. law or rule. The United States, which brings more trade complaints than any other nation, is not diluting its sovereignty by agreeing to rules of dispute resolution.
As Rep. Dick Armey, a Texas Republican, says, ““Any treaty or agreement restricts a participating government’s policy choices to some extent . . . This is not a limit on sovereignty. It is instead the selection of one policy that necessarily excludes selection of alternatives.’’ And agreements that reduce protectionism enhance sovereignty of U.S. citizens by reducing the ability of avaricious American lobbies to get the U.S. government to enact protectionist measures that restrict the freedom of individuals freely to buy and sell goods and services internationally.
A sensible conservative complaint is that GATT is too permissive. It is so regarding government subsidies in the service of ““industrial policy,’’ meaning government planning and direction of investment. The Clinton administration, staffed by liberals long parched for power, itches to throw the government’s weight around. The administration hopes to buy a long-term lease in office by subsidizing this or that. That is why it pushed for expansion of GATT’s permissiveness regarding subsidies. This amounts to indirect protectionism.
Already the administration, using a dubious ““national security’’ argument, plans to pump more than half a billion Pentagon dollars into a sector (flat panel display) of the computer industry in an attempt to capture market share from the Japanese. GATT would be much better if it prevented such ““industrial policy’’ subsidies everywhere. But GATT merely permits foolishness. Congress remains free to abstain or to react to other nations’ policies.
Some of GATT’s critics are simply trying to cling to existing protectionism that transfers wealth to them from the pockets of other Americans. For example, U.S. tariffs and quotas on textile imports produce the effect of 50 percent tariffs on many imports from Third World countries. This is a regressive tax imposed disproportionately on apparel bought by Americans of modest means at stores like Kmart and Wal-Mart. Textiles from, say, Italy and France are exempt, so shoppers at Gucci and Hermes stores do not suffer. When next you hear a member of Congress rattling on high-mindedly about defending U.S. sovereignty from the WTO, ask if he has received any campaign contributions from U.S. textile interests.
GATT will cost the U.S. Treasury about $14 billion over five years in revenues lost because of reduced tariffs. Under budget rules, this tax cut for consumers must be paid for with $14 billion in increased revenues or decreased spending. Republicans think the government already has more money than is good for it, so they oppose new taxes. Democrats think the government already is anorexic, so they oppose spending cuts. (Cutting in half urban mass transit subsidies would more than suffice.) But it would be lunacy to allow $14 billion over five years to impede acceptance of trade rules that may enlarge U.S. GDP by a cumulative $1 trillion during the first 10 years.
We still live in a world littered with protectionism, overt and covert, arising from the mercantilist theory that nations can most efficiently produce prosperity by restricting imports and subsidizing exports. The residues of this fallacy are retarding the growth of living standards. GATT, an antimercantilist measure, is imperfect, but so is this naughty world, and in politics, pursuit of perfection often impedes improvement.
