Trade Policy for a Networked World

NEW ERA, NEW CHALLENGES

Trade policy has been a notable and bipartisan success of postwar American foreign policy. Across 10 administrations and 26 Congresses, Washington has guided the world's economies toward freer trade and higher levels of development -- from the foundation of the General Agreement on Tariffs and Trade (GATT) in 1947; through the U.S. Trade Expansion Act of 1962 and the Kennedy, Tokyo, and Uruguay Rounds of GATT negotiations; to the U.S.-Canada Free Trade Agreement, the North American Free Trade Agreement (NAFTA), recent trade agreements with China, Vietnam, and Jordan, and legislation liberalizing trade with Africa and the Caribbean. Current challenges along these lines include completing negotiations on free trade agreements with Singapore and Chile, inaugurating a new round of the World Trade Organization (WTO) and negotiating Russia's entry into it, and moving forward on a Free Trade Area of the Americas.

Trade agreements have grown in complexity and scope over time, but the landmark achievements of earlier years all dealt with essentially similar problems. They catalogued and reduced tariffs, quotas, and other trade barriers. As a new century opens, however, trade policy is taking on a fundamentally new set of challenges -- ensuring an open, competitive, well-regulated information economy. One of the principal achievements of the Clinton administration was to begin rethinking trade policy to fit this new economy. And one of the great opportunities for the new Bush administration is to build on the foundational agreements of the Clinton years and fully adapt trade policy to the information age.

SETTING STANDARDS AND PROTECTING IDEAS

Trade has typically involved goods one can see crossing the border: beef, steel, semiconductors, cars, or bottles of wine. Postwar administrations thus initially focused on such tangibles by trying to persuade other governments to remove their import tariffs. As tariffs fell, the focus shifted to eliminating import quotas, which distort market behavior and the allocation of resources. As these formal barriers began to diminish, trade negotiations moved into more arcane fields such as harmonizing technical standards -- so that a semiconductor chip built in Costa Rica and a hard drive assembled in Southeast Asia, for example, can run programs written in India for a computer designed in North Carolina.

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