Bhagwati & Ikenson on unilateral liberalization

I attended a Cato Center for Trade Policy Studies event on unilateral trade liberalization featuring Jagdish Bhagwati and Dan Ikenson yesterday. It was quite enjoyable, as both speakers were entertaining and offered scholarly insights.

The case for unilateral liberalization is the traditional case for free trade. Imports are not merely “the price we pay for exports,” but an economic gain that boost consumption, increase competition, and lower input costs. If our trading partners decide to drop rocks in their harbors, that is not a reason for us to follow suit. Ikenson’s new CTPS policy analysis (pdf) outlines the potential gains from liberalization in the context of the current US tariff schedule and the global trading environment.

Although, as Ikenson noted, unilateral action constituted two-thirds (pdf) of the liberalization by developing countries in the past twenty years, “going alone” does not have a very strong history in the United States. Should we expect policy makers to adopt that approach now?

I doubt it. Both speakers pressed the case for unilateral liberalization, but neither claimed that such an approach was likely or politically feasible this summer. Bhagwati conceded that the US won’t “go alone,” but argued that we ought to “convey the lessons of unilateral liberalization” so as to educate people about the benefits of free trade and increase the likelihood of success at Doha. Ikenson was less optimistic about the WTO round’s chances, but one will note that his brief defends the economic feasibility of going alone, not its political palatability. He does not make any arguments that unilateral trade liberalization might win support amongst Congress members who don’t already support significant US liberalization via the multilateral approach. Bhagwati did say that the US ought to relax its demands and provide trade leadership, but that’s been true all along.

Though not able to prescribe a magical elixir for the Doha round’s woes, Bhagwati did offer a few political economy insights. First, he argued that the change in USTR from Rob Portman to Susan Schwab likely hurt the round, as Portman was known as an accommodating representative that would accept a more minimal outcome in terms of US demands. Schwab, according to Bhagwati, has shown a tendency towards the maximalist approach in the past. While not subscribing to the bicycle theory of trade, he clearly prefers that the US salvage Doha and accept a minimalist outcome.

Second, Bhagwati noted in the Q&A session that the business communities and export lobbies needed to push a WTO deal through Congress won’t take the position that a minimalist deal is worse than none and will be on-board for an outcome that keeps the multilateral system alive. Apparently Bhagwati believes that a successful Doha round is necessary to renew the president’s trade promotion authority, which is the basis for both PTA and WTO negotiations. So if the business community wants any kind of trade deals, they’ll back any Doha outcome that gives Bush a win. I may have misunderstood his remarks on this topic, but that was my interpretation of the comment.

Bhagwati remains optimistic about the WTO, while Ikenson is less confident. The next few weeks will be very interesting. Check out Ben Muse’s summary of what’s happening.

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