6 August 1997
Journal of Commerce
Editorial

Confused on trade

Americans are increasingly skeptical about free trade. So say some of the nation's most vocal consumer groups, and the few surveys that exist on the subject tend to confirm this. How is it, then, that consumers, who are the most certain beneficiaries of free trade, seem to take a position so clearly against their own interests? What makes consumers in the United States, the world's most open, consumer-oriented society, feel that way? There is no single answer. But media coverage and the government's own ambiguous attitude are among the chief causes.

News reports justifiably point to the growing importance of trade to the U.S. economy. But most of the media reports emphasize the value and benefits of exports. Imports are portrayed largely in a negative light as the real cause behind trade deficits. This clearly instills the mercantilistic message that exports are good and imports are bad. The message that the U.S. economy is growing just as dependent on imports as it does on exports in today's economy is lost in the process.

And so is the principle that there is a direct relationship between a country's standard of living and its trade. Economic studies have consistently shown that the more a country trades, the richer it becomes. The most recent research, which has gone further than its predecessors in establishing a causal relationship between wealth and trade, estimates that expanding exports and imports by 1 percent raises per-capita income by 2 percent or more. The study, conducted by two University of California at Berkeley economists, was the first to measure the benefits of open markets in dollars and cents.

The Clinton administration has clearly endorsed the principle that free trade serves the U.S. economy. Its policy of seeking to expand access to U.S. markets even as it forces other countries to open their markets through the World Trade Organization agreements is, therefore, economically justified. In fact, in running for his second term, President Clinton had pointed to the more than 200 trade agreements signed during his first term as the key reason for America's continuing prosperity.

Yet the Clinton administration, more than any of its predecessors, has resorted to trade restrictions as one of the main instruments of its foreign policy. USA Engage, a business coalition set up solely to fight the government's proliferation of trade SANCTIONS, counted 61 unilateral SANCTIONS imposed by the Clinton administration against 35 countries in the last four years. Many of the target countries are America's best customers. Individual states and cities have joined in this SANCTIONS binge, imposing their own punitive measures. The practice of imposing unilateral restrictions not only undermines the U.S. lead in trade liberalization, it is also getting Washington embroiled in unnecessary WTO trade disputes.

The point made by Doreen Brown of the Consumers for World Trade that misleading media coverage and the administration's double standard are largely responsible for the consumers' ambivalent attitude on trade is valid. The more confusing the message, the more vulnerable consumers are to easy arguments advanced by populist politicians of Pat Buchanan's ilk, trade unions and the country's most protected industries.

Uninformed coverage also widens the gap between political and economic reality. Consequently, a congressional vote to punish objectionable policies of other countries with unilateral economic SANCTIONS is largely viewed as having no economic impact. In fact, such measures carry huge economic costs for U.S. companies.

Those costs go straight out of consumers' pocketbooks. That's a message that both the media and the country's leaders should deliver.

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