A Renaissance for U.S. Trade Policy?

Courtesy Reuters


U.S. trade policy has been facing widespread criticism around the world. Under threat of congressional action, the Bush administration initiated an investigation of steel imports, imposed tariffs of up to 30 percent on a sizable portion of foreign steel shipments to the United States, and launched an effort to organize global steel production -- all within the past year. The administration and Congress have agreed to roll back some apparel imports from the Caribbean and Central America. Sharp new tariffs have been slapped on lumber imports from Canada, a nation with which the United States supposedly has free trade. Both Congress and the president have backed a new farm bill that perpetuates substantial subsidies for U.S. agriculture, even though the United States has railed for years against such practices abroad. All these steps have reinforced the concern that America is pursuing a unilateralist rather than a globally cooperative foreign policy.

Moreover, these protectionist initiatives have surfaced at a time when the global trading system is already under severe strain. U.S. trade retaliation against Europe is still in place from a previous dispute over beef. Europe is considering up to $4 billion of counteraction against U.S. tax subsidies for exports -- a practice found illegal under the rules of the World Trade Organization (WTO) -- and is fighting Washington's new steel measures. Last year, Japan and China engaged in a cycle of retaliation and counterretaliation. There has been continuing concern about trade wars among the largest economies, and the recent U.S. actions are widely viewed as throwing fuel on the fire. U.S. backtracking on liberalization gives other countries an excuse to do likewise and reduces the prospects for future reduction of barriers.

At a more subtle level, some of the most crucial components of the global system are coming under considerable stress. The WTO's new dispute-settlement mechanism, a crowning achievement of the 50-year drive to forge an effective rules-based trade regime, could crack under the

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