Assessing competitive liberalization

Simon Evenett & Michael Meier (pdf):

When the Bush Administration took office in January 2001 the U.S. executive branch had been without trade negotiating authority from Congress for six years. It is unsurprising, therefore, that the newly appointed U.S. trade officials put a high priority on being granted this authority and perhaps felt that they needed a compelling narrative to explain why that authority should be granted and how it would be subsequently used. Competitive Liberalization was adopted as the credo of the Bush Administration’s trade officials…

There is no doubt that U.S. trade negotiators have been very active since 2001… At least 18 Trade and Investment Framework Agreements, a pre-cursor to negotiations for a free trade agreement, have been signed. The Doha Round was launched and U.S. officials have contributed to ongoing regional initiatives such as APEC and the FTAA. Some might argue that these activities have restored the United States’ central role in the world trading system and this is praise enough. However, is this the right metric to judge Competitive Liberalization? After all, has the implementation of this policy fulfilled the goals articulated for it at the beginning of the Bush Administration? This question is all the more important as Competitive Liberalization represented an explicit break from the United States almost exclusive pursuit of multilateralism.

We argued that a number of factors have limited the effectiveness of the policy of Competitive Liberalization often from the start, including: the internal divisions among U.S. legislators and among the executive branch over the priorities for U.S. trade policy; the associated tendency to load more and more conditions on U.S. trading partners before and during negotiations on free trade agreements; the effect of pre-existing U.S. unilateral preference schemes; and the options available to trading partners to bolster foreign direct investment other than signing free trade agreements with the United States. These constraints, plus concerns about the coherence of the logic underlying Competitive Liberalization and the incentives created by some aspects of this policy, lead us to conclude that the current U.S. trade policy is almost certain to fall well short of its stated goals.

Over the longer term, U.S. officials and trade policy experts may want to reflect on the strength of the supposedly mutually reinforcing aspects of negotiations at the bilateral, regional, and multilateral levels. For if multilateralism and leading regional trade initiatives remain stalled, then Competitive Liberalization may amount to little more than bilateral opportunism masquerading as high principle.